Network marketing, also called multi-level marketing (MLM) is form of direct selling. However, to answer the question ‘what is network marketing?’ you need to understand what distinguishes it from other forms of relatively similar marketing strategies.
So, What Is Network Marketing?
What is network marketing?
The term network marketing emphasizes the idea of distribution system upon which this marketing strategy is based. Multi-level marketing, on the other hand, identifies the type of compensation involved in network marketing activities.
Network marketing is a flexible strategy, which requires a low initial investment. It is based on selling directly to personal contacts, and recruiting new sales representatives. If you’re a rep, you can bring in new recruits, which in turn brings you a commission. This is called a ‘‘downline’’. If you’re a network marketing representative, your downline comprises all the other people who are recruited as a result of your recommendation. You are paid not only for the sales you make, but also for the new recruits you bring in.
Network Marketing Distinctions
Some network marketing systems may be liable for illegal activity, falling in the category of pyramid or Ponzi schemes, if their business operations rely on recruiting, rather than on selling products to get revenue. Another important distinction to make between network marketing programs and other business models is not to mistake them for franchises. The insurance industry is a typical example of industry that uses network marketing, as they recruit agents to sell their products.
The Power of Personal Contact
Unlike affiliate marketing, network marketing uses direct selling through recruited reps, not online or other conventional, offline marketing strategies. Reps use their personal connections, starting with family and friends. This way companies don’t have to spend money on advertising, and rely instead on word-of-mouth methods. The idea is that you are more likely to buy something you need from someone you know and trust, than from an anonymous online retailer or service provider you know nothing about.
Network Marketing Strategies
Network marketing employs three basic strategies to make profit: generating leads – or finding prospects, recruiting- or increasing the customer base, and the number of business partnerships, and business development and management – which involves training and leading your sales force.
Types of Network Marketing
Network marketing falls in several categories.
Single-Tier Businesses
These businesses use affiliates or reps to sell their products or services. Affiliates are paid only for their direct sales, not for recruiting other representatives. Avon is an example of company that uses single-tier network marketing.
Two-Tier Businesses
In this case, if you’re a company representative or distributor, you are paid for your direct sales, but also for the sales made by the people you recruited for the company.
Multi-Level Businesses
This network marketing strategy generally uses more than two tiers to sell its products or services. Take, for instance Amway that conducts business this way.
By keeping these few basic distinctions in mind, you will be better equipped to weigh your options when considering network marketing as a business strategy or as an opportunity to round out your income.
More Questions?
Do you have more questions about Network Marketing or have a comment/thought . You can leave your questions or comments in the comment section below or you can contact me at my Wealthy Affiliate profile.
