The Explanation Of Network Marketing Network marketing or multi-level marketing, as it is also called, is a strategy where the participants in a network get compensated for the sales that they personally make, and for the sales that the people that they recruit make. The people who are recruited are known as the participant’s downline. Multiple levels of individuals can be in a person’s downline.
The strategy is for people to sell and market the product or the services to people directly through personal relationships and referral marketing. Usually a network marketing company will be selling products and services that are available in regular retail outlets, and the object of the network marketing concept is to buy from yourself, and count the commission as a discount. If everyone performs in this manner, then the venture will be a success.
Individuals who participate in network marketing are called distributors, independent business owners, dealers, independent agents, etc. They are representatives of the company who makes the products or services that are being sold. They earn a commission based upon the volume of merchandise or services sold by themselves and through their downline.
The organization that is developed by the distributor consists of an active base of customers who buy from the company at a discount, via their commissions and a downline of active distributors like him or herself, and in turn also build downlines.
Opponents of this system of marketing like to quote figures such as only 10% of the distributors of XYZ Company actually make a profit. While this may be true to an extent, it largely due to people getting involved and then not really working at the venture as a business. It does really make sense to buy from yourself on a wholesale basis, rather than pay retail at the store.
To really make a network marketing company work, the product has to be something that people use all the time. It also has to be of a superior value compared to what can be purchased at a retail store and the retail price of the item has to be close to what retail is in the stores.
Using this model, the commission will offset the trouble of getting involved in this, and downline commissions will make it attractive enough to work at the business end of things. Where a lot of the network marketing companies make a mistake is trying to sell a product for $39.95 when you can pick it up at Wal-Mart for $9.95.
If a person is considering getting involved in a network marketing company, they should do their homework and compare some products in stores around them and just see how the proposed products from the multi-level marketing company compare. People are not stupid and they are somewhat reluctant anyway to get involved in any more multi-level companies.
However, if the product is unique enough, and the price is right, then that is the secret sauce that can kick things off. Companies like Pampered Chef, Watkins Products, Avon, and Tupperware are going strong because of the uniqueness of their products and their emphasis on retailing their products, along with a multi-level mix.