NETWORK MARKETING: Definition & How Does It Works

network marketing
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You probably have a mental image of what is network marketing (also known as direct sales or multilevel marketing) is all about: housewives buying and selling Tupperware while gossiping and eating finger sandwiches, or a high-pressure salesperson trying to persuade you that you can easily become a millionaire if only you and your friends and their friends and so on would buy an item. The reality of the network marketing example is nothing like either of these images. It’s neither a pastime nor a get-rich scheme; rather, it’s an opportunity for you to make money while working part-time or full-time.

What is network marketing


Network marketing is a business model that relies on independent representatives selling to other people, often from their homes. You may need to build a network of business partners or salespeople to help you generate leads and close sales if you start a network marketing business.

Although there are many legitimate network marketing companies, some have been labelled as pyramid schemes. The latter may place a greater emphasis on the recruitment of salespeople who may be required to pay for expensive starter kits upfront.

Overview

Multilevel marketing (MLM), cellular marketing, affiliate marketing, consumer-direct marketing, referral marketing, and home-based business franchising are all terms used to describe network marketing.


Network marketing companies frequently construct layers of salespeople, in which salespeople are to recruit their own networks of salespeople. The persons who start a new tier (or “upline”) get commission on their own sales as well as the sales of the people in the tier they started (the “downline”). With time, a new tier may emerge, providing additional commission to the top tier as well as the middle tier. Thus, the earnings of salespeople depend on recruitment as well as product sales. Those who got in early and are in a top tier make the most.

Types of Network Marketing

#1. Single-Tier Network Marketing

You join a company’s affiliate program to sell its products or services through single-tier network marketing. You don’t need to recruit other distributors, and direct sales are your only source of income. Avon, a well-known cosmetics brand, employs single-tier networking marketing.


Some internet affiliate schemes pay you for driving traffic to the affiliate’s website. Single-tier networking also includes pay-per-click (PPC) and pay-per-lead (PPL) affiliate schemes.

#2. Two-Tier Network Marketing

Two-tier network marketing, unlike single-tier network marketing, requires some recruiting, but your pay isn’t entirely dependent on it. You get compensated for direct sales (or traffic driven to a website) as well as direct sales or recommended traffic generated by affiliates or distributors you hire to work for you. Ken Envoy’s Site Sell is an example of a two-tier scheme.

#3. Multi-Level Marketing

Multi-Level Marketing (MLM) is a two- or more-tiered distribution-based marketing network example. Marketing-driven networks and name-driven networks are two further sorts of network marketing tactics. There may be incentives for recruiting in some MLM programs because you can make money five or more tiers deep. LuLaRoe, Magnetic Sponsoring, and Amway are examples of MLM companies.

The Advantages and Disadvantages of Network Marketing

There is a stigma linked to networking marketing businesses, particularly those with numerous levels, which can be described as pyramid schemes that is, salespeople in the top tier can make large sums of money on commissions from the tiers below them. People in the lower ranks will make significantly less money. The business makes money by offering high-priced beginning packages to new hires.


The allure of network marketing example is that it allows someone with a lot of energy and good sales abilities to build a profitable business with a small initial expenditure.

According to the Federal Trade Commission (FCC), single-tier network marketing operations are more trustworthy than multi-tier schemes, in which people are based on the number of distributors they recruit.

Avon Products, Mary Kay, and Excel Communications are among well-known single-tier network marketing companies.

How does Network Marketing work?

Multi-Level Marketing (MLM), cellular marketing, affiliate marketing, consumer-direct marketing, referral marketing, and home business franchising are all terms to describe network marketing.

Network marketing companies frequently construct layers of salespeople, in which salespeople are incentivized to recruit their own networks of salespeople. 

  • The persons who start a new tier (or “upline”) get commission on their own sales as well as the sales of the individuals in the tier they start (the “downline”). 
  • With time, a new tier may emerge, providing additional commission to the top tier as well as the intermediate tier.
  • The earning of a member of network marketing depends on the sale of the product as well as on the recruiting.

Any person joining the network marketing team goes through two processes: the first one is training and the other one is sales.

#1. Training

After joining, the first step is to become a distributor for the company, which means you will be the one selling the products from now on.

Because the job comprises selling and recruiting distributors, the company you’re joining or your sponsor will provide you with extensive product and sales training.

The Firm provides you with product information as well as promotional things such as advertising brochures and Marcom tools to help you start with the company.

You’ll learn about the complexities of your company’s product line, the quality and safety regulations that they meet, how they compare to the competition, what types of customer questions to expect, and answers to frequently asked questions, among other things.

Most firms provide sales training in addition to recruiting new employees; in most cases, a brief workshop is for this purpose.

#2. Sales

When the Company has taught you selling, product knowledge, and provided you with the appropriate tools and resources, as well as a startup package, you are ready to begin working. Your sponsor will be present during your training and will help you get started with the business.

Prospecting or creating a list of prospects, qualifying them, setting up an appointment with them, meeting them and presenting the MLM business proposal, answering questions and assisting them in making a decision to join the network, and following up with them on a regular basis for a positive decision will now be part of your sales process.

Signing up as distributors, receiving product training, selling, and providing them with tools, marketing materials, and a starter kit is all part of the process, as is encouraging and working with them to help them develop their network.

In addition to employing and building your distributor network, you’ll attempt to increase retail sales. Your family, friends, neighbours, and the local community, as well as your coworkers, your firm, and other firms with which you have known contacts, should all be included in your list of retail sales prospects. This is how a straightforward Network Marketing business plan works.

Network marketing example

Let’s consider some of the network marketing examples

#1. Tupperware

It is one of the world’s most well-known multi-level marketing companies. The company, which was founded in 1938 in the United States, has become synonymous with its whole product category plastic food storage containers. To a degree only rivalled by companies that use traditional distribution techniques such as Scotch tape or Hoover vacuum cleaners. Approximately 40 Tupperware parties are every minute around the world.

#2. Avon

This a huge network marketing example for cosmetics corporations with millions of sales agents and projected revenue of $3.63 billion in 2020. It is one of the largest multi-level marketing companies in the globe. In early 2020, Natura & Co, a cosmetics firm that also owns The Body Shop, purchased Avon Products, Inc.

#3. Herbalife

It’s a dietary supplement-selling multi-level marketing company. It began in California in 1980 and now has millions of independent distributors around the world.

#4. Amway

Amway is the world’s largest network marketing company, with an estimated revenue of $8.5 billion in 2020. This network marketing example company has grown to over 3 million distributors selling health, beauty, and home care goods in over 100 countries since its establishment in Michigan in 1959.

What does it take to succeed in this industry?

#1. Choose wisely

When it comes to choosing an opportunity, there are six crucial factors to consider. The first is consistency. What is the company’s age? Number two is high-quality goods or services that customers will want and need more of.

The third consideration is the pay plan: how equitable, fair, and generous is the overall distribution? This is critical since the pay plan determines how you will be compensated or not compensated. There are only two questions to ask [in this regard]: How much of each dollar of sales is returned to the distributors each month, and how equitable is the distribution of these pennies between old and new members?

The company’s and management’s integrity is ranked fourth. As much as possible, [examine] the CEO’s experience, [their] history, and [their] experience in the network marketing sector. Have they had any success in other businesses in the industry? Do they have a solid track record?

The fifth factor is momentum and timing. Examine the company’s current state, what’s going on with it, and whether it’s expanding.

Support, training, and business systems are the sixth and last items on the list. You may have chosen a terrific firm with excellent management, goods that make a difference. A compensation plan that is uniquely fair and generous, as well as momentum and stable. But none of it will matter unless you have a system in place that works. Most businesses will employ a transferable training approach, which is where mentorship comes in.

#2. Practice what they teach

You must be willing to listen to and learn from mentors in order to succeed. Because of the way this industry is structured, it’s in the [MLM veterans in your company’s] best interests to see you succeed, therefore they’re willing to teach you the system. Whatever [your mentor] did to achieve success can be replicated, but you must be willing to listen, learn, and follow those systems.

#3. Evaluate the higher-ups

It’s known by a variety of names, but the most common is “upline,” which refers to those who are above you. How helpful are they? Do they address you by name? Do they assist you in developing a strategy? Or do they care as much about your success as they do about their own? You should be able to connect with [your upline] and be able to call them at any moment and say, “I need some assistance.” The level of support you receive from those in positions of authority in the firm is critical.

#4. Take the lead with your downline

In the network marketing example sector, there’s a name for people who are brought in and then the person who brought them in is so busy bringing in other people that they don’t have time to teach and train [the new person]. You should expect to spend at least 30 days assisting a newcomer to the profession, training, supporting, and holding their hand until they feel confident enough to branch out on their own.

You must question yourself if you are willing to go through with it. Are you capable of doing so? This is all about cultivating long-term relationships here. It’s not only about bringing individuals into the company and then moving on. It’s about collaborating with these individuals and assisting them in the development of relationships.

#5. Make use of the internet

People are relying heavily on [the internet] as a marketing tool. [You may set up autoresponders on your site] so that when you acquire leads, the autoresponder can follow up with them. Follow-up is one of the most important aspects of our business. Many people will receive a call from someone who wants, or they may call the person and express their interest, but they will not follow up. The internet’s automation has allowed for a far more consistent way of follow-up.

The sole disadvantage of the internet is that it is by spammers. If there’s one thing I’d advise against when using the internet as a marketing tool, it’s spamming. Because it can damage not only your reputation but also the reputation of the firm you’re working with.

#6. Take care of business

This is a company, and you should hire an accountant just like you would if you were running a franchise or a shop. Tax-wise, you have all of the same write-offs as if you were running a [full-time] business, so [do your research] before you get engaged before you start generating money from it. What impact will this have on your tax situation? What kind of write-offs do you have?

It’s critical to assemble a [support] group around you. I’d recommend looking for network marketing lawyers who are well-versed in all the regulations and how they affect [your business.] Accountants that specialize in dealing with home-based firms, particularly in the direct-selling industry, are also available.

FAQ

Is network marketing a pyramid scheme?

Pyramid selling is a scheme that operates similar to Network Marketing in the form of recruiting people to join the network.

Is network marketing a good career?

Most of the network marketing companies working on the same concept which is consumer satisfaction. So we can say that the future of network marketing is very good in India and this sector will give lots of jobs opportunity. You can join any best direct marketing companies in India to start extra income

Why is network marketing bad?

Because most of the companies will have some products to cover their money schemes because there’re no laws that declare this kind of operations illegal because MLM promoters manage to get some high profile persons on board to show their credibility all goes well during the early years.

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