Network marketing is another term for multi level marketing, consumer–direct marketing, referral marketing, affiliate marketing, and widely known as multi level marketing or MLM for short. Network marketing is a business model in which companies hire independent sales representatives to sell their products and services directly to consumers. These independent distributors make money by selling the company’s products, and through the sales of their downline members. The more people an independent salesperson can acquire through a referral system, the more sales they can make as they earn a small commission from the sales of those below them. Hence the word “network” is used in the term network marketing because there are multiple levels that create a network of salespeople working to sell products and services directly to consumers.
History
Network Marketing began to take off after the 1930’s during a time when health supplement companies began to utilize this particular business model. Today, there are several different network marketing businesses such as Monay, Mary Kay, Avon, and Amway. Amway has been the most successful company in network marketing pulling in billions of dollars a year. The industry is growing, particularly due to the rise of social media use, with more people signing up to be independent distributors.
The Process
As described, Network marketing works as a multi–tier system. The more independent sales representatives that sign up through a referral, the more the top tier members will earn. The commissions earned come from sales and from the sales of referees. The more members a representative recruits, the larger their downline becomes which means they can earn more income if their downline team is making sales.
Whoever signs up to be a salesperson does not earn a fixed income from the company, but rather has to earn based on their own work ethic and effort. The key to success in Network marketing is to build the biggest network, the more people involved in direct selling on your team, the more lucrative. It is important to note, though, that a company should focus on selling products rather than just pushing for recruits. If a company encourages recruitment more than selling, it can potentially be flagged as a pyramid scheme.
Oftentimes, direct salespeople that work for network marketing companies are selling on social media and building their influencer business as well, but many times they start by asking family and friends to join. Reaching out to those most closely related is a typical starting point for those just starting out in the network marketing business. Many times relatives, friends, and acquaintances are the first customers many network marketing salespeople acquire in their downline.
Whoever signs up to be a salesperson does not earn a fixed income from the company, but rather has to earn based on their own work ethic and effort. The key to success in Network marketing is to build the biggest network, the more people involved in direct selling on your team, the more lucrative. It is important to note, though, that a company should focus on selling products rather than just pushing for recruits. If a company encourages recruitment more than selling, it can potentially be flagged as a pyramid scheme.
Oftentimes, direct salespeople that work for network marketing companies are selling on social media and building their influencer business as well, but many times they start by asking family and friends to join. Reaching out to those most closely related is a typical starting point for those just starting out in the network marketing business. Many times relatives, friends, and acquaintances are the first customers many network marketing salespeople acquire in their downline.
Pros
As with any business model, even those with tainted reputations like Network Marketing, there are still positive aspects which include:
● Unlimited earning potential: A salesperson can make as much as they want if they can amass their own personal sales and grow their downline. There are usually no limits on expanding a downline and this leaves the potential to earn a lot or very little depending how effective you market and sell your products as an independent distributor.
● Low cost: Starting a business can cost a lot of money, but with network marketing, direct salespeople can start their own business with a small investment. This is a low risk opportunity that can yield profitable results.
● Flexible: Most network marketing businesses are run from the comfort of home, at any time, any day, with no set amount of hours. This is significantly appealing for many people in various situations in which they are not able to work a 9–5 job, such as stay at home moms or college students. Network marketing is a side hustle for most people because it can be done in addition to completing a daily packed schedule.
● Unlimited earning potential: A salesperson can make as much as they want if they can amass their own personal sales and grow their downline. There are usually no limits on expanding a downline and this leaves the potential to earn a lot or very little depending how effective you market and sell your products as an independent distributor.
● Low cost: Starting a business can cost a lot of money, but with network marketing, direct salespeople can start their own business with a small investment. This is a low risk opportunity that can yield profitable results.
● Flexible: Most network marketing businesses are run from the comfort of home, at any time, any day, with no set amount of hours. This is significantly appealing for many people in various situations in which they are not able to work a 9–5 job, such as stay at home moms or college students. Network marketing is a side hustle for most people because it can be done in addition to completing a daily packed schedule.
Cons
It is no secret that Network Marketing, commonly referred to as MLM has negative elements to consider.
● Erroneous Reputation: Many people are hesitant to join the network marketing business because it is often related to scams and fraudulent activity, or deceptively dishonest tactics in the least. Because of this many direct sales people find it challenging to bring on new referrals into their downline. The Federal Trade Commission (FTC) monitors these issues and handles complaints in this arena.
● Competitive: Because Network Marketing has become so popular and is only growing, the competition independent representatives face can be overwhelming. There are millions of people trying to sell the same products worldwide.
● Tough Grind: Being in the network marketing business requires relentless dedication, sales drive, and a lot of hard work. It is not a get rich quick scheme and it is common knowledge that many, if not most, people do not make any significant earnings.
● Erroneous Reputation: Many people are hesitant to join the network marketing business because it is often related to scams and fraudulent activity, or deceptively dishonest tactics in the least. Because of this many direct sales people find it challenging to bring on new referrals into their downline. The Federal Trade Commission (FTC) monitors these issues and handles complaints in this arena.
● Competitive: Because Network Marketing has become so popular and is only growing, the competition independent representatives face can be overwhelming. There are millions of people trying to sell the same products worldwide.
● Tough Grind: Being in the network marketing business requires relentless dedication, sales drive, and a lot of hard work. It is not a get rich quick scheme and it is common knowledge that many, if not most, people do not make any significant earnings.
Is Network Marketing Right for Me?
Joining a Network Marketing company should not be a decision made in haste. There are several factors that need to be taken into consideration and evaluated before signing up to run your own direct sales business including:
● Is the company reputable? Are there any scams in relation to this company?
● What is the compensation plan? Are there real testimonials of people making money?
● Does the company have a mission statement or vision?
● Are the products high–quality?
● Is the company reputable? Are there any scams in relation to this company?
● What is the compensation plan? Are there real testimonials of people making money?
● Does the company have a mission statement or vision?
● Are the products high–quality?
