Someone from your close circle must have approached you to try some products at factory rates. Moreover, they might have also asked you to become a distributor just like him and earn a decent commission. If yes, then you have been pitched for Network Marketing Business.
Definition: Network Marketing implies a people-oriented business model that involves direct sales and marketing by Independent Representatives or distributors.
It is known by a variety of alternative names listed below:
- Multilevel Marketing (MLM)
- Pyramid Scheme
- Referral Marketing
- Cellular Marketing
- Affiliate Marketing
- Consumer Direct Marketing
- Home-based Business Franchising
It is not an industry but a pure distribution model where people connect, engage and build relationships to grow business. These relationships gradually take the shape of ever-increasing networks.
The distributors approach their personal network to sell the product. Moreover, they motivate them to join the organization and build their network. Further, these networks are used to generate sales and recruit more people.
Network Marketing businesses have a non-salaried workforce. However, they earn through sale commissions derived from a pyramid-shaped commission system.
It involves person-to-person sales and approaching customers using word-of-mouth. Such businesses don’t require any distribution channel. The mobilization of goods happens directly from the manufacturer to the consumer.
The people joining in as distributors are known as IBOs, i.e., Independent Business Owners. They become part of a hierarchy arranged in the form of a structured pyramid.
The bottom of the pyramid is known as the Downline, and recruited participants as the Downline Distributors. Moreover, each participant earns a commission according to their position in the pyramid.
Participants try to sell more, add more people, and motivate and train them to earn more commission. In return, they get a percentage of their sales as commission.
Content: Network Marketing
Network Marketing Companies
It is a business model that strictly implements direct marketing by the people for the people. The distributors use relationship referrals and earn recurring and passive income.
The well-known examples of multilevel marketing companies are furnished below:
- Tupperware: It is one of the best MLMs, with a presence in around 100 countries and a huge membership base. It deals in plastic products that are treatable and produce less waste.
Some product line includes Home, Kitchen, Storage and Serving Products. Also, its ideologies empower women and help make them self-sufficient.
- Amway: Another top-ranking network marketing company is Amway. It has operated for 60 years since its inception, offering more than 400 products.
Its owners believe the IBOs must take ownership and develop their business style. Consequently, they will connect more, consider it as their own business and work hard with the same dedication.
Herbal Life, Forever Living Products, and Modi Care are more such companies.
Today, many companies are using MLM in combination with traditional marketing methods. They do it by including network marketing as one of the distribution channels.
Given below are the advantages of running and participating in a multilevel marketing business:
- Good Earnings: The people on the top tier of the pyramid will earn a good amount of money. This is because, the accumulation of commission runs backwards from the pyramid’s Downline.
- Company Profits: The company earn profits from sales and the starter kit purchased by the distributors.
- Equal Opportunity: MLM does not require specialized skills to join the business. They focus on creating and expanding the network. Therefore, there is equal opportunity for all to join in and earn.
- Less Investment: Participants only invest a little money to do business. But, they must invest the most valuable thing, i.e., Time and Effort.
- No Advertisements: Companies don’t have to spend money on advertisements. As, personal marketing is more effective and less costly.
The basic model is quite the same in all types of network marketing businesses. Here, we have discussed its three most prominent types in brief.
- Multilevel Marketing: Here, the sales force is compensated not only for sales they personally generate. Also, for the sales of the other salespeople that they recruit. They sell authentic products or services that distributors believe in.
- Affiliate Marketing: The latest form of network marketing works on online or e-platforms known as Affiliate Marketing. Bloggers and people review and recommend products of various brands. When anybody purchases that product, the blogger will earn a commission.
- Direct Marketing: This marketing system only has one tier wherein people register and start selling the offerings. Unlike MLM, the participants don’t need to add more people to the network.
How to start Network Marketing?
It is a very simple business model, and anyone can try their luck. You need a quality product or service that offers value to customers.
Next, create standardized and clear policies to be followed by the Downline. Now, try to join more and more people in the system, train them and motivate them to sell and create their own sub-network.
Network Marketing Strategy
It is an unconventional and different marketing method that uses a push strategy. Simply put, it pushes people to buy products and services and join the team.
The company recruits all the interested people, irrespective of the following factors:
- Financial Status
Post recruitment, these people become independent business owners. They are not entitled to a fixed monthly salary but follow a commission system.
A compensation plan usually pays out to participants from two potential revenue systems.
- Sales commission from directly selling the product or service.
- The payout from the commission is based upon the wholesale purchases made by other sellers the participant has recruited to sell the product.
The company uses three core strategies to succeed:
- Lead Generation
- Building and Management
All in all, it is a Morden Marketing Method that creates a huge membership base. Companies don’t directly get involved in the selling and distribution. In addition, they don’t need any distribution channel. The simple transaction happens between the manufacturer and the customer.
It is predicted that network marketing will be the most chosen career option by 60% of people.