Network marketing is one of the most popular and emerging busines models that are apt for the recent business trends. It complies with the evolving demands of the current business era and provides the best outcomes. Network marketing is s specific genre of business marketing that relies on a person-to-person sales strategy conducted by individual sales/business representatives. Network marketing business will help build a solid network of functional representatives to assist the business house in achieving its targets and generate more outstanding leads per requirements. The other name of network marketing is the pyramid scheme. Let us learn more about Network Marketing.
Network marketing has many other professional names, such as Multi-level marketing (MLM), affiliate marketing, and cellular marketing. It is also considered referral marketing or consumer-direct marketing. Network marketing aims to appeal to energetic people with exceptional sales skills to help a business create a good network of salespersons. The most attractive part of the marketing program is low to the sensible investment needed, making it approachable to many people.
Companies that rely on network marketing create a multi-tier business model of network marketing. They create several levels of salespersons. Each salesperson’s job is to recruit their personal network of more salespeople and spread the net wider. Whenever a salesperson can recruit more salespeople under his network, they receive a commission. That is how each person contributes to widening the network. Research studies and market surveys have indicated that single-tier or uni-tier business network models are more reliable than multi-tier business models.
The recruiting salesperson now becomes the upline, and the ones they recruit become the downline. The salespersons in the upline earn money from reaching their own sales target whenever any downline salesperson sells a product. It is much like the policy that most mobile applications follow – refer to your friend, and whenever your friend purchases something, you get a specific commission for the referral. So, the equation stands out as – the more downline salesperson you can recruit, the higher your earnings. The more people in the bottom tiers, the greater the earnings of the top tiers. This is the rough structure of the network business model.
It may seem that the professionals in the top tier of network marketing make more money than the ones in the lower tier. Then why does the company at all need a downline? It is mainly because the company earns a lot by selling starter kits to newly recruited salespersons.
We know what network marketing is and how it operates practically. Let us quickly look at the prominent advantages and disadvantages of Network marketing.
Network marketing has several advantages that make it lucrative to so many people. Let us explore in depth some of the most prominent advantages of networking marketing.
- Network marketing business is infinite. There is no limit to the network that even one salesperson can create. This is true because the companies or the sales tiers can collaborate with as many people as possible to become their distributors. The chain is infinite. The distributors can further recruit sub-distributors. In this way, the chain elongates, and there are huge sales of the company products. Network marketing is one of the many proven ways to highly amplify any company’s product and service sales.
- Network marketing mitigates the dependence of any company on the advertisement. Since a vast human network is involved, the companies do not solely rely on advertisement. In some cases, network marketing is even better than advertisements because there is direct communication between consumers and salespersons. There is no need for any intermediate bridge of advertisement. This dramatically reduces the cost of advertisements.
- If any business house can establish a good network marketing structure, there are high chances of monetary profits. The structure will also determine the profit margins of th distributors and the sub-distributors. The nodal point of the company need not bear any burden for the payment of the sales persons and the distributors. The commission and the profit get rolled to satisfy the expenditure.
- The company need not spend any money on the storage and distribution of the products. The distributors will bear the expenses for the storage and distribution. This signifies that the ROI of a company on adopting the network marketing model is relatively high. The companies have enhanced interest in establishing such business models.
- Finally, there is a scope for unlimited income from network marketing. It all depends on your potential to deal with the company. The sales persons can earn from their profits and the profit of the distributors or downline salespersons recruited by them. The more you can spread the network, the more profitable it gets.
There are limited disadvantages but let us focus on some. One of the core problems that companies face with network marketing is that -they cannot predict consumer behavior. The companies either overstock or understock the products. There is often scope for miscommunication among the central authorities and the distributors in various tiers. This could lead to faulty management and often a disastrous situation where the companies either go into a loss for producing extra or cannot meet the market demand, leading to loss of potential customers. Manufacturers have a limited role, mainly the distributors and the salespersons at several tiers who determine the business’s success.
Here are 5 quick tips to help you to create a great network marketing chain:
- Follow whatever the company teaches because they are pros at this job
- Identify the target appropriately
- Develop an organized work system
- Choose wisely
- Evolve and renovate your business plans every day for better results
Pro Tip: Not all network marketing companies are genuine. Some fake network marketing business houses can force you to join the business and buy expensive products. Beware of such companies and also report about them. Home franchising is a great way to earn unless it is fraud.