What is Network Marketing: How it Works, Advantages and Disadvantages
You’ve probably seen network marketing companies on Facebook, Instagram, and Twitter. They all claim that you can make a lot of money with their company.
But how does it work? What should you know before signing up? Is this business model for everyone? How do you measure your success?
If you’re considering network marketing but aren’t sure what it’s all about, this article will help you understand how this business model works and the advantages and disadvantages that come with it.
What is network marketing?
Network marketing is a type of business model where people build their own sales networks.
This means you’ll need to find and recruit your own team members who will then go out and sell the product for you. It can sound like a pyramid scheme but there are several differences between the two.
What are the differences between network marketing and a pyramid scheme?
Network marketing is based on building your own team to sell products, whereas a pyramid scheme relies only on recruiting.
The main difference is that network marketing involves selling real items at a competitive price to more than one person as opposed to just getting people onto your “down line.” Networkers earn commissions for profit made by their team.
Pyramid schemes, on the other hand, are illegal since they typically involve paying people for recruitment rather than production of a product or service and often incentivize members to recruit others in order to advance up the pyramid scheme’s hierarchy. Pyramid scams are also based solely on one person recruiting multiple levels below them without selling any products.
Traditional businesses usually sell their products to customers in a one-on-one or retail setting, but network marketing focuses on recruiting and selling the product for you so that people can become distributors without having to build an organization themselves.
Network marketers are often considered more trustworthy by potential recruits because they work from home (or other locations) and don’t require a large investment or use of physical resources. However, they are also considered less educated and trained as traditional marketers because there isn’t much in the way of formal training.
How does network marketing work?
Network marketing works by having the distributor earn money from a direct sales force and also receive commission-based compensation for distributors they’ve recruited.
They can even make residual income, which means that their customer base continues to grow over time, resulting in increased commissions. Network marketers typically sell products directly to customers as part of one or more teams. They can also create their own products and sell them through a network of distributors.
What are the types of network marketing?
There are several types of networks, but among the most popular ones is direct sales or what’s also known as “multilevel marketing.” These companies provide a number of products to their distributors and offer generous commissions for the sale.
Single-tier network marketing
This is the most common type of network marketing and the one you’re probably thinking about. This is when a distributor sells directly to another individual in their social circle, passing on personal purchases from other distributors as they go. These plans require less commitment than multilevel or binary MLM’s because there are no quotas that need to be met when it comes to purchasing products.
This type of marketing can become difficult because you’re not making any money from the sales, and if your friends aren’t interested in buying these items on a regular basis, what is going to happen? You’ll have wasted time convincing them when they could be spending their hard-earned cash elsewhere.
Two-tier network marketing
This type of network marketing is also referred to as “downline” marketing. It can be a great way for new distributors to get started because they will not have the upfront costs of purchasing inventory and profits from these sales start flowing more quickly.
In this plan, you receive commissions on all of your direct referrals’ purchases (hence the term “two-tier”) as well as on the purchases of people who your members recruit, and their recruits in turn. There are also some two-tier plans that offer an additional commission for sales made by distributors’ “downline.”
However, these commissions only apply to product purchase – not service or membership fees. And they can add up with so many people in the network.
The commissions are typically paid out on a weekly or monthly basis, so it’s important to be diligent about tracking your numbers and staying up-to-date with any changes on the company website.
Multi-Level Network Marketing
This type of network marketing is where you recruit distributors to go out and sell products with the hope that they will also do what is called “building a team.”
If you have recruited at least five new members in your first line, then congratulations! You are now eligible for commissions from those people’s purchases.
Now it becomes more about getting others involved than just selling product.
Why is network marketing popular?
Network marketing is popular because:
- It’s a low-cost way to make money without needing an initial investment.
- You don’t have to be a natural salesperson, as long as you are friendly and like talking about the products or services that your company offers, then it can work for you.
- It is a good way to get on your feet when you are unemployed. You can work as many hours or little hours that you want and it is flexible with the number of people who depend on your income.
- The people who are in the network marketing organization will offer advice and support.
- If you have a lot of free time and enjoy talking to people, then this can be a good business for you.
Disadvantages of network marketing
- Many people do not like the idea of being a salesperson.
- Network marketing can be hard because you will need to talk about your company and products to other individuals who may have little interest in what you are selling. It is important that you don’t take it personally if someone does not want anything from your offer or rejects you.
- It can be hard to sell a product or service that is not in high demand or does not offer benefits for the customers.
- Network marketing offers little control of your own business opportunity, which may lead you into an endless chain of recruiting people who are also looking to recruit more people down their line, creating a “pyramid scheme” type of business.
- Network marketing offers little opportunity for growth in the way of providing room for advancement through increased responsibility or challenging projects, which is often seen as a key benefit to other professions and careers.
- It can be hard because you will need to talk about your company and products to other individuals who may have little interest in what you are trying to sell.
- Network marketing success is often related more closely with your ability to recruit new members rather than how well the products or services sell themselves, which means that network marketers may be in for an uphill battle as they go against established companies and those who don’t need their help getting customers.
How to succeed in network marketing
Here are some tips on how to succeed in network marketing:
- Don’t be afraid to ask for referrals and endorsements when trying to recruit others. These are the most powerful tools that you have in your arsenal because of their authenticity. Individuals looking at a network marketing opportunity will want to know who they would be working with, which is where personal recommendations come into play. If someone feels like you’re asking for a referral because they’re the only option you have, it could come off as desperate.
- Don’t try to sell people on your product right away or even mention what you are selling until you establish trust with them. People do business with those that they like and feel comfortable around so make sure to be approachable before trying to get someone to buy something.
- It’s a lot easier to sell from your network than outside of it, so be sure that you are properly connected with as many people in your industry as possible before trying anything.
- Network marketing takes time and patience because the only way for this type of business model is through personal networks, which can take months or even years to build.
- It is important to be confident in your product or service and know that it has value without trying to push the sale on people too hard from the start. Network marketing can take time so keep this patience when you are speaking with customers about a possible purchase.
- Be sure to not make any promises of profit or income that you cannot deliver.
- It is important to take a look at the company or opportunity before signing up, even if it may not be in your industry of expertise.
- Be sure to research any product or service and know what you are getting into with a network marketing organization because this type of business can lead to being committed full time.
What to do if you’re considering network marketing
One of the things you should do if you’re considering network marketing is to take a look at the company or opportunity before signing up, even if it is not in your industry of expertise.
It is important to know what you are getting into with an organization like this because this type of business can lead to being committed full time.
What to do if you’re considering network marketing
One of the things you should do if you’re considering network marketing is to take a look at the company or opportunity before signing up, even if it is not in your industry of expertise. It is important to know what you are getting into with an organization like this because this type of business can lead to being committed full time.
One of the ways to do this is to check out online reviews such as those offered at I Buy I Review. One of the big players in the network marketing industry is Jeunesse Global. I Buy I Review offers a comprehensive review of Jeunesse Global here.
I buy and review courses so you don’t have to. Sometimes, I even find courses that are legitimate and worthwhile; and that’s how I accidentally came across one that led me to building a 6-figure business in a little under 5 years. Now, I still review courses because it’s my favorite hobby. 🙂 Learn more about me here.
