Network Marketing is a business model built on a distributor network. These businesses are also multilevel marketing in nature in that commission payouts occur at more than one level. J. Paul Getty, said “I would rather make 1 percent on the efforts of 100 people than 100 percent on my own efforts.”
Many people ask me, What is Network Marketing? And is it a legitimate way to make money? Everyone knows someone, or has been pitched by someone involved in network marketing, to get involved in the “next big thing.” You may have heard of Avon, Mary Kay, NuSkin or Herbalife. These are among a few billion dollar companies that follow the network marketing model. But how does it differ from a more traditional marketing model?
Simply put, network marketing is a direct selling method where independent agents serve as distributors of whatever goods and services they are marketing. It could be a health drink, essential oils, skin care products, the list goes on and on. As a distributor you build and manage your own sales force by recruiting other distributors and training them to do the same. You create a “down line,” which is the line of people that you personally recruit that are underneath you in your organization. This down line is important because the life blood of the business is the commission earned on your sales revenue, as well as on the sales revenue of your recruits. Network marketing is also known as multilevel marketing (MLM), or by other such names. Network marketing is a multi-billion dollar worldwide industry that distributes just about any type of product imaginable from skin care to financial services.
There are three major components in the network marketing model. They are prospecting or finding new sales people for your down line, following up with interested parties, and selling the goods or services to the prospect. Once the prospects are properly cultivated, joined the organization and purchased product, the salesperson will help to leverage the relationships of the prospect to contact other individuals in their personal and professional network that may be interested in the business opportunity. Hence the term, network marketing.
If the products are so great, why don’t they just sell them online or other marketing methods? This is a common question from critics of the network marketing model. The answer is pretty simple, they want access to your professional and personal networks. Traditional marketing methods can cost companies millions of dollars each year to market their products and services. Companies know that word-of-mouth marketing is a way more effective method of marketing, especially, when that message comes from loved ones or trusted friends. The trade off is that network marketing companies are more than willing to pay you a commission, to share their opportunity with your network of friends and family.
Network marketing is not a get-rich-quick scheme. There are some people who do make large amounts of money very quickly. This is largely due to their ability to network effectively and efficiently. But the most successful people in network marketing build their business in a systemitized and organized way. They set aside a certain number of dedicated hours each week, with each hour of effort serving as a building block for their long-term business growth. Then they bring on other people, friends and family, and teach those people how to sell the dream and sponsor others who then duplicate the very same process. By helping the people they personally sponsor to sponsor others, they duplicate themselves. As this process continues, it creates compound growth that can lead to hundreds or even thousands of people coming into the business.
In network marketing, there are no big capital expenditures requirements, no geographical barriers, and no real special education or skills needed. As a business option, network marketing is a low-overhead, home based business that can offer many of the tax advantages associated with owning your own business. Network marketing is a referral based business that can significantly expand your network of friends. For many, it’s a business that allows you to have fun and travel, meet new people and enjoy the lifestyle that extra income can provide. For those looking to add another source of income to their Make Cash Flow bucket, network marketing can be a great option. We will delve into the how to in later posts.