What is Network Marketing?

Remember those Tupperware and Pampered Chef parties your mom used to have when you were a kid? You’d spend the whole day cleaning the house only to end up stuck in your room while your mom showed off fancy kitchen stuff and hung out with other moms in the neighborhood. You weren’t really sure what was going on beyond your bedroom door during those nights.

Well, it turns out, your mom was quite the entrepreneur—running her own home marketing business and doing network marketing.

Network marketing is a business model that grows a business through a network of distributors. There are different kinds of network marketing, and one of the most famous types is called multi-level marketing.

What is Network Marketing?

Network marketing is a lot like what its name suggests. Sometimes called direct marketing, it’s a business model that utilizes networks to advertise, distribute, and sell products and services. Network marketing doesn’t use a middleman; instead, manufacturers use independent distributors to promote products directly to consumers using the distributor’s own expense. Thus, companies eliminate the need for:

  • Advertising costs
  • Building and training a sales force
  • Overhead costs

There’s a bit of confusion between network marketing and multi-level marketing, and most references use the two terms interchangeably. There is actually a significantly thick wall between the two. Multi-level marketing (MLM) is a branch of network marketing, but it’s much more elaborate. In MLM, each sales agent is allowed to create and train their own team of distributors, thus creating tiers of sales personnel.

Examples of businesses that employ the network marketing model include:

  • Real estate companies
  • Insurance firms
  • Health clubs

It is often companies with products and services that are personal in nature that use this business strategy. Financial services and insurance are two types of products that consumers tend to purchase through recommendations from friends and family.

How Network Marketing Works

Network marketing is a business model where a company relies on individual distributors to market and sell their products. It’s known by various names such as direct selling, multilevel marketing (MLM), cellular marketing, referral marketing, and home-based business franchising. 

Instead of paying a fixed salary to a sales force, network marketing companies reward distributors with bonuses and commissions. This way, businesses save money on traditional advertising and operational costs.

On the salesperson’s side, products and services are not promoted through regular advertising. Instead, they’re recommended to a network of people such as friends, relatives, neighbors, colleagues, and even strangers who might be interested. The distributors earn money when their recommendations lead to sales.

Some network marketing companies use a multilevel model, where they build a sales team. This involves recruiting new salespeople who buy a starter package containing the products. When these new salespeople make a sale, a portion of their profit goes to the recruiter. This setup encourages recruiting more people to earn commissions from their sales and the sales of those they recruit.

Pros and Cons of Network Marketing

Network marketing can be beneficial for everyone involved. Manufacturers save money, independent sales agents earn income, and consumers get recommended products without flashy advertising.

However, there’s a downside, especially in multi-tiered companies. Top salespeople earn a lot from the salespeople below them, leading to significant income differences. Some companies also sell pricey starter kits to new recruits.

Starting a profitable network marketing business is possible with a small investment and dedication.

The Federal Trade Commission (FTC) generally discourages schemes where people earn based on recruiting distributors. It suggests that compensation tied to actual sales to customers is more reliable.

Learn more about the pros and cons of network marketing

Can You Make Money With Network Marketing?

It’s hard to making money in network marketing. On average, a network marketer sponsors 2.2 reps in about 93 days, and chances are you might not last that long. The typical weekly income is less than $10, unless you’re part of the 10%.

Success in network marketing is reserved for leaders – those action-oriented warriors. Your odds of making it in this field increase significantly if you join the leadership club.

Unlike a job with a fixed wage, network marketing pays you based on your company’s earnings. Your 30 hours of advertising mean little if people don’t buy your products.

In network marketing, there’s no guaranteed monthly income. You might earn $600 this month and nothing the next, making it less secure than traditional jobs.

Examples of Network Marketing Programs

Choosing the right network marketing company is important for your success in this field. Here are some well-known MLM programs:

Tupperware

Tupperware Brands Corporation, formerly Tupperware Corporation, is an American multinational multi-level marketing company. Its main focus is a kitchen and household products, and it is particularly known for its line of plastic containers for food storage and preparation.

Avon

Avon is a global beauty company that celebrates innovation, honesty, inclusion, and beauty. The company is one of the largest multilevel marketing companies in the world. Natura & Co, a cosmetics company that also owns The Body Shop, purchased Avon Products, Inc. in early 2020.

Herbalife

Herbalife Nutrition Ltd. is a global multi-level marketing corporation that develops and sells dietary supplements. The company was founded by Mark R. Hughes in 1980 and currently employs approximately 9,900 people worldwide.

Amway

Amway is an American multi-level marketing company that sells health, beauty, and home care products. Founded in 1959 by Jay Van Andel and Richard DeVos, the company is headquartered in Ada, Michigan. In 2019, Amway and its sister companies under Alticor achieved sales of $8.4 billion.

Is Network Marketing a Pyramid Scheme?

Yes, there’s a difference between network marketing and pyramid schemes. In network marketing, you earn commissions by recruiting members, but it’s a legit business with actual products and services.

Pyramid schemes, however, are scams. They may seem like legit MLMs, selling familiar products. But getting involved can waste your time and money with no chance of recovery. Stick to genuine network marketing to avoid scams.

Learn more: MLMs vs. Pyramid Schemes

Tips for Success in Network Marketing

Network marketing can be a tough field, but there are ways to give yourself an edge in your career. Here are some simple tips to help you improve your skills and qualifications:

  1. Find Your Passion: Enjoy what you do. Selling becomes easier and more successful when you’re passionate about the products. Look for a company that sells something you genuinely care about.

  2. Choose Quality Products: Sell products that you and your customers value. Identify items with high market demand, and ensure they are of good quality. It’s easier to build your reputation by selling quality products.

  3. Do Your Research: Make a list of MLM companies you’re interested in and spend some time Googling the background of each company. Compare them to find the one that aligns with your goals. For example, do they prioritize recruitment over product quality? Do they encourage the use of party plans?

  4. Seek Supportive Companies: A company’s support for its sales professionals matters. Choose a company that invests in your success by providing additional support. This can significantly impact your career development.

  5. Connect with Current Sellers: Before joining an MLM company, it’s better to talk to former sales representatives. They are more willing to share their experiences and reasons for leaving the company. This can provide you with a more complete picture.

  6. Be Patient: It takes time to build networks and promote MLM products. Be patient and focus on increasing awareness about the products and the brand. You will see profits come with time and dedication.

  7. Understand Upline Policies: Some companies have upline policies, meaning a portion of your sales goes to the person who recruited you. Choose a company where new sales professionals earn a fair commission immediately to avoid potential pitfalls.

Learn more: How to Sell MLM Products

Should You Join Network Marketing?

Network marketing isn’t suitable for everyone. In the end, 97% of network marketers don’t succeed. Unless you’re okay with being in the 3%, this might not be the right path for you.

Unlike a regular job that earns societal respect, building a network marketing business might not garner the same level of respect.

Getting sign-ups can be stressful, especially if you’re constantly reaching out to friends and family. Switching from desperation marketing to attraction marketing could be a game-changer.

Prepare for rejection – 90% to 97% of people you approach may say no, some might even ridicule you, and you might lose friendships. Imagine talking to 100 people and only 3 saying yes – that can be tough.

Even those who say yes may not take the business seriously, becoming a burden for your business to handle.

Learn more about the things you have to consider before joining network marketing

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