My decision to start Commercial Open Source blog was significantly influenced by my desire to share ideas on open source business models, extending my quest for feedback and opinions from other authoritative open source thought leaders.
Rereading Matt Asay‘s post about “the convenience of proprietary software“, to which just yesterday followed Stormy Peters’ answer, I thought it was time to throw another business model idea: open source network marketing.
Make a difference by aepoc
Wikipedia’s entry on Network Marketing reports (the italic emphasis and URLs are mine):
Network marketing is a business distribution model that allows a parent multi-level marketing company to market their products directly to consumers by means of relationship referral and direct selling.
Independent unsalaried salespeople of multi-level marketing referred to as distributors (associates, independent business owners, franchise owners, sales consultants, consultants, independent agents, etc.), represent the parent company and are rewarded a commission relative to the volume of product sold through each of their independent businesses (organizations). Independent distributors develop their organization by either building an active customer base, who buy direct from the parent company and/or by recruiting a downline of independent distributors who also build a customer base, expanding the overall organization. Additionally, distributors can also earn a profit by retailing products which they purchased from the parent company at wholesale price.
Skepticism around Multi Level Marketing has its place, and there are many resources explaining what’s wrong with Multi Level Marketing. As a matter of fact the legitimacy of MLM businesses can’t be given for granted, and many pyramid schemes try to present themselves as legitimate MLM businesses. Apparently the Federal Trade Commission advises that MLM companies setting greater incentives for recruitment than product sales are to be viewed skeptically. Others state that the real problem with MLM is the people it attracts, highlighting that network marketers often have little or no experience developing business relationships other than that of employer/employee, and they are in danger of disappointment caused by the failure to quickly satisfy unrealistic economical expectations.
So, why do we need a scheme like an MLM to sell open source?
Information asymmetry make categorizing open source customers a not so easy task, and I believe that is not uncommon to see users – read potential customers – spent a lot of time (therefore money) instead of buying commercial open source products and services. Someone, somewhere in the IT department, knows how much time spends to make things work.
These people can make the difference, they can really help to turn users into customers, from inside.
They use open source software, they know what kind of support do they need, they are the best distribution channel than ever. They do know how to reach customers – rather they live by them – and how to offer your value proposition.
The point is: what you can offer them?