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Network marketing is gaining in importance, although it seems that its best years have already passed. It is a platform that combines the flexibility of the business system and the payroll system. However, you have to remember that in order to really earn in marketing, we must be patient and all quick earnings are usually financial pyramids.
What is network marketing?
Network marketing is a business model based on a network of distributors in order to develop a company.
This is a good career for the few. It will be a waste to most others. As with any business, a successful multi-level marketing (MLM) venture will require considerable investment of time and effort. If there is correctly done, it’s a great way to build wealth.
Network marketing usually consist on the use of three basic types of systematic strategies to make money:
- Lead generation.
- Recruitment: adding clients and/or business partners to the network.
- Building and management: methods used to train, motivate and manage recruits.
There are many types of network marketing, including two-ply programs and multi-level marketing, but many more stronger marketing companies, such as Avon, are single-ply.
Network marketing includes multi-level marketing (referred as MLM), direct marketing, also known as consumer direct marketing (CDM) and hybrids. Avon, Mary Kay, and other reputable companies have grown into multi-million dollar companies using this marketing and distribution model.
Single-ply network marketing
You sign up for the affiliative program to sell their products or services. You don’t have to recruit other distributors and pay only when you sell directly. Avon is a company which uses single-ply network marketing.
In some online partner programs, you only pay for the traffic you have directed to your partner’s website. Pay-per-click (PPC) and pay-per-lead (PPL) partnership programs are further examples of a one-level network.
Two-ply network marketing
This term refers to network marketing which pays for direct sales (or traffic that you direct to a website) and target sales or recommended traffic made by affiliates or distributors whom you recruit to work under you. An example of a two-ply program is the Ken Envoy sales website.
Multi-level marketing (MLM) is a distribution-based on marketing network which has at least two “deep” levels. Some MLM programs allow you to earn money at a depth of at least five levels.
How does network marketing work?
Network marketing is known by many names, including multi-level marketing, mobile marketing, affiliate marketing, consumer direct marketing, recommendation marketing or a home business franchise.
Companies using the network marketing model often create seller levels – which means, they are encouraged to recruit their own sales network. The creators of the new level earn a commission on their own sales and on sales made by people from the level they created. Over time, the new level may germinate another level, which brings more commission for the person from the top or middle.
Salaries’ earnings therefore depend on the recruitment and sale of products. Those who entered early and are at the highest level are doing the most.
Advantages and disadvantages of network marketing
There is a stigma associated with network marketing, especially those with many levels which can be characterized as financial pyramids – that is, top-level salespeople can earn impressive amounts on commissions from lower levels. People at lower levels will earn much less. The company earns money by selling expensive starter kits to new recruits.
What are the advantages of MLM?
The biggest advantage of multi-level marketing is that you can build a thriving business without having to develop a product or brand. The company provides this for you; all you have to do is sell. A well-managed company will have systems and marketing materials to increase your chances of success.
It is also scalable. You can transform your business into a huge company with many layers of recruits. If you want to invest time, you can finally have enough sales representatives in your team to completely leave it. A network marketing enterprise can therefore be an effective income generating asset. There are many MLM entrepreneurs who passively earn six- and seven-digit incomes.
In addition, MLM is a great way to develop sales skills, public speaking, leadership and management. I often suggest this to beginner entrepreneurs who have not yet decided what they want to implement. Network marketing may not make you rich overnight, but it can teach you a lot of what you need to know to run a successful business. You can use it as a training ground.
Finally, many people think that mentoring and personal development are involved in network marketing. If you participate in MLM, you join a community of like-minded people. Your peers will want to achieve financial freedom, stick to their product, believe in their mission and want to improve their skills. This is valuable in itself.
Are there any disadvantages to network marketing?
Of course, there are plenty of them and you have to be aware before such a decision.
The MLM world is a seat of cheats and suspicious characters. There are lots of examples of companies which have extracted money from people.
Change of regulatory framework
Trade regulators and securities have prompted network marketing companies to base their remuneration models on sales commissions rather than recruitment.
Your resource may disappear
If a company makes or ends a relationship with you, it will destroy the resources you’ve built up over the years. MLM participants rely on the good condition of the company. One way to hedge against this risk is to maintain close relationships with people in your structure. They will then be more likely to come with you if you decide to change company.
Most network marketing companies come with a toll. This will usually be in the form of a minimum monthly product purchase, initial payment, or annual membership cost. Moreover, there are often encouragements to pay more to improve or qualify for higher bonuses.
Is it worth it?
Anyone considering joining to the network marketing operation should do the research before making a decision. Consider the following questions:
- Was it a chance to earn money by selling products or recruiting others?
- What are the achievements of the company’s founders?
- Are you personally enthusiastic about products?
- Are people you know enthusiastic about products?
- Is the product successfully promoted?
- Do you expect a relatively fast path to profit or a long path?
Network marketing can be a good career, but it has traps. Perhaps the main thing is to convince people that this will lead to easy money, and then discover the truth. If you make an informed decision and work hard for success, I encourage you to do it. If you can’t do this, look for other opportunities.