The History of MLM
How MLM (Network Marketing) got started and grew to meet the needs of the customer and the entrepreneur. It’s fascinating 🙂
A company that creates a product must make that product widely known. Sales organizations made up of individual salespeople were (and still are) the backbone of business.
The number of salespeople in the United States began to grow rapidly starting in the late 1800s.
1860 – Traveling salesmen were known as canvassers, peddlers, hawkers and drummers. Some of these former peddlers created trained sales organizations. Had it not been for their influence, many of the corporate names we’re all familiar with today might never have been.
-Henry Heinz, a former peddler, created an organization of 400 salesmen to sell various vegetable products, like ketchup and pickles, to people who didn’t grow their own.
-Asa Candler, another former peddler, built a sales force to sell Coca-Cola syrup to restaurants after buying the formula from pharmacist John Pemberton for $2300 in 1886.
Out of these organizations came companies that allowed their salespeople to have their “own” business.
1868 – J.R. Watkins founded the J.R. Watkins Medical Company, one of America’s first natural-remedies companies where associates marketed directly to consumers.
1890 – David McConnel started the California Perfume Company, based out of New York. In 1906 he had 10,000 sales representatives selling 117 different products. The California Perfume Company changed its name to Avon Products in 1937.
1905 – Alfred C. Fuller was another former peddler who greatly influenced future sales organizations. Fuller started the Fuller Brush Company and hired 270 dealers throughout the U.S. to follow his business plan on commission only. By 1919, the Fuller Brush Company had made $1 million in sales; by 1960, $109 million.
1931 – Frank Stanley Beveridge was the former vice president of sales for Fuller Brush Company. He and Catherine L. O’Brien founded Stanley Home Products. Influenced by the economic hardships of the Great Depression, Frank and Catherine envisioned an opportunity for people to start their own businesses with minimal investment, selling products that people use everyday. This vision was obviously taken from the Fuller Brush Company. Stanley Home Products sold household cleaners, brushes, and mops. Some Stanley dealers began giving demonstrations for clubs and organizations rather than for individuals to increase sales volume. Other Stanley dealers quickly embraced this idea as a way to maximize the selling presentation. These dealers took the “clubs and organizations” concept into homes by having the home owner invite friends and family over….and the “party plan” was born.
Stanley Home Products became the training ground for many well-known company leaders. Mary Kay Ash, founder of Mary Kay Cosmetics; Brownie Wise of Tupperware; Jan and Frank Day, founders of Jafra Cosmetics; and Mary Crowley, founder of Home Interiors all received early training as Stanley Home Products dealers – again spurred by the Fuller Brush company.
1934 – Carl Rehnborg started the California Vitamin Corporation selling what today are known as vitamin supplements. In 1939 the company changed its name to Nutrilite Products Company, Inc.
1945 – Nutrilite contracted with Mytinger & Casselberry to become the exclusive American distributor of Nutrilite products. Mytinger & Casselberry created the first documented MLM compensation plan. It worked like this: A Nutrilite distributor bought his supplies at a 35% discount. (Ex: A distributor bought a box of vitamins for $13 and then sold them for $20 = $7.00 profit.)
To encourage the distributor to sell more, Nutrilite paid an extra monthly bonus of 25% on the total sales. 20 customers x $13.00 (wholesale value) = $260 x 25% =$65.00 profit.
Once the distributor proved that he could get 25 customers he was allowed to become a DIRECT distributor – which meant that he could find others who wanted to sell the Nutrilite products and then they would buy their products from him. In essence, once he proved that he could get customers he was “promoted” and allowed to find other distributors and to train them to get customers. As an incentive to train his distributors well, once he and his distributors amassed 150 customers, he received an additional 2% of the total sales volume.
This is not a pyramid – it’s a quota-based system of management. Those who sold the most boxes of vitamins got a higher reward than those who sold little. The MLM compensation plan was simply an extension of the Fuller Brush Company rewarding production. With MLM (Network Marketing) , the company could motivate a sales person to not only sell more products, but to train others to sell more products as well.
1945 – Earl Tupper created a line of flexible, lightweight plastic containers with tight-sealing lids. He started selling his products through conventional retail outlets, but realized the products needed demonstration. Earl Tupper then teamed up with Brownie Wise (formerly with Stanley Home Products) and launched Tupperware Party Plan, now a world-wide billion-dollar company operating in 40 countries.
1949 – Rich DeVos and Jay Van Andel (high school buddies and business partners) returned from military service and became distributors for Nutrilite vitamin supplements in 1950. After a brief dilemma with Nutrilite in 1959, the two abandoned ship and formed the Amway Corporation. In 1972 Amway Corporation acquired Nutrilite.
1956 – Dr. Forrest Shaklee developed a method of extracting minerals from vegetables and used MLM (Network Marketing) to distribute his products.
1963 – Mary Kay Ash creates Mary Kay Cosmetics. By 1996, company sales were in excess of 2 billion dollars.
1975 – The FTC (Federal Trade Commission) filed suit against Amway corporation for operating a pyramid scheme.
1979 – An administrative law judge ruled that Amway’s multi-level-marketing program was a legitimate business opportunity, as opposed to a pyramid scheme.
Recommended next page: Pyramid history
About the Author
Tim’s experience in building his own downline of 56,000 network marketers helped him develop his signature training series. A public relations ambassador for the network marketing industry, Tim has also dedicated his time to debunking the false information spread about the network marketing industry.