Network marketing is a business model perfectly suited for high energy individuals with a drive for sales. It offers a flexible working schedule with many part-time opportunities that will fit around an individual’s daily life.
It is common for a network marketing strategy to require its employees to both sell products and recruit more salespeople, as this helps to further profits and lead generations. Caution is advised when it comes to companies that place the majority of their focus on recruitment rather than sales since this tactic is often an indication of an illegal pyramid scheme. Researching a company thoroughly before joining and being aware of businesses that have a large multi-tiered structure will help to avoid becoming involved with such a scheme.
What is Network Marketing?
Network Marketing, sometimes called Multi-Level Marketing (MLM) or Direct Sales, was first seen in America in the 1930s and has become increasingly popular over the last two decades. It is defined as: ‘A business model in which a distributor network is needed to build the business. Usually, such businesses are also multilevel marketing in nature in that payouts occur at more than one level’. Some well-known companies such as Mary Kay, Tupperware, and Avon Cosmetics used this style of marketing.
How Network Marketing works
When an individual joins a network marketing-based business, they will be asked to make a small investment upfront, usually in the region of a few hundred dollars, which will secure them the equipment and products to sell.
This marketing model is not only focused on sales as recruitment is often equally important. Recruiting another salesperson can have a number of benefits: in the single-tier structure, the individual will gain a commission from this recruitment. For a multi-tier structure, the potential for commissions is much higher. These encourage an individual to recruit a network of new employees, thus making a new tier. The initial recruiter, or upline, will then receive a commission of all sales made by their network. In turn, this network is encouraged to create another network for themselves. This serves to benefit both middle and upper-tier creators, since they will both receive a commission from sales made by this downline tier.
However, the more tiers a model relies upon, the more contentious the business becomes. This is because such a structure allows for the major profits to go to those in the highest tiers, while those selling in the lowest tiers will receive considerably less money. The Federal Trades Commission advises working for a single rather than multi-level business for greater financial benefits. It is also important to note that these types of business models are usually not defined as franchises and therefore are under fewer federal laws, so it is advised to thoroughly research before making an investment. To find out how to safely invest money in these opportunities, as well as how to become a successful network marketer, check out these network marketing books.
Network marketing businesses can be a really great opportunity, especially if an individual is a good salesperson, likes a more flexible working schedule, is passionate about the product they are selling, and feels their friends or family would appreciate the product too. However, it is important to remember to research the company and the product before making the initial investment and getting stuck into sales.