"...the prospect of a quarter of a billion brassiere and girdle hawkers is not only impossible but frightening to contemplate . . .  However, we live in a real world and not fantasyland."

Forget The Saturation Theory

By Jeffrey A. Babener

October, 1993

 

 

One of the frequent criticisms of network marketing has been the saturation theory. Under this hypothesis, every networking opportunity will ultimately come to an end when networkers run out of customers to sell to or distributors to recruit. This theory just hasn't worked. After at least three decades of hard charging recruiting, even the oldest and largest networking companies still are finding plenty of distributors and customers. Just take a look at Amway and Avon, both with sales in excess of $3 billion.

Scores of other networking companies have come since and are thriving. Even at this late date only 5 to 10 million people are involved as distributors in the U.S., a country with a population of 250 million people. And the rest of the world has hardly been touched. Growth around the globe continues at a fast pace with sales in excess of $50 billion, but only some 14 million involved in a world with 5 billion people.

Several years ago, the saturation theory was tested in a famous court case involving a company named Go-Re-Mar. The company's program was challenged as a pyramid scheme with the claim that its sales force would ultimately run out of new recruits. But, as the court noted, that is not how things work in the real world. Instead the U.S. Court of Appeals, while injecting some humor in its opinion about this brassier hawking company, made its position perfectly clear:

"The sole evidence to support the Commission's holding that the plan is inherently unfair and deceptive is a mathematical formula, which shows that if each participant in the plan recruited only five new recruits each month and each of those in turn recruited five additional recruits in the following month, and this process were allowed to continue, at the end of only 12 months the number of participants would exceed 244 million, including presumably the entire staff of the FTC. The Commission concludes that this, in effect, is the impossible dream and that the siren song of Symbra'Ette must be stilled. We find no flaw in the mathematics or the extrapolation and agree that the prospect of a quarter of a billion brassiere and girdle hawkers is not only impossible but frightening to contemplate, particularly since it is in excess of the present population of the Nation, only about half of whom hopefully are prospective lingerie consumers. However, we live in a real world and not fantasyland.

As indicated by the record, the fact is that Symbra'Ette, which commenced business in 1963, did not reach its peak in distributorships until 1972 when it had attracted some 3,635 distributors. The record does not indicate the geographical distribution of these vendors, and we have no study or analysis in the record which would realistically establish that some recruiting saturation exists which make the entry of additional distributors and the recruitment of others potentially impossible in any practical sense. While the Commission need not establish actual deception by the testimony of disappointed entrepreneurs, it has failed entirely to establish a potential threat. Not all Americans aspire to the calling in issue and not all who are attracted will continue indefinitely."

In fact, as long as there is a market for a product, there will be new opportunities for distributors. For example, in a 10 year period Amway developed a whole new market for its products in the Japanese market, racking up a billion dollars a year in sales. Networking companies in the U.S. are constantly cracking new demographic markets. For instance, the fast growing hispanic market in the U.S. has represented significant growth. Companies like Discovery Toys have opened up the market to networks of teachers. A.L. Williams opened the market to networks of part-time insurance agents. Quorum International, with its range of personal security products, opened up networks of law enforcement personnel and security salesmen to the world of network marketing.

The expansion of the great franchiser, McDonald's, opens an interesting parallel to the growth opportunities abroad for American consumer products. The ratios abroad of people to McDonald's restaurants suggests the pattern of expansion possibilities, and also suggests the market won't become saturated for America's most famous consumer product, the McDonald's hamburger.

Ratio of people to McDonald's restaurants
U.S. 27 thousand to 1
Canada 40 thousand to 1
Australia 47 thousand to 1
England 108 thousand to 1
Japan 124 thousand to 1
Germany 177 thousand to 1

Just as for networkers, the world is waiting for McDonalds. Although networkers sell every type of consumer product imaginable, a fact of every day life about the core products of the industry, health products and cosmetics, says much about saturation of the opportunity to sell products. Walk onto the first floor of any department store and note it is almost entirely filled with cosmetics counters. Likewise note the health and nutritional section of every major supermarket chain. As long as you see these departments, you will know there is still plenty of market for networkers.

So next time the saturation theory comes up, tell them about Amway and Avon. Tell them about Go-Re-Mar. Tell them about Big Macs.

Jeffrey A. Babener
Babener & Associates
121 SW Morrison, Suite 1020
Portland, OR 97204
Jeffrey A. Babener, the principal attorney in the Portland, Oregon law firm of Babener & Associates, represents many of the leading direct selling companies in the United States and abroad.

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