12 Pros and Cons of Network Marketing

Network marketing, also known as multilevel marketing (MLM) or referral marketing, is a way of selling products without traditional retail stores. Even though referral marketing has been around for a long time, many people are still unfamiliar with it.

Network marketing provides an opportunity to start a profitable business with little or no initial investment. It can be a full-time venture or a part-time gig alongside your current job or business.

Here’s how it usually works: You sell a product or service produced by a parent company, and you also recruit others to sell these products. You earn a commission on your sales and a smaller commission on the sales made by the people you brought into the company. Moreover, you might receive a percentage commission based on the sales generated by the people introduced by your recruits, and so on.

There are numerous reputable network marketing companies worldwide offering products and services in various industries, such as health, telecommunications, household products, technology, e-commerce, and more.

Like any business, network marketing has its pros and cons. In this article, we’ll take a closer look at the advantages and disadvantages of this selling approach.

Pros of Network Marketing

1. Little or no start-up costs

Starting a network marketing business is affordable. For most companies, you only need to invest around $100 in a business kit and some sample products. This makes it a great option for getting started without a big initial cost.

Unlike many other businesses that need a lot of money to take off, network marketing lets you begin with minimal capital and still has the potential to grow significantly.

2. The potential to build a substantial business

You can grow a big business in network marketing by recruiting more people into the company, and as they bring in more recruits, your earnings from their sales increase. Plus, if you’re actively making sales yourself, that adds to your income.

The more effort you put into this business, the higher your chances of making a profit. It’s up to you to decide how large you want your network marketing business to become.

3. You can work from home

You can run a network marketing business from the comfort of your home. No need for an office or a specific location – you can kick off your business in any city you choose.

The option to grow your network marketing business online is a big advantage. Unlike before when we had to gather people in one place for meetings, now we can connect with our team online, using platforms like social media.

4. Low risk

Unlike a brand-new business idea that you may have uncovered, network marketing products and services are usually tried-and-tested.

That doesn’t mean they can’t fail, but if you follow the rules you’re less likely to hit the buffers than you would on your own.

5. A great deal of support and advice is often given

You usually get a lot of support and advice in network marketing. The company you’re working with and the person who introduced you want you to succeed because your success means more earnings for them.

They guide you on the basics, such as crafting sales pitches, finding potential customers, and reaching goals. They also help you promote yourself on various platforms and provide you with marketing materials like catalogs.

6. Flexible hours

You have the flexibility to sell full-time or part-time, choosing hours that work for both you and your customers. You can even manage the business from your home.

In network marketing, there’s no fixed office schedule or specific working hours. You can enjoy time freedom, allowing you to work when it’s convenient for you.

While success is more likely with greater time commitment, the beauty of this business is the flexibility it offers.

Cons of Network Marketing

1. Most people fail to make money through network marketing

Many people struggle to earn money through network marketing. The truth is, most don’t even make a part-time income from it. The problem lies in the fact that many MLM organizations don’t have specific territories.

To become a representative, you just pay the fee, and there you go. This leads to competition saturating markets with the same goods or services, making it hard to make a decent profit.

2. It takes a long time to grow your business

In network marketing, you’re essentially starting your own business, unofficially. You receive support like promotional materials, a team, and perhaps a website, but even the greatest product won’t sell if no one knows about it.

Growing in network marketing takes time, just like any other business, and not everyone has that time to spare. While joining is straightforward, convincing people to buy from a company they’ve never heard of can be tough. It’s a time-consuming process, and there’s no guarantee they’ll join you.

3. Most network marketing sales are face-to-face

Most network marketing sales happen in person, not online. Less than 6% of sales occur on the internet, while around 80% happen face-to-face. This may not be ideal for shy people.

In fact, many newcomers to network marketing aren’t comfortable talking to strangers or discussing their product. That’s why most representatives end up selling mainly to their families and not to others.

4. A lot of rejection involved

Rejections are a normal part of life and a crucial aspect of network marketing. If you’re not experiencing rejection, you’re not pushing yourself to grow. Expect rejections if you’re investing your time in this.

When you start network marketing, many people will say “no” at first. Rejections will keep coming. On average, beginners might only convert 1% of the people they approach for a sale. So, out of 100 people, 99 might turn down the opportunity.

5. Not all sponsors make good mentors

In the world of network marketing, it’s competitive, and new people entering the scene could be seen as a threat. If you’re excelling in sales and building your own team, the sponsor who initially supported you might not want to mentor you anymore. Some sponsors might not even bother with mentoring. Plus, you usually don’t get to choose your sponsor, so the success of your business might depend on factors beyond your control.

6. Lots of network marketing scams

While there are many legitimate network marketing companies, there are also some shady operations that take advantage of people. This erodes trust in the entire industry.

It can be tricky to distinguish between genuine opportunities and scams in modern network marketing. Usually, if there’s a real product or service being sold, the opportunity is likely safe. However, be cautious if someone is asking for investments without any real return except for “information.” Any hint of a scam can lead to alienation in network marketing and being associated with a scam will spoil the business opportunity.

Check out the list of the MLM schemes you should avoid

The Bottom Line

Network marketing has its pros and cons. On the positive side, it can bring in good money. But, on the downside, it usually requires more work than people expect to make a profit. If you’re into a certain product, enjoy talking to people, and can handle hearing “no” a lot, it might be a good fit for you.

Just remember to check out the network company using trade associations such as the Direct Selling Association. You won’t get rich in a hurry, or probably ever, but if you take care you probably won’t lose your shirt either.

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