Network marketing or Multi-level Network Marketing (MLM) is a method of marketing that makes use of independent sales representatives as a way to reach a wider range of networks, where more conventional methods such as traditional online or offline advertising wouldn’t work. Network marketing is a very popular business opportunity for people looking to work part-time doing more flexible jobs.
Hundreds of companies utilize this method, including some well-known brands such as Avon, Amway and Herbalife for example. These companies and their respective associates hire a ‘sales force’, much like insurance companies have been doing for years, and they use these people to reach networks such as friends and family.
Ever come across an ad on TV using the term “Independent Insurance Agent”, or something similar? These persons are not really employees of the company. They operate independently by purchasing a product sample starter kit, which usually costs a few hundred dollars. This way they get an opportunity to sell the product line to their own contacts, friends, family, etc.
These types of marketing programs rely on the ability of the individual to influence their network and sell the products. When properly executed, both parties benefit. A lot of network marketing programs require participants to recruit more sales reps, and as a participant adds to their own “downline”, sales made by the new recruits generates income for those above them.
Compensation cannot be made exclusively on the basis of recruitment. Instead, it should be based on the ability to sell the services and/or the products of the company. If a network marketing program generates revenu almost entirely from these recruitments then it may be illegal, and by definition it would be a pyramid scheme.
A network marketing program is usually exempt from traditional business regulation and state and federal laws don’t define it as franchises under franchise law, so you may need to do some research.
Why Businesses Use Network Marketing
It’s pretty simple, businesses need to access your network, influence your family and friends, and traditional advertising methods tend to be limited. You would have an easier time trusting a new brand if a friend or family member suggested it, and that’s what makes these programs so effective.
The types of products and services included in a network marketing program can range from Nutrition, Finance, Communication, Internet Access, Electric Power, Weight Loss, and so on. Word of mouth marketing is too powerful to ignore and because it’s not as expensive as the alternative, which would be spending millions of dollars each year on complex marketing campaigns, network marketing companies are more than willing to pay you to spread the word.
The difference between a successful attempt at being a network marketer and a complete disaster doesn’t necessarily depend on a person’s ability to bug their friends, or lecturing them into submission to have them buying the product or service. That strategy might yield immediate results but it wouldn’t work for long.
Your ability to learn who in your circles would benefit from what you’re selling, and who would be interested in joining the program, that information will get you better results in the long run.
Different Types Of Network Marketing
Almost all network marketing companies operate as some type of multi-level marketing plan, where the company provides a product or service and assigns agents to sell it. This multi-level marketing plan gives the sales reps an opportunity to earn a commission by selling products, and recruiting new reps and growing their own little network inside the company.
Direct marketing works in a similar way, where a product line is launched to the market, and the company invests in a range of marketing materials including training and tools to help the new investors become successful. The commission largely depends on the number of items sold over a period of time and if there is an existing market to tap into, where products can sell out in large volumes.
People who are looking for a more family-friendly type of network marketing could try out party plans, which are very popular by parents who want to create an additional revenue stream. Party plan systems require an initial investment to create websites, buy product samples and relevant marketing materials, but their flexible scheduling makes them ideal for anyone splitting their time between the company and other responsibilities.
Today’s technology allows sales representatives to expand existing networks and tap into new ones in order to create a wider revenue stream. As their down-line expands, so does the commission and with a big-enough down-line your leg work reduces and you start earning from the new reps. But before you get to this point, you have to select the right type of system and you need a plan of action.
Here are the different structures available in the world of network marketing:
The unilevel structure allows you to earn from your frontline and it doesn’t limit the number of people you can sign. It’s one of the oldest systems and it’s certainly not the most lucrative but it does promote cross-line competition, which means a higher chance of expansion.
Stair Step Breakaway Plan
This plan is perfect for the more aggressive marketer, and this plan is excellent if you have plenty of time to dedicate to sales. The higher you go up the steps, the more you break up from your own up-line, and in the end you’ll only have people on your down-line, which means people will stop earning from you.
If for instance you’re supposed to breakaway at step 7, your up-line won’t earn from you anymore, and you will get all commissions from anyone below you.
The Binary System
The binary system has been popularized by Questnet and it takes significant dedication to earn from. With this plan you get only two down-lines and new sign-ups are automatically under your down-line. In order to make money you have to earn from both down-lines.
This means when you choose this type of plan, you want to try to get one where you can carry over extra points from the less active binary side.
Forced Matrix Plan
The forced matrix plan aims to promote teamwork and it allows newcomers to earn high commissions by combining forces with fellow members. Because frontline has defined, the system allows members to focus on signing more people in order to earn on higher levels.