Network marketing is a 10-year marketing model that involves selling legitimate products to consumers who need them directly at fair prices. Instead of distributing their products to stores and relying on hired vendors, companies are using a network of distributors, many of whom start as customers.
For companies, this is a profitable way to sell their products and expand their capabilities without the minimum marketing cost and paid workforce. For home distributors in general, network marketing is an opportunity for them to start their own small business with flexible working hours.
In addition to the payments that occur at each of these levels, there is also a multi-level distribution. Therefore, this marketing model is called multi-level marketing (MLM).
How does MLM Marketing work? Make Money With Network Marketing
In multi-level marketing, companies first hire a group of sellers who are passionate about their products. Instead of paying them, companies offer them this product at a discounted price and encourage them to sell it to others at full market price. Everything they get from those sales goes directly into their pockets. Many of these sellers or distributors reinvest the money they earn so that they can sell more products to more people and increase revenue.
In addition to promoting and marketing products, companies are also encouraging their distributors to hire new distributors. In turn, they receive a small percentage of every sale made by employers. These recruits are called “inferior”. Network marketing is also known as referral marketing because these recruiters are directed to the company by key distributors.
This is not the end of the matter, as employers are also encouraged to involve their subordinates. Finally, all distributors are actively encouraged to become particularly enthusiastic customers. Thus, an independent distributor working in network marketing earns a profit from his sales and the sales of the people he hires. At the same time, the company is making a profit by selling to a growing distribution network and investing very little in marketing.
Is network marketing a pyramid scheme?
If you try to draw a diagram of a network marketing model with the company above, the primary distributors in the second row, and all the other recruits in the rows below, it will really look like a pyramid. For this reason, it is known as the sale of the pyramid. However, despite being organized in the form of a pyramid, multi-level marketing is not a pyramid scheme in the legal sense of the term. There are several differences between multi-level marketing and pyramid schemes.
Especially if the former is legal and the latter is not. Multi-level marketing is generally transparent and is built around legitimate products, and all pyramid schemes consist of scams. Both aim to create a network of distributors, but while network marketing allows each distributor to generate revenue, pyramid schemes are designed to deceive distributors and all employers by depriving them of hard-earned money.
MLM companies don’t ask distributors to pay large registration fees, membership fees, or prepay most of their products – but companies that hide behind a pyramid scheme do so. If a distributor fails to sell its inventory and wants to return a portion, most MLM companies will offer to buy it back at the interest the original distributor paid. But with pyramid schemes, every sale is final.
Pyramid schemes always evaluate those hired through sales. Therefore, if a distributor earns more money by adding a new distributor to the network instead of selling their products or services, then they are more likely to be involved in a pyramid scheme. Because MLM companies make money from sales, they evaluate sales by hiring.
Is Network Marketing Still Working?
Since the 1930s, several companies have used network marketing to their advantage to build brands with global recognition. It all started with the California Perfume Company, which is still strong under its current name – Avon. Other notable success stories include Tupperware, Mary Kay, Amway and Pampered Chef . All of these companies made a name for themselves long before the Internet age, but that doesn’t mean that multi-level marketing will no longer work.
In fact, with social media, e-commerce platforms, and easily set up websites, there are more opportunities than ever to market and sell products from independent distributors. At the same time, there is more competition than ever. Because while employers aren’t harmed, success in multi-level marketing depends more on “downsides” than sales. Distributors have to spend a lot of time and effort to find a customer, sell their products, and make money, along with a small investment in advance (usually no more than $ 1,000).
Is network marketing the right choice for you?
If you expect to be extremely rich in network marketing , the chances of this happening are slim. As with any other business model, this is only for the successful. Similarly, if you see network marketing as an opportunity to make money without working, it will not happen.
Network marketing is not as time consuming as a full day’s work, and of course it is more convenient. There is more comfort than usual because you work from home. So you can spend your working hours with your children, or go to the gym or do hobbies that you did not have time before. You can turn it into a second job to save extra money or pay off your debts .