What is Network Marketing?
- 6 min read
- Karla Sambolić
What is Network Marketing ?Network marketing is a type of business model where independent representatives sell goods and services from a company to an end consumer. It’s very popular with people looking for a part-time job, since it requires very little investment from their part. On the other hand, some businesses have adopted this model with great success as well.
Also called multi-level marketing (MLM), the concept of network marketing works in this way:
a company has a product or a service to sell. It finds representatives to sell the product and recruit more representatives to expand the network.
The representatives get a sales commission on every product they sell and on every product the people they’ve recruited sell, too. Network marketing is the distribution of products and services through a network of people, rather than through traditional supply chains.
In simple terms, the philosophy behind it is: instead of spending millions (or billions) of in marketing and advertising their products through main-stream media (television, radio, billboard advertisements, newspapers and magazines etc.) they simply reward people to distribute their products by referral, word of mouth.
The three major components of network marketing involve prospecting, following up with inquiries from interested parties, and selling the good or service to the prospect.
Network marketing components
Represented visually, this marketing systems looks like a pyramid, that’s why this kind of marketing is also called pyramid marketing. There’s one important point to be made here – network marketing is not the same as pyramid schemes you sometimes hear about.
Pyramid schemes are the product of unethical practice carried out by some companies. They pay representatives only for recruiting other people, instead of focusing on selling the product.
Unfortunately, the nature of network marketing has attracted some individuals who gave the entire model a bad name. To identify if a company using this model is a legitimate business, take a look at if the company:
- Has a quality product or service
- Income is earned off sales of products or services
- The focus is on sales, not recruitment
I had to mention these unpleasant schemes as to make sure you understand that networking can be a great way to market a product. It’s just that sometimes the model is abused by some unscrupulous individuals. Network marketing, or multi-level marketing, is one of the fastest-growing business models of the past few decades.
Between 1993 and 2003, total direct selling revenues grew by 7.1% annually, dramatically above the rate of growth of the US economy — and of total retail sales. (according to the DSA)
There are several benefits network marketing can bring to a company:
Network marketing benefits
- No advertising costs. It’s hard for companies who are just starting out to reach their audience with traditional, expensive advertising methods. Since network marketing is based on personal recommendations and word of mouth, there are almost no advertising costs involved.
- Low staff costs. Since most of the people in the process will be representatives working on sales commission, companies can save a lot of money.
- Ability to expand quickly. Depending on the product, it’s possible for MLM companies to reach a lot of consumers in a short period of time.
This can often lead to poor results, so it’s important to have a good sales and marketing team to educate all representatives how to properly sell the products or services. This may seem obvious, but a big part of network marketing success is finding people with charisma.
Since they’re most likely not professional salespeople, they at least need to have good communication and interpersonal skills. Also, businesses should try to find people who are excited about their product.
This kind of people will easily become brand ambassadors and spread the word about the company.According to DSA, 20.5 million people were involved in direct selling in the US in 2016, and most of them were involved in network marketing.
Modern companies which utilize network marketing methods usually concentrate on leveraging Internet technologies to increase sales.
Network marketing is a direct selling method in which independent agents serve as distributors of goods and services. They are encouraged to build and manage their own sales force. They do this by recruiting and training other independent agents.
It’s important to understand that network marketing isn’t a get-rich-quick scheme. Success is based on following some very basic yet dynamic principles. This applies to both the company and the representatives working for it.
Individuals can use it to establish a personal income by becoming a part of the marketing network. Companies can use it to promote their products through direct and personal sales process. Contact us today if you need help with network marketing.
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