Network Marketing 4 Today

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 other main benefit of the Network Marketing business model is the fact that some of the money spent on advertising and the distribution channel (wholesalers, retailers, etc.) can now go to the people who actually promote the products by their word-of-mouth advertising.

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.

Distributors earn commissions based on the sales efforts of their organization, which includes their efforts as well as the efforts of their downline. Commissions are paid to distributors according to their company’s compensation plan. There can be multiple levels of people receiving commission from one person’s sales. In addition, distributors can earn profit by retailing products which they purchase from their parent company at wholesale price.

What’s the Difference Between Network Marketing and Multi-level Marketing, or MLM?

In a word, nothing! The terms Network Marketing and Multi-level Marketing refer to two aspects of the same type of business.

Network Marketing describes how the products are marketed, through a network of people in communication with one another.

Multi-level Marketing is how the people in the network are compensated for their efforts. It simply means that commissions are paid on multiple levels of the organization, thereby creating leverage.

And Leverage is....

Leverage in this instance refers to being able to earn income on someone else’s efforts.

Obviously, this concept is used by most businesses with employees. An employee earns money for a company, and in turn is compensated with a salary, which is hopefully less that he’s bringing in. The owner of the company gets to keep the difference. So he is leveraging his income by making money off his employees.

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. Leverage will be discussed further in future articles.

Is This What’s Called a “Pyramid Scheme”?

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.

Network marketing companies are not pyramids, though some pyramid schemes try to pass themselves off as legitimate MLM businesses. In most legitimate MLM companies, commissions are earned only on sales of the company’s products or services. No money can be earned from recruiting alone, as in sign-up fees.

Two Good Resources For Learning More About the Industry of Network Marketing.

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.