What is Network Marketing – by Someone Who Realizes the Potential of this Multi-Billion Dollar Industry?
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Network Marketing is a term that describes how a company decides to market their products or services. The companies decide that to build their business, they want to make use of a distributor network.
In simple terms it is having independent agents serve as distributors of their products or service, and are encouraged to build and manage their own sales force by recruiting and training other independent agents. Usually such businesses are multilevel marketing in nature in that payouts occur at more than one level.
It is a method employed by large firms such as Amway, Avon, Tupperware, Mary Kay Cosmetics. And now even entrepreneurs like Donald Trump, Robert Kiyosaki and Warren Buffett have endorsed Network Marketing either by buying out a Network Marketing company, or investing in one, or even building their own using Network Marketing as the business model; as they have realized the potential of this multi-billion dollar worldwide industry that distributes practically any portable item.
The Structure in Simple Terms
Independent distributors:
are encouraged to sell the company’s products or services,
are encouraged to build and manage their own sales force team by recruiting and training other independent distributors (known as a downline),
are awarded a commission based upon the volume of product sold through their own sales efforts as well as on the sales revenue of the sales-force recruited by the distributor and his/her recruits (called downline),
develop their organizations by either building an active customer base, who buy directly from the company, or by recruiting a downline of independent distributors who also build a customer base – thereby expanding the overall organization,
also earn a profit by retailing products they purchased from the company at wholesale price.
Commissions are paid to multi-level marketing distributors according to the company’s compensation plan. There can be individuals at multiple levels of the structure receiving royalties from a single person’s sales.
This arrangement of distributors earning a commission based on the sales of their independent efforts as well as the leverage sales efforts of their downline is what makes the business model so lucrative, and which would eventually create residual wealth.
Multi-level Marketing, Direct Selling or Referral Marketing?
Network Marketing also goes by the following terms…
Multi-level Marketing – The structure is designed to create a marketing and sales force by compensating promoters of company products not only for sales they personally generate, but also for the sales of other promoters they introduce to the company, creating a downline of distributors and a hierarchy of multiple levels of compensation.
Note: If not abused, this method of marketing has the potential to create residual wealth. In addition, one has to learn effective and modern marketing strategies that work in this internet age.
Direct Selling Method – Independent Distributors market directly to consumers and potential business partners.
Note: If done in a professional way, this method encourages customizing a product plan or a service plan according to the customers’ individual needs.
Referral Marketing – Products or services and the business opportunity is marketed by means of a relationship of referrals and word-of-mouth marketing.
Note: Traditionally, your warm market was your friends, family and other personal contacts. Now imagine the scale of using modern marketing strategies (the internet) to build your list of fans.
Network Marketing – What you are building is a marketing network that will advertise your services and products.
Note: Network Marketing has always been a great way to get the word out about any business, and in today’s day and age, it is more effective than ever before – with social networking sites.
Some Controversial Issues
Why is it called a pyramid scheme?
Not all multilevel plans are legitimate. Some are pyramid schemes – where the money you make is based primarily on the number of distributors you recruit and your sales to them, rather than on your sales to people outside the plan who intend to use the products.
This is illegal, because plans that pay commissions for recruiting new distributors inevitably collapse, when no new distributors can be recruited. And when a plan collapses, most people (except perhaps those at the very top of the pyramid) end up empty-handed.
So, you need to research the company’s compensation plan, among other diligent research about the company and the products.
Why are MLM companies a frequent subject of controversy and lawsuits?
Some of the criticisms regarding MLM companies have been…
o that they are similar to illegal pyramid schemes,
o high initial start-up costs,
o price-fixing of products,
o encouraging if not requiring distributors to purchase and use the company’s products,
o emphasis on recruitment of lower-tiered distributors over actual sales,
o misleading information, especially with regards to income potential,
o potential exploitation of personal relationships which are used as new sales and recruiting targets,
o complex and sometimes exaggerated compensation plans,
o cult-like techniques which some groups use to enhance their members enthusiasm and devotion.
However, not all MLM companies operate in the same way. So once again, you need to do your research properly.
Why is there such a high failure (drop-out) rate?
We often hear the term that 97% fail in MLM. Research also comes up with statistics such as: “just 10% of Amway’s agents in Britain make any profit, with less than one in ten selling a single item of the group’s products” (Times Nov 27, 2007), or “while earning potential varies by company and sales ability, DSA says the median annual income for those in direct sales is $2,400.” (USA Today Sept 14, 2009). Why is this so?!!!!
Before deciding to quit or not to join at all, let me tell you of some of the reasons why most fail:-
1. not taught how to market effectively. Just talking to family and friends and strangers will only lead to frustration.
2. given the wrong impression – that there is no sales involved. Hence people find it difficult if they are not prepared to learn sales techniques,
3. given the wrong impression – that it is easy to duplicate. So people enter with the impression that this is going to be an easy ride.
4. given the wrong impression – that you are going to get rich. With the right training and determination and commitment and hard work, you will become rich. But it takes time, as this is exactly the same like someone builds his / her own business.
Hence, with the right frame of mind and the right marketing training, you will succeed like the 10%. If you use the internet to leverage your business, then you are light ways ahead of your competition who is prospecting strangers in the mall. In addition, although you need network marketing if you want to create residual wealth; leveraging your internet attraction marketing skills, will allow you to additionally create multiple streams of income. And it is this combination that will allow you to retire from ‘corporate America’, quit your 9-5 job, and live a life of financial freedom.
If You Would Like To Retire From Your 9-5 Job, If You Would Like Financial Freedom, And Are Willing To Work Hard To Achieve Your Dream Life, Lessons Are Being Given At BrandingYOU&Co.
To Your Success
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