Network Marketing is a way that companies market their products to the consumer. It is different from most other types of businesses because it doesn't have any advertising, wholesaling, or retailing costs involved in it. It is done entirely by direct selling and referral, word-of-mouth type of advertising. This eliminates the middle man.
How Is 'No Middle Men' a Business Benefit?
When companies use "middle men" they spend money, and lots of it, on things that don't enhance the product. If they don't have these costs, they can spend more on research and development. This means that they can produce a higher quality, more unique offering.
The benefit that probably means the most to you? It's the fact that some of that money that's freed up by not paying for advertising, wholesalers, and retailers, can go in the pocket of the person who is promoting the product by telling his friends and family about it.
This person is referred to as an associate, independent agent, or distributor. He or she is a salesperson who has their own business or distributorship. They create income by building up a customer base that buys the products directly from the parent company, or by recruiting other entrepreneurs who in turn build their own customer base, or usually a combination of both. This increases the size of the overall organization.
Distributors earn commissions based on the sales efforts of their organization, which includes their efforts as well as the efforts of their downline. Commissions are paid to distributors according to their company's compensation plan. There can be multiple levels of people receiving commission from one person's sales. In addition, distributors can earn profit by retailing products which they purchase from their parent company at wholesale price.
I've heard of multi-level marketing, or MLM. What's the difference between this and network marketing?
In a word, nothing! The terms Network Marketing and Multi-level Marketing refer to two aspects of the same type of business.
First, network marketing. This term describes how the products are promoted, which is through a bunch of different people talking to each other, or networking.
Leverage is created by paying commissions on multiple levels of associates as compensation for their efforts. This is what is referred to as the term "Multi-Level Marketing".
What do you mean by leverage?
Leverage can mean different things. In this context, it means the ability to earn commission on something that someone else sells.
Obviously, this concept is used by most businesses with employees. An employee earns money for a company, and in turn is compensated with a salary, which is hopefully less that he's bringing in. The owner of the company gets to keep the difference. So he is leveraging his income by making money off his employees.
This is similar to the concept of network marketing compensation plans, with the distinct difference being that those that the distributor is leveraging off of are independent distributors themselves. This means that there are no employee costs involved, and that these people are going to be much more motivated to succeed.
Hey, this sounds like a "Pyramid Scheme"!
Pyramid schemes are illegal in all states and most countries, whereas legitimate network marketing companies are allowed in all states and most countries. A pyramid scheme is recognized when distributors are paid primarily from money received from new recruits, or if they're required to by more products then they can consume or sell.
There are illegal pyramid schemes that try to pass themselves off as legitimate network marketing businesses. If a company is legitimate, the distributor can only earn commission from sales of the company's products or services, and not from recruiting sign-up fees alone.
Two Good Resources For Learning More About the Industry of Network Marketing.
The two resources are The 45 Second Presentation That Will Change Your Life by Don Faila, and Brilliant Compensation by Tim Sales. These are both excellent third-party tools that are not only informational, but extremely useful for showing to prospects that are dubious. - 15431
How Is 'No Middle Men' a Business Benefit?
When companies use "middle men" they spend money, and lots of it, on things that don't enhance the product. If they don't have these costs, they can spend more on research and development. This means that they can produce a higher quality, more unique offering.
The benefit that probably means the most to you? It's the fact that some of that money that's freed up by not paying for advertising, wholesalers, and retailers, can go in the pocket of the person who is promoting the product by telling his friends and family about it.
This person is referred to as an associate, independent agent, or distributor. He or she is a salesperson who has their own business or distributorship. They create income by building up a customer base that buys the products directly from the parent company, or by recruiting other entrepreneurs who in turn build their own customer base, or usually a combination of both. This increases the size of the overall organization.
Distributors earn commissions based on the sales efforts of their organization, which includes their efforts as well as the efforts of their downline. Commissions are paid to distributors according to their company's compensation plan. There can be multiple levels of people receiving commission from one person's sales. In addition, distributors can earn profit by retailing products which they purchase from their parent company at wholesale price.
I've heard of multi-level marketing, or MLM. What's the difference between this and network marketing?
In a word, nothing! The terms Network Marketing and Multi-level Marketing refer to two aspects of the same type of business.
First, network marketing. This term describes how the products are promoted, which is through a bunch of different people talking to each other, or networking.
Leverage is created by paying commissions on multiple levels of associates as compensation for their efforts. This is what is referred to as the term "Multi-Level Marketing".
What do you mean by leverage?
Leverage can mean different things. In this context, it means the ability to earn commission on something that someone else sells.
Obviously, this concept is used by most businesses with employees. An employee earns money for a company, and in turn is compensated with a salary, which is hopefully less that he's bringing in. The owner of the company gets to keep the difference. So he is leveraging his income by making money off his employees.
This is similar to the concept of network marketing compensation plans, with the distinct difference being that those that the distributor is leveraging off of are independent distributors themselves. This means that there are no employee costs involved, and that these people are going to be much more motivated to succeed.
Hey, this sounds like a "Pyramid Scheme"!
Pyramid schemes are illegal in all states and most countries, whereas legitimate network marketing companies are allowed in all states and most countries. A pyramid scheme is recognized when distributors are paid primarily from money received from new recruits, or if they're required to by more products then they can consume or sell.
There are illegal pyramid schemes that try to pass themselves off as legitimate network marketing businesses. If a company is legitimate, the distributor can only earn commission from sales of the company's products or services, and not from recruiting sign-up fees alone.
Two Good Resources For Learning More About the Industry of Network Marketing.
The two resources are The 45 Second Presentation That Will Change Your Life by Don Faila, and Brilliant Compensation by Tim Sales. These are both excellent third-party tools that are not only informational, but extremely useful for showing to prospects that are dubious. - 15431
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