You may have heard about Network Marketing.
Network marketing tends to appeal to individuals who have high energy and strong sales skills.
Moreover, people who can build a profitable business with a modest investment often do this type of marketing.
A network marketing business can either be a single-tier program, where you see the product.
However, it can also be multi-tier, where you also recruit additional salespeople.
It is important to note that there are also certain disadvantages of this type of marketing.
Make sure to beware of network marketing companies that tend to create a number of tiers of salespeople or require you to purchase expensive products or training material up-front.
Also, make sure that you thoroughly research the company before you join it.
So let’s start:
Network marketing is a type of marketing that relies on a one-on-one slave by individual representatives.
This individual may work from home and can have a great network of business partners and salespeople for the growth of the business.
A network marketing business may need you to build a network of business partners or salespeople that can assist you with lead generation and closing sales.
Moreover, such marketing can be of two categories:
- single-tier program
- multi-tier program
In a single-tier program, you will have to sell the products or services, however, in a multi-tier program, you will have to sell the products and recruit other salespeople.
It is important to note that some of these network marketing is condemned as a pyramid scheme.
A pyramid scheme is an unfeasible business where real investors tend to make money by recruiting other people instead of selling their products and services.
Almost the entire pyramid scheme-based business tends to collapse.
Therefore, it is important that you carry out proper research thoroughly before joining any company.
Working in a Network Marketing
You may hear the name network marketing interchangeably with multilevel marketing, MLM, cellular marketing, affiliate marketing, consumer-direct marketing, referral marketing, or home-based business franchising.
It is important to note that network marketing companies tend to offer to create tiers of salespeople.
And it encourages them the recruitment of their salespeople.
The individuals that make a new tier or upline will get a commission on their sales.
In the same way, this new tier will again recruit other salespeople and both top and middle-tier will get commissions on their sales which is the downline.
Therefore, network marketing is based on recruiting salespeople.
Moreover, it encourages them to recruit their salespeople to earn profit from it.
The earnings of the salespeople tend to depend on recruitment as well as product sales.
Those who get in early and are in the top tier tend to make the most.
It is important to note that the FTC advises that single-tier network marketing operations are more reputable than multi-tier schemes.
Types of Network Marketing
Depending on the method of marketing, network marketing can be classified into the following three categories:
Direct Marketing: This is a type of single-tier marketing system.
In such a system, individuals tend to enroll themselves to sell their services and products to customers.
Thus, there is no need to hire any distributors in direct marketing.
The individual tends to gain profits from the direct sales made by them.
Affiliate Marketing: This one is highly trending nowadays.
Moreover, these creators tend to receive profit based on the sales through their links.
The creators can easily add a simple disclaimer about their products in their posts, blogs, or video.
Multi-level Marketing: When you have a distribution depending on network marketing, it will involve both direct sales and distributors.
It is important to note that multi-level marketing is often mistaken for pyramid schemes.
Due to this, they often tend to receive the wrong impression.
However, multi-level marketing is to sell the products which distributors have to believe.
Whereas pyramid schemes will require people to invest in the deceitful promise of profit.
Multi-level Marketing vs. Network Marketing
It is important to note that multi-level marketing is a form of network marketing with a number of levels of distributors.
A large part of a multi-level marketer’s success tends to come from recruiting.
However, there are two other, simpler modes of network marketing:
Single-tier Network Marketing: In this type, you will sign up for the affiliate program of a company to sell its products or services.
You will not need to recruit other distributors and all your payment will come from direct sales.
For instance, Avon is a popular beauty company that uses single-tier network marketing.
In some online affiliate programs, you can get paid for the traffic you drive to the website of the affiliate.
Pay per click, PPC, and pay per lead, PPL affiliate programs are other examples.
Two-Tier Network Marketing: Unlike single-tier marketing, this one will involve some recruiting.
However, your payment is not solely dependent on it.
Moreover, you will get paid for sales or traffic you drive to a website, and for direct sales or referred traffic by affiliates or distributors, you recruit to work for you.
An example of a two-tier program is Ken Knvoy’s Site Sell.
Advantages and Disadvantages
It is important to note that there is some stigma attached to the network marketing business.
It is especially one with multiple tiers which can be characterized as a pyramid scheme.
Moreover, in this scheme, the salespeople in the top tier can make impressive amounts of money on commissions from the tiers below them.
The individuals on the lower tiers, however, tend to earn much less.
The company tends to make money by selling expensive starter kits to new recruits.
What makes network marketing appealing is that an individual with a lot of energy and good sales skill can create a profitable business with a modest investment.
Furthermore, a good rule of thumb, according to the Federal Trade Commission, FTC is that an operation that makes sure compensation on actual sales to real customers tends to be more reputable than multi-tier schemes.
In such schemes, people make money based on the number of distributors they recruit.
Is it Risky?
Yes! There are certain risks that go with this type of marketing.
You will risk the money that it takes for startup costs, inventory purchases, and training materials.
Moreover, you will spend time and money filling out paperwork, filling and shipping orders, and recruiting new sale person.
In order to make money back, you will need to sell a lot of products and to continue to make a profit, you will need to continue selling more, and in some cases, recruiting new salespeople for your downline.
Consider whether your network has enough buyers to support the needs of your business.
And make sure to research the network marketing companies thoroughly before you get involved.
Is it a Pyramid Scheme?
While both network and multi-level marketing have been accused of being pyramid schemes, there are some important differences between the two.
Those who are able to recruit more members into the program are often able to enjoy greater residual commissions.
Network marketing tends to be a legitimate and legal business structure.
It tends to offer real products and services that are sold to customers.
Will you make Money?
Though it is certainly possible, not probable.
Some people do enjoy great success at this type of marketing, largely due to their ability to recruit more members.
It is important to note that there are two main revenue resources:
- selling products
- commissions from sales made by team members downline
Moreover, the more people there will be downline from you, the more money you will be able to accrue, and the larger team you recruit, the more money you can make.
It is important to note that most people who join legitimate network marketing programs make little or no money.
People can actually lose money in this form of marketing.
Some can become involved in an illegal pyramid scheme and not realize that they have joined a fraudulent venture.
And thus they can lose everything they invest.
Therefore, it is important to do your research and ask around before diving in.
To Sum Up
In order to be a successful network marketer, you must study the market first.
Try to find the affordability and your target market and you will have to research for a reliable and trusted network marketing company to invest in.
Moreover, always research the company thoroughly before investing in it. You will just have to identify your opportunities and connect with different marketers to be successful.
It is important to note that network marketing is legal and a trusted form of marketing.
However, in some cases, people can misconnect it with a pyramid scheme which is illegal. In such a scheme, people tend to make money by recruiting new members instead of selling their products and services.