A lot of people have radical views one way or the other about Network marketing, also known as Multi-Level Marketing (MLM). For some, it’s one of the best opportunities for entry level entrepreneurs to own their own business with very little investment. For others, it’s some sort of shady or sinister endeavor that should be avoided at all costs.
The truth is that MLM is a legitimate business model that has been used successfully by some of the biggest and most successful companies in the US, including Amway, PrePaid Legal, Exel, Meleleuca and USANA.
Who Is Involved with Network Marketing?
Most of the people in the network marketing industry are honest, hardworking individuals who are simply trying to earn a living to provide a high quality lifestyle for themselves and their families. Sadly, like any industry, network marketing also includes a small number of dishonest people who poison the well for everybody else so that the entire concept of MLM is seen in a dim light by people ignorant of the facts.
In this article, we are going to look at the advantages network marketing offers to both experienced entrepreneurs and to those just starting out. We also will look at the opportunities it presents for honest people who are willing to work hard running their own business. Don’t worry, we’re not going to try to sell you any cleaning products or timeshares!
Definition of Network Marketing
Network marketing is a marketing strategy in which the people are paid not only for sales they generate themselves, but also for the sales of other salesmen they recruit. This business model is known as a “downline model” because it has distributors and a hierarchy that involves multiple levels of compensation.
It’s different than single-level marketing., which is when salesmen are compensated for products they sell directly consumers.
Network Marketing Structure
In network marketing business, the sales force pays a portion of their revenues to the person who recruited them. That person then pays a portion of all of their revenues to the person on the level above them, and so on. This is what is known as an “upline revenue structure”.
The first network marketing platforms were launched in the 1950’s and involved nutritional supplements, household products, and cosmetics. By the 1980s, MLM businesses had grown to include companies specializing in insurance and long-distance telephone services.
By the 21st Century, technological advances enabled network marketing to expand into credit cards, travel, pre-paid legal services and other successful areas.
There are all types of network marketing platforms. And in many cases people can get into the market for very little upfront investment while still enjoying the benefits of owning their own business. MLM opportunities usually are far less costly than buying a business franchise.
In most network marketing platforms, salespeople sell products directly to consumers by means of relationship referrals and word of mouth marketing.
Common Network Marketing Misconceptions
Let’s address some of the most common misconceptions about network marketing. A lot of people have a bad opinion of network marketing because occasionally it attracts people looking to exploit its structure to reap financial reward with very little work. In other words, people who simply want to “get rich quick”.
Network marketing is also criticized because the upline revenue stream is structured like a pyramid. This creates confusion among people who think all network marketing must be a “pyramid scheme” or a “Ponzi scheme”.
These toxic terms refer to illegal business models in which people on the bottom of the pyramid invest in business opportunities but get little or no return on their investment. The people at the top of the pyramid keep most or all the money and don’t deliver the goods or services they promised.
The reality is that network marketing is simply a non-traditional business model. It’s more like “micro-franchising” than anything else. MLM can be a good choice for people because it has a very low cost of entry and there is the potential to earn a lot of money.
Is Network Marketing a Risky Business?
Some people make money in network marketing businesses and some people lose money. But the same can be said for traditional business models such as franchising. The success or failure of the individual under either scenario has less to do with the structure of the business model itself than it does with the person’s understanding of their market, the effort they made to create opportunities for themselves, and even just plain luck.
Most network marketing businesses focus on creating opportunities for people who might otherwise not have them, including people who:
- Lack experience running their own business
- Have little previous sales experience
- Are unhappy with their current income level
- Have been unsuccessful running previous businesses
Network marketing businesses offer these people the opportunity to achieve high levels of success. But, if it’s not your thing, there are other ways to make money online, such as promoting affiliate offers.