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

Related posts:

1. How to Succeed in Network Marketing
2. What Do You Do If Your MLM Company Closed Its Doors On You?

If you are involved in an MLM company (also known as network marketing companies) or are interested in joining one, then you must be familiar with the phrase… ‘make a list of friends and family’. If you are anything like me, you must be really frustrated with this phrase, as you are aware that most often than not this strategy simply doesn’t work.

Another frustrating phrase is …‘talk to as many people as you can’. This in other words means pitching your sales-story to strangers, assuming that all their life they were waiting for this moment, and they will jump in the boat too and will make you rich! However, an interesting analogy is, that if you become an accountant you don’t ‘pester’ others to become an accountant too and work for your firm?!

After trying a couple of these strategies, one becomes to realize how frustrating this is and most often than not will lead you nowhere or with just a couple of dollars, which is not much compared to the hard work you put in, or worse off spending more than you are earning.

Why do most people fail?

A lot of people are shown a different view of the business model. A lot of people are told that there is no selling involved, and that the products are so good that they sell for themselves. ‘Once people try, they will buy for themselves and their family…’, the pitch goes. This myth is misleading, and brings a false relief to people who don’t like selling. However, people, with no experience of sales and no proper training in marketing and business, struggle desperately, often quitting within a few months. Some people might even join another MLM company, thinking that the problem is the company – but they are wrong.

THE MAIN PROBLEM is that most often than not, people are not taught how to market properly. What you want is people being ‘attracted’ to you and calling you to join your business. And this is done through learning how to market correctly, and through learning how to brand you as the expert. If you haven’t read Mike Dillard’s Magnetic Sponsoring, then grab a copy now, as it will change your outlook in how business is done.

In addition, people are given false beliefs that by joining an MLM one is going to become rich instantly. You can make money in network marketing, but it takes determination, hard work and patience, plus the PROPER TRAINING. Unfortunately, most of the training of most MLM companies is ‘outdated, offline-only, old-school techniques’, which although might work for a few, there are other cutting-edge marketing strategies (based on science) that can actually guarantee you results if implemented persistently.

Another frustrating problem within an MLM company is the attrition rate. The ratio at which people join your team and the amount of people who quit is horrendous. You find yourself training someone to leave you for another company. This can easily be resolved by giving your team proper ‘modern’ marketing strategies which actually work. Once they see that it’s working, they view you as an expert, and would want to continue being in your team.

So How do People Earn The Big Money in Network Marketing?

From research of different MLM’s brochures and website, in the success stories page, one always finds in small print that the typical annual gross income is much much less than otherwise advertised. A lot of articles state that 97% fail in the network marketing industry with only less than 3% actually live the life that is often the bait to many to enter the network marketing industry. While I won’t go into the exact percentage, it’s a fact that only a few succeed to earn a substantial income from their MLM business. MLM is often compared to a pyramid scheme where the bottom people ‘slave’, so that the few at the top become richer and richer at their expense.

However, it is important to note that those who have made it to the top, have done so through a lot of hard work, maybe luck too. For sure they didn’t do it just through talking to family and friends. A probable answer is that they might have already had a large network of people, which made their list of family and friends much longer than yours. It could also be that they previously came from a sales background. An interesting fact is that if someone sticks to the same company for 10 years, they are in the running of becoming part of the top few – but could this also mean that they were persistent, worked hard towards their goal, had a vision and did not give up easily?

Is There A Future For Me in Network Marketing?

Nowadays, there are different strategies of how to go about your MLM business, and achieve success – dare I say it… guaranteed success. But this is done through proper training, and being determined to put in hard work. The get-rich-quick-and-easy mentality does not work. My favourite strategies that I personally use are:

1. an attraction-marketing based system that teaches me how to market successfully to the target people that I want and who are interested in what I have to say. I don’t waste my time giving meetings to people who are not interested, and only end up buying because they pity me. You can check out the system here.

2. the second strategy is providing free valuable information first, and building a relationship with my readers, while branding myself as an expert and positioning myself as the-person-to-go-to in my industry. And this I do through my own self-hosted blog. Subscribe to Claire Morawski’s free training on how to create a successful blog.

To Your Success

Related posts:

1. What is Network Marketing – by Someone Who Realizes the Potential of this Multi-Billion Dollar Industry?