Network Marketing Definition, Types & How It Works
During the past few decades, the network marketing industry has exploded as companies tap into online job seekers. This includes users who are searching for jobs via online marketplaces like LinkedIn.
Moreover, as our lives become increasingly connected and mobile. Users are looking for ways to tap into the opportunities that the peer-to-peer recruiting model provides. That’s where network marketing comes in. There are many benefits to joining a network marketing company. These include earning an equity stake in the company as well as earning an above-average income.
However, joining a network marketing company comes with its own unique set of challenges and risks. If you think that network marketing is the right fit for you, check out the list of this article to learn more about the world of network marketing.
Table of Contents
- Network marketing is ideal for outgoing, passionate people.
- Network marketing involves the selling of products or the recruitment of salespeople.
- Be sure to avoid network marketing with tiered plans.
What Is Network Marketing?
Network marketing, also known as direct sales, involves product sales directly to consumers. Instead of a middleman, the products get sold to real customers, whether it be in-person sales, by phone, or through email.
The benefit to consumers is that they have control over the product and can earn money if they are the ones who get interested in the products.
How Network Marketing Works
There are two main types of network marketing programs: direct sales and multi-level marketing. Direct sales is a type of network marketing where you earn money from products you have already sold. You make the sale, and the money gets deposited right into your bank account.
In multi-level marketing, you earn money when people sign contracts with you and get a commission on the sales of people they recruit. People involved in multi-level marketing often have a “business opportunity” they’re trying to sell (whether it be a product or service).
As a network marketer, you’ll find it’s easier to build your network. For example, if you’re interested in real estate, you might approach other people in your network who work in that industry. You can ask if you can talk to them about what they do and what they’re looking for.
Types of Network Marketing
This is a sales model that involves making sales directly to end consumers. The company does not pay a network marketing commission. Rather, the salesperson earns a sales commission based on retail sales of the company’s products.
This sales model involves sponsoring independent distributors that sell products to end consumers. The distributors do not pay a network marketing commission. Rather, the salesperson makes a commission based on the distributor’s sales, either to the public or to other distributors.
This is a business model that involves selling an “opportunity.” In other words, an “investment” to join a business opportunity and make a profit.
This is a type of marketing where a company pays the person only if the product happens to get sold. Similarly, there is also Advertisement Marketing. This is a type of marketing where a company pays the person based on the number of clicks they get on advertisements.
Sometimes, the compensation plan is just a percentage of sales. It can also be performance-based.
This is a sales model that involves selling a product that must be purchased immediately. Often, the person doing the selling receives a commission on the product.
This is a sales model that involves selling to a distributor that then resells the products to end consumers. The reseller does not pay a network marketing commission. Rather, the reseller earns a commission from retail sales of the products.
Pros of Network Marketing
You Get to Meet People: One of the advantages of network marketing is that you get to meet lots of different people. If you’re interested in real estate, for example, you might approach other people in your network and ask if you can talk about what they do at a local level.
You Get to Learn New Skills: As you meet people, you can also pick up new skills and experience in your field from people you talk to.
You Get to Build a Network: Network marketing can be an effective way to build a network if you’re not very social and meeting new people is difficult for you.
Financial Stability and Independence: Most network marketing companies require you to buy inventory. You then sell it in order to make money. This can be a good way to build financial stability and independence by learning how to make purchases on your own.
You Get to Help People: Network marketing can be a good way to help people in your community if that interests you.
Cons of Network Marketing
It Takes Time and Effort to Build a Network: It takes a significant amount of time and effort to build a network in any field, not just network marketing.
You Have to Procure Products to Sell: In most cases, network marketing companies require you to buy a certain amount of products to sell. You may not like the products or find it difficult to procure them.
You May Not Make a Profit: Many network marketing companies do not provide enough training or guidance for new recruits. As a result, you may find it difficult to make a profit.
You May Feel Pressured to Recruit: Network marketing companies often pressure you to recruit more people.
It Can Be Hard to Drop Network Marketing: It’s easy to stay in network marketing for a long time. But it’s also easy to stay in network marketing for a long time and not make much money.It May Not Work for You: It may take some time to determine whether network marketing is right for you.
Network marketing companies offer a variety of sales and marketing programs. But many involve some level of investment. While the income can be good, it’s important to understand what you’re getting into and the risks involved.
FAQs About Network Marketing
Is network marketing a pyramid scheme?
Network marketing is not an illegal pyramid scheme. The main difference between these two is that you have to sell real products in network marketing. That’s often not the case in pyramid schemes.
Will I make money by joining a network marketing program?
Although it is possible, it is not likely. Network marketing can be a lucrative field for some people. But they are able to achieve great success, thanks to their ability to recruit new members.
Should you join a network marketing company?
You have to be careful, as there are scams in the network marketing industry. These use deceptive tactics to gain the interest of would-be distributors. So it’s important to research a company before investing your time and money in it.
How to improve your network marketing efforts?
Don’t be afraid to reach out to people you meet and show them how much you appreciate their support. Networking is all about building relationships, and there is no better way to do this than to make it about others.
WHY BUSINESS OWNERS LOVE FRESHBOOKS
SAVE UP TO 553 HOURS EACH YEAR BY USING FRESHBOOKS
SAVE UP TO $7000 IN BILLABLE HOURS EVERY YEAR
OVER 30 MILLION PEOPLE HAVE USED FRESHBOOKS WORLDWIDE