Understanding
What is Network Marketing
Can mean the difference between failure and success

I am often asked, Israel, what is network marketing? Since you are here, it is possible you also asked the same question. Here is a brief overview of this business system.

The term network marketing, also known as multi-level marketing or MLM, refers to a marketing strategy used by some companies to sell their products or services.

Essentially an existing product user signs up as a distributor. He/she then recruits other product users who also become sellers of company products to others. These recruits also recruit other product users to do the same.

Each distributor earns a commission in his/her own right, much like the traditional sales agent. But the difference comes in when the distributor recruits other distributors into the business. This is where the network part comes into play.

Each distributor earns commission from personal sales plus from the sales made by distributors in his/her downline.

Let me illustrate the point.

Say you decide to start a home based business and multi-level marketing is your preferred vehicle.

You recruit Bob and Claire, Bob recruits Dennis, Emma and Fiona, and Claire recruits George and Hilton.

Bob and Claire are known as your first level, or frontline. Their recruits become your second level. These are Dennis, Emma, Fiona recruited by Bob and George and Hilton who were recruited by Hilton. Your second level will in turn recruit your third level.

There is no limit as to how deep your levels can go. For this reason, some companies limit the levels up to which you can receive compensation. For many companies, you can go as wide as you want. Depending on your company’s compensation plan, you can recruit as many first level members as you want.

Note that no matter when you start in MLM, you are always the start of a new business unit, your own. You become an independent business owner. There is no such thing as ‘get in on the ground floor’.

A large part of your money in network marketing comes from deeper levels in your organisation. Your success, as it were, will then depend to a large extend on how well you are prepared to help other people get what they want.

History

Network marketing dates back to the 1940’s.

One company in USA realised that it could increase its revenue by paying its existing network of product users to introduce other product users to its products. Since then it has developed into a multi billion dollar industry.

Click here for more on the history of multi-level marketing.

For the first time, individuals who would otherwise not be able to start a business were able to do so because an MLM business requires a small amount of initial capital.

What makes multi-level marketing an attractive alternative?

  • Low initial capital and high potential returns
  • You can start a million dollar business for less than $100. As your network expands, so does your income.

  • You can start it as a part-time business
  • There is no need to quit your current job. If your business does not succeed you have the security of your current job.

  • You can build a residual income that has the potential to surpass your current earnings many fold.
  • It does not really matter what your current income is, you always have the potential to earn more than your current income level.

  • Financial freedom
  • Whatever your reasons are for getting into this business, the ultimate goal is the possibility of being financially free. Imagine not having to go to work again, not having to pay off any debt, and doing exactly what you want with your time.

  • Can be operated from home – perfect for mothers
  • No need to rent space or buy office buildings. Because you work as and when you want, you can schedule your activities around your family.

  • You own a business that needs no employees
  • No need to comply with any form of labour law.

    In one sentence, network marketing offers you all the benefits of a traditional business without the headaches.

See also the five powerful reasons why network marketing is such a great business opportunity.

Cons

  • Association with illegal pyramid schemes
  • Illegal pyramid schemes have tried to mimic MLM, as a result many people still can’t tell the difference between the two. As a result next time you talk to someone about network marketing chances are that you will be asked something like this, "Is it not a pyramid scheme?"

  • Lack of adequate training
  • Most companies promise training, but this may mean you have to buy a lot of so-called training materials from the company.

  • Overheads
  • While overheads in multi-level marketing are minimal compared to traditional business, unless you see results quickly enough, this can be a cause of much discontent.

So back to the main question, "What is network marketing?".

It is simply a business opportunity for you, the individual, but a marketing strategy for companies. Understand this and you will be on your way to making money in this industry.

Note, however, that building a network marketing business is not as simple as some people may want you to believe. As you continue with your research some people may tell that you can build your business using only word of mouth. But the truth about network marketing is that you need to hone your marketing and selling skills if you want to succeed.

If you arrived at this page being clueless about network marketing, this page might deepen your understanding of this business concept.

Click here for to learn about the advantages of multi-level marketing.

Click here if you are still not sure what is network marketing and raise your question.

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