What is Network Marketing?

Network marketing is defined as a business model in which the business’s growth and success is largely dependent on a network of distributors to sell a product. Structurally, network marketing often relies on three systems of operation:

  1. Lead Generation. This is the work of identifying new and potential buyers of the product or service. Think Tupperware parties or Mary Kay makeovers, but there are also many other ways for distributors to spread the word about their products.
  2. Most network marketing programs incentivize distributors to grow their business by building and training a sales organization, often referred to as a “downline.” Sales generated by those in a distributor’s downline profit the individual making the sale as well as those above them in their “upline.”
  3. This is the human resources work of training, sponsoring, and motivating recruits to the program. This system may also manage the coordination of the business’s online presence as well as the shipping and delivery of the product or service.

Network Marketing Tiers

Single-Tier: This type of network marketing pays distributors when they make a direct sale.

Two-Tier: Two-tier programs both pay out direct sales and benefit those distributors who build a downline.

Multi-Level: Multi-level marketing (MLM) is a category of network marketing reserved for programs that allow multiple tiers (sometimes five or more deep) through which you can profit exponentially from a downline.

The Appeal of Network Marketing

For entrepreneurial types who aren’t interested in franchising a brick-and-mortar storefront, network marketing provides significant amount of freedom and flexibility as well as a low-cost barrier to entry. The product is moved as distributors connect with friends, family, and personal contacts in whatever established or creative ways they want.

Before becoming a distributor for any network marketing program, here’s a list of recommended due diligence questions to ask yourself and representatives of the business:

  1. How long has the company been around for? Five years is a good target minimum.
  2. Is the company quick to pay commissions? In other words, it should be well established, capitalized, and up-to-date with the latest technology.
  3. What do you know about the product? A product that is unique or less readily available is a boon to network marketing distributors, but beware of fads and trends. You should also be able to define the genuine need for the product and whether or not it will build you a residual income.
  4. How immediate is the potential income? You want to be able to put your cash flow into marketing efforts ASAP.
  5. Is your recruiter willing to also be a sponsor? Know the difference between a sponsor and recruiter. One is committed to your success and will motivate and train you while the other merely wants bodies in their downline.
  6. How ingenious and current is the program’s online presence? Most new distributors have full-time responsibilities and need programs that will accommodate their busy schedules by doing much of the monotonous work for them (i.e. online stores, order fulfillment, etc.).
  7. Is the product and company a winner in your eyes? You want to gauge your rapport with recruiters, other distributors, and the atmosphere of the company itself to determine if it’s going to be a good fit for you.

Sources:

https://www.entrepreneur.com/encyclopedia/network-marketing

http://www.jasonleehq.com/benefits-of-network-marketing/

https://www.thebalance.com/the-network-marketing-business-model-is-it-right-for-you-3515493

https://www.thebalance.com/choose-network-marketing-opportunity-1201185

 

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