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NETWORK MARKETING BOOMS WHEN RECESSION HITS THE ECONOMY,
By ROD COOK
The oldest Recession Hit Network Marketing company we can track is the marine-vegetable (seaweed) supplement company, Wachter's, which started in 1937 near the bottom of the Great Depression. Nutrilite took off in 1945 during the economic decline immediately following World War II. Shaklee and Neolife fared well in the post-Korean War slump. Amway got a good start building with the slump in 1958. Mary Kay started with the downturn in the 1960s. This theory held true in 1992 when Alliance, Kaire, Life Plus, and a number of other companies started up and boomed (then later failed due to legal problems, partnership disputes, and mismanagement after the recession). Others like Hearbalife (see chart below) went into hyper growth due to the same recession and became billion dollar companies.
The U.S. economy is cracking apart due to mortgage meltdowns
and rising fuel costs (energy) that
are causing great concern worldwide. Fears are that an American economic
dive will hurt the entire world economy.
you're in Network Marketing, there's good news, and there's bad news - and the great news is that, for you, they're both good news.
In good economic times, people are less interested in career alternatives but they can easily afford to buy more consumer goods. In bad times, they crave new business opportunities. Today, we could soon be facing global recession - and tremendous worldwide opportunities for you.
U.S. and worldwide, people are beginning to worry. Once they start worrying, they quit spending money. This "psychology of fear" fuels bigger recessions. I'm not saying there is going to be a depression, which is much worse than a recession. What I am predicting, based on surveys conducted by our company (which have proved exceedingly accurate over the past 20 years), is higher unemployment and underemployment - good people forced to work for less money than their qualifications would warrant. Translated: pushed to work for trashcan wages.
MLM A Countercyclical Business
General economic theory holds that there tends to be a recession about every eight years. The entire history of the modern United States reflects this boom-and-bust cycle. Consistently, Network Marketing has grown during the "down" periods. PER CNBC CURRENT VIDEO click here
In the chart below note that during the depth of the recession indicated by the blue dotted line retail sales by major retail outlets took a dive. Direct sales (90% are MLM) shown by the solid yellow line jumped as store front retailing dropped like a rock! Today history repeats itself!
Source: DSA and MLM Watchdog
When recession hits, those with any intelligence are going to scramble to find alternative sources of income. In their frantic searches, they are going to find that the best of all alternatives is Network Marketing.
Understanding the relationship between low-cost entrepreneurship and economics is important. During the past few years, the world economic boom has made people complacent. In the U.S., the jobless rate dropped to all-time lows of less than five percent. People had to be sick, lame, or lazy not to get a job. Hamburger flippers got higher-paying jobs, such as assembling computers, and their incomes rose. Rather than looking for an alternative to a job or seeking extra income, these folks sat around and watched television.
When recession hits, those with any intelligence are going to scramble to find alternative sources of income. In their frantic searches, they are going to find that the best alternative is MLM also known as Network Marketing.
Another factor that fueling the growth in Network Marketing is that many Baby Boomers have put their life savings into the stock market. With the market's shaky up and down spirals, many Baby Boomers are slowing their high-flying, fast-spending ways due to meager savings except for shaky stocks. With the inevitable, cyclical decline of the stock market, they will see their retirement plan funds lose 25 to 50 percent in value. Will panic will follow? We hope not! But, Baby Boomers with good sense will be looking for secondary ways to build a secondary residual retirement income. A common phrase today is, "multiple streams of income."
Grab your hat and prepare for the next boom in Network Marketing. If you are a newcomer, study the industry closely (and quickly). If you are an old-timer, get out your contact lists for the last two to ten years. In a recession, they will be solid gold! All you have to do is get out there and help people out of their economic duress.
Now is the best time to grow your Network Marketing individual business or start your company! Whether you are a veteran or a beginning network marketer, the future is bright. Soon consumers will be looking for the best quality at the best prices. Where do they find it? In the quality products offered by your Network Marketing company .
Recession causes people to open their minds to gaining alternative sources of income. If they are still employed, they are worrying about the possibility of losing their jobs or having them downgraded. If they are unemployed, they are seeking ways to build their income without spending large amounts of money to start another business.
Rod Cook B.s., M.A., M.B.A.:
Rod is recognized as THE major researcher in the MLM - Network Marketing world on economics and MLM Compensation pay plans. His majors include many hours in mathematics giving him research tools no others in the MLM have. Rod keeps a list of over 1500 U.S. MLM companies (plus over 100 foreign companies operating in the U.S.) on his MLM Company World Directory (see www.mlmwatchdog.com) this alone is a research tool no one else has as far as what MLM compensation pay plans survive.
MLM & BAD ECONOMY
HISTORICAL PERSPECTIVE FROM 2002 RECESSION = MLM BOOM
By Len Clements
REASON #1 THE ECONOMY
I have always had the belief that the condition of the U.S. economy did influence the condition of network marketing, somewhat, but not significantly. I based that belief on the simple conclusion that there was never an economy where people didn't want more money and more free time. In fact, a few months ago I set out to write an article debunking this age old assumption that bad economic conditions favor network marketing. I began to really do some digging to find as much evidence as I could to support my contrarian position. And what I soon discovered was, I was wrong. The fact that one of the strongest growth phases in network marketing history, which occurred between 1990 to '92, also coincided with the last economic recession should have been a clue. But there was so much more.
First, an analysis of unemployment rates over the decades is key here. After all, the want for network marketing is created by the desire for alternative sources of income, and income sources that we have control over. And when we compare the popularity trends of network marketing to unemployment rates, on a semi-decade basis, there are some intriguing and very exciting revelations.
Although multilevel marketing existed as far back as 1936, for all intents and purposed MLM really began in earnest in the 1950s. So let's start there. Now, tracking MLM popularity trends is somewhat subjective, but surely there would be no argument that network marketing was far more popular in the second half of the 50's than the first. Not a single company of consequence launched from 1950 to 1955, however industry giants Shaklee, NeoLife, and Amway all came into existence from 1956 to 1959. The unemployment rate the first have of the decade averaged 4%, and was the second lowest in U.S. history in 1953 at 2.9% (only during WWII was it ever lower). However, it averaged 5.3% the second half of the decade reaching it's highest level since the Great Depression in 1958 at 6.8% (Rod Cook note the Amway launched - the second time). Although the difference may seem small from a statistical standpoint, translated into today's numbers that would mean almost 6 million more people becoming unemployed between 1953 to '58.
The first half of the 1960's all types of direct sales continued to flourish with the launch of Mary Kay Cosmetics in 1963, and companies such as Avon, Fuller Brush and Tupperware all achieving momentum. Although the industry continued to grow from '65 to '69, it was not nearly at the same pace with no new major company launches taking place. The unemployment rate the first half of the decade was significantly higher than the second half when 2-and-a-half million unemployed people went back to work.
Let's jump ahead to the 1980's. Again, few MLM veterans would disagree that the first half of this decade definitely outperformed the second. Although there were about as many company launches in each half of the decade, there are actually more companies that launched during the first half that are still in business today than during the second. While network marketing flourished from 1980 to '85, the rest of the decade saw some of the worst fiasco in network marketing history. Also, another indicator of MLM economic conditions is the number of legal actions. During industry slumps companies and distributors tend to be more aggressive and take greater risks. The number of law suits almost doubled during the second half of the 80's compared to the first. And, while network marketing was thriving the first half of the 80's, unemployment continued to rise. In fact, in 1982 it was at it's highest level in 40 years at 9.7%. During the second half MLM slump unemployment dropped considerably, and by the end of the decade the number of those out of work was almost half of what it was at the beginning of the decade.
The 1990's saw perhaps the clearest distinction between halves of any decade with more major company launches and more companies going into momentum than any other time in history. There was also more wealth being created by way of MLM from 1990 to 1994 than any other 5 year period in network marketing history. The second half, as many of you probably still remember, wasn't exactly the best of times for network marketing. In fact, if there ever was such thing as an MLM recession, we had one from about 1996 through 1999. Why? One reason may have been the very high unemployment rate from 1990 to '94, and the sharp drop during the second half of the decade where it hit a 30 year low at 4.2% in 1999.
The only exception to this half-century long pattern is the 1970's, but that was an exceptional decade. Remember, the last half of the 60's industry growth slowed as unemployment dropped to a post-war low. During the first half of the 70's network marketing started rocking again as unemployment rates jumped. Unfortunately, all that rocking started rocking some boats, and the result was over five times as many MLM related law suits from 1970 to 1974 than all of the 50's and 60's combined. These included landmark cases involving Koscot, Bestline, Holiday Magic, Culture Farms, and others, and in 1975, there was a federal action which essentially questioned the legality of network marketing in general. Fortunately, one company, Amway, had the financial ability to defend themselves, and in essence, the entire multilevel marketing industry. This case lasted until late 1979 when the court eventually ruled in favor of Amway and as a result there was, for the first time, a clear delineation between illegal pyramids and legitimate network marketing companies. So, obviously, there was a pretty dark cloud hanging over the industry the last half of the 70's and there wasn't a lot of expansion in spite of the even higher unemployment rate.BACK TO SOURCE
The last, and arguably greatest MLM growth phase began in 1990, the same year we went into our last economic recession. And, again, from 1980 to '84 were boom years for network marketing and we experienced recessions in 1980, part of '81 and most of '82. Nineteen-seventy to '74 were also boom years, and our economy was in recession almost all of 1970, and 1974. Remember how the last half of the 50's and into the early 60's were years of great MLM expansion? We were in recession from '57 to '58 and most of 1960. In deed, every severe economic downturn in the last 50 years has been during, or immediately preceded every period of network marketing expansion.
We're not done yet. According to figures supplied by the Direct Selling Association, not all, but most of which is made up of network marketing companies, U.S. sales increased from 1990 to 1992 by an annual average of 9.25 percent. That was during our last recession. From 1997 to 2000, at the peak of our last economic boom, annual sales within the direct selling industry increased by a little more than half as much. Clearly, the condition of our national economy absolutely does effect the condition of the network marketing industry.
So where does this lead us? Well, as I write this it's early 2002 and we are in a recession, and have been for several months. Most recessions last around 12-18 months, but that doesn't mean that when a recession is over, so is a slumping economy, or high unemployment rates. And again, it's rising unemployment rates that are most closely tied to rising interest in network marketing. Here's a rather remarkable fact - we've had eight recessions in the last 50 years, and during the 12 months immediately after the end of the recession the unemployment rate went up! Every time. What's more, most economic experts today are predicting a much slower recovery than that which followed previous downturns, followed by volatile economic swings for the next several years.
Leonard Clements has concentrated his full-time efforts over the last twelve years on researching and analyzing all aspects of Network Marketing. He is a professional speaker and trainer, and currently conducts "Inside Network Marketing" seminars throughout the world. Len is the author of the controversial book "Inside Network Marketing" (Random House) and the best selling cassette tapes "Case Closed! The Whole Truth About Network Marketing" and "The Coming Network Marketing Boom." To receive additional information about MarketWave and its products, please call 1-800-688-4766, or write to MarketWave, Inc., 2406 Canberra Ave., Henderson, NV 89052
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