Network Marketing: What Is It? Is It The Right Option For You?
Network Marketing is a type of business model that constitutes a group of people forming a network to earn from sales commissions, as well as through new joinings to the network. This system creates a flexible approach to the business, where a new member (as a salesperson) also becomes a business owner. The system has been in existence for many decades and has evolved multiple times since.
In this article, you will learn the essential details about network marketing (also known as multi-level marketing). You will also learn how network marketing works, as well as the types of network marketing options with the help of which businesses operate. Finally, we will also look at some of the major advantages and disadvantages of network marketing for businesses. Hence, to learn more, read on through to the end of the article.
What Is Network Marketing?
According to Investopedia,
“Network marketing is a business model that depends on person-to-person sales by independent representatives, often working from home. A network marketing business may require you to build a network of business partners or salespeople to assist with lead generation and closing sales. There are many reputable network marketing operations, but some have been denounced as pyramid schemes.”
The network marketing businesses that run through pyramid schemes focus more on the recruitment of salespeople. This is because new salespeople are required to pay upfront for expensive starter kits. For these payments, the people up the order in the pyramid get commissions.
Most companies that you will come across run through pyramid schemes. Hence, if you are looking to join a network marketing company, make sure that it is not a scam. Most companies with pyramid schemes have been banned due to running scams. Therefore, research is essential before you are looking to join a network marketing business.
Some of the most famous network marketing companies are Amway, Avon Products, Tupperware, Herbalife Nutrition, etc.
Read More: Market Segmentation: Definition, Types, Benefits, And More
How Does Network Marketing Work? – Types Of Network Marketing
Every network marketing business focuses on sales as the most important factor. In such a business, a core sales team specializing in sales starts selling products and brings in new salespeople.
Here, each of the salespersons in the core team brings in new salespersons, thus creating a new tier. Each of the salespersons in the new tier creates another tier in the same way. This is how the team takes the shape of a pyramid as the tiers increase. With more tiers, the team gets more salespeople, who add to more sales of the business.
The salespeople earn commission based on the number of items they sell. however, there is an interesting catch in this business model. With each sale, the people up the order get commissions based on their rank. However, this feature is different in many companies.
Types Of Network Marketing
The following are the major types of network marketing options:
1. Single-Tier
Here, the salespersons in the team earn based on direct commission. Getting another tier of people is not compulsory. Here, affiliate marketing strategies come into play.
2. Two-Tier
In this case, apart from earning direct sales commissions, salespersons also earn through commissions for new recruits.
3. Multi-Tier Marketing
It consists of more than two tiers of people. Both direct sales commissions and indirect recruitment commissions are available in this case.
Network Marketing – Scam Or Legit?
Many network marketing businesses had their rise during the COVID-19 lockdowns. As people were locked in their homes, they were looking to make more money. Since the internet was a huge relief for many, and social media users grew, many people started online counterpart to advertise their products and brands.
This led to many such businesses getting bigger. However, there were many scams as well.
According to Wall Street Mojo,
“By recognizing the potential for such gig works, many businesses exploited the people looking for jobs by making them pay upfront for training materials. Their objective is to earn money from people in the name of a business. Thus, the pyramid schemes focus not on customers but on workers who become the bait.”
What Are The Advantages Of Network Marketing?
Here are some of the major advantages of network marketing that you will benefit from:
- It helps to bring together people who are sales enthusiasts.
- For many people, it offers a secondary source of income by acting as an affiliate.
- They only pay those who contribute to sales, which is a gain for the business.
- The company does not need to think about recruitment or providing additional benefits to employees.
- In most cases, the business supplies quality products.
What Are The Disadvantages Of Network Marketing?
According to Entrepreneur.com,
“Things can get sticky when a network marketing network compensates participants primarily for recruiting others rather than for selling the company’s products or services. A network marketing system in which most of the revenue comes from recruitment may be considered an illegal pyramid scheme.”
The following are a few disadvantages of network marketing, which you must be aware of:
- It is difficult to predict the production targets for the business.
- Manufacturers have a limited role in facilitating the distribution of the products.
- Too much focus on creating a pyramid of salespersons and earning through commission leads the business to trouble.
- New distributors have to spend a lot at the start.
- Many businesses are found to be scams.
Read More: Micromarketing – What Is It? How Does It Work? Pros And Cons
Wrapping Up
Hope this article was helpful for you to get a better idea of what network marketing is and how it works. You might have already understood that it is mostly suits those people who have high energy and top-end sales skills. If you are confident about building a profitable business with a modest investment, network marketing can be a good option for you.
You can choose a single-tier, two-tier, or multi-tier approach based on what you are comfortable with. However, research well before you join a network marketing company. Do you think this can really help in achieving financial independence? Share your thoughts on the matter in the comments section below.
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Define Your Goals And Objectives As a CEO who wants to boost your business through webinars, it's essential to define your goals and objectives beforehand. Having a clear understanding of what you want to achieve will help you tailor your webinar's content and format to meet your specific needs. Are you looking to generate leads, educate your audience, or promote a new product/service? Knowing your endgame will help you plan your webinar more effectively and deliver a compelling presentation that resonates with your target audience. So, take a step back and consider your objectives before diving into the planning process. Know Your Audience Understanding your target audience and what they care about is crucial for the success of any business, including yours. As a CEO, it's important to conduct thorough research to learn your audience's pain points, preferences, and interests. 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Optimize Your Google Updates Google Page updates or the experience coming in May 2021 will provide you with the core metrics known as the core web vitals; it will help your business grow in the right direction. The type of marketing activity you want to do depends on your site load time, interactivity, and content stability. It will help you to improve your overall search rankings. You must understand one thing that if you want to develop your business, then you need to understand the metrics of Google in a better way. Develop different types of marketing strategies to grow your business. You can be the owner of the web design agency as it will help you develop the core web vitals of your website. 2. Prepare The End Of Third Party Cookies The third-party cookies will not work any further from 2021 to 2022. You need to reshape your branding process to help your business grow in a better manner. Ensure that you have made the correct choices from your end. 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These webinars can connect you directly with your target audience, and you can do one-to-one interactions. You must develop the process of your branding innovatively. It will help you to achieve the desired goals of your business. It is one of the innovative types of marketing that you can practice from your end. Ensure that you have given your hundred percent effort into it. Why Must You Experiment On Different Types Of Marketing Practices? You must experiment with different types of marketing practices to gain the maximum market reach in a short time. You need to understand one thing that if you want to develop your business, then you must consider individual essential facts to make things happen in your favor. Business always works in an everchanging environment, and it can push you back if you are not complying with the recent marketing trends to develop your business. Ensure that you have made the right choices from your end to develop the perfect business model. 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