What Is Network Marketing?
Network Marketing is a business distribution model that allows a company to market their products directly to consumers by means of direct selling and referral, or word-of-mouth advertising. It differs from most other types of businesses in that there are no advertising, wholesale, or retail costs involved (no middle men!).
How Is 'No Middle Men' a Business Benefit?
One of the benefits of this is that more money can be spent on research, development and manufacturing, which usually results in much higher quality, unique products.
The benefit that probably means the most to you? It's the fact that some of that money that's freed up by not paying for advertising, wholesalers, and retailers, can go in the pocket of the person who is promoting the product by telling his friends and family about it.
These people are referred to as associates, distributors, independent agents, and other terms. They are unsalaried salespeople that basically have their own business, and develop their organization by either building a customer base that buys their company's products directly from the parent company and/or by recruiting a downline of independent distributors who also build their own customer base, thereby increasing the size of the overall organization.
Associates can earn money in the form of commissions based on the efforst of their organization, which includes themselves and everyone in their downlines. These commissions are calculated based on the individual company's compensation plan, which determines how an associate gets paid. There are usually many levels of people getting paid from one person's sales. Also, associates can earn money by retailing products that they buy from the company at wholesale prices.
What's the Difference Between Network Marketing and Multi-level Marketing, or MLM?
There is no difference! These two terms, network marketing and multi-level marketing actually refer to different aspects of the same type of business.
Network marketing is just how it sounds: a network, or group of people, communicate with each other and products are marketed this way.
Multi-level marketing is simply the means by which the people in the network are paid for their efforts. Commissions are paid to multiple levels of distributors, which creates leverage.
What exactly is leverage?
Leverage in this instance refers to being able to earn income on someone else's efforts.
The leverage concept is nothing new. It's used by all for-profit businesses that have employees. The company charges money for something that the employee produces, then only pays the employee part of that. The owner of the company then keeps the rest, thereby leveraging the employees hours to create income for himself.
This is similar to the concept of network marketing compensation plans, with the distinct difference being that those that the distributor is leveraging off of are independent distributors themselves. This means that there are no employee costs involved, and that these people are going to be much more motivated to succeed.
Wait a minute! Is this one of those "Pyramid Schemes"?
If distributors are paid primarily from money received from new recruits, or if they're required to buy more product than they are likely to sell, then the company may be a pyramid. Pyramids are illegal in all states and most countries. Legitimate Network Marketing companies are not only legal, but thrive in every state and in most countries.
There are illegal pyramid schemes that try to pass themselves off as legitimate network marketing businesses. If a company is legitimate, the distributor can only earn commission from sales of the company's products or services, and not from recruiting sign-up fees alone.
Here are a couple of good resources for learning more about the Network Marketing Industry.
These resources, from a third-party perspective and not created by any specific company, are Brilliant Compensation by Tim Sales and The 45 Second Presentation That Will Change Your Life by Don Faila. I recommend both of these as not only informational, but as good resources to use in your prospecting efforts with skeptical people.
How Is 'No Middle Men' a Business Benefit?
One of the benefits of this is that more money can be spent on research, development and manufacturing, which usually results in much higher quality, unique products.
The benefit that probably means the most to you? It's the fact that some of that money that's freed up by not paying for advertising, wholesalers, and retailers, can go in the pocket of the person who is promoting the product by telling his friends and family about it.
These people are referred to as associates, distributors, independent agents, and other terms. They are unsalaried salespeople that basically have their own business, and develop their organization by either building a customer base that buys their company's products directly from the parent company and/or by recruiting a downline of independent distributors who also build their own customer base, thereby increasing the size of the overall organization.
Associates can earn money in the form of commissions based on the efforst of their organization, which includes themselves and everyone in their downlines. These commissions are calculated based on the individual company's compensation plan, which determines how an associate gets paid. There are usually many levels of people getting paid from one person's sales. Also, associates can earn money by retailing products that they buy from the company at wholesale prices.
What's the Difference Between Network Marketing and Multi-level Marketing, or MLM?
There is no difference! These two terms, network marketing and multi-level marketing actually refer to different aspects of the same type of business.
Network marketing is just how it sounds: a network, or group of people, communicate with each other and products are marketed this way.
Multi-level marketing is simply the means by which the people in the network are paid for their efforts. Commissions are paid to multiple levels of distributors, which creates leverage.
What exactly is leverage?
Leverage in this instance refers to being able to earn income on someone else's efforts.
The leverage concept is nothing new. It's used by all for-profit businesses that have employees. The company charges money for something that the employee produces, then only pays the employee part of that. The owner of the company then keeps the rest, thereby leveraging the employees hours to create income for himself.
This is similar to the concept of network marketing compensation plans, with the distinct difference being that those that the distributor is leveraging off of are independent distributors themselves. This means that there are no employee costs involved, and that these people are going to be much more motivated to succeed.
Wait a minute! Is this one of those "Pyramid Schemes"?
If distributors are paid primarily from money received from new recruits, or if they're required to buy more product than they are likely to sell, then the company may be a pyramid. Pyramids are illegal in all states and most countries. Legitimate Network Marketing companies are not only legal, but thrive in every state and in most countries.
There are illegal pyramid schemes that try to pass themselves off as legitimate network marketing businesses. If a company is legitimate, the distributor can only earn commission from sales of the company's products or services, and not from recruiting sign-up fees alone.
Here are a couple of good resources for learning more about the Network Marketing Industry.
These resources, from a third-party perspective and not created by any specific company, are Brilliant Compensation by Tim Sales and The 45 Second Presentation That Will Change Your Life by Don Faila. I recommend both of these as not only informational, but as good resources to use in your prospecting efforts with skeptical people.
About the Author:
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Wow!
You have a cool blog here. Thanks a ton for sharing this useful info.
Network marketing is a multi-billion dollar industry involving millions of independent business people around the globe. Network marketing is a 'BIG' small business, which offers everyone, with or without business experience, the opportunity to start and run a home-based business that works.