What is Network Marketing?
Network marketing: some claim it’s a buzz word, others believe it’s the holy grail of marketing and something everyone should subscribe to. Often called Multi-Level Marketing (MLM), this business model and selling method focuses on personal network development and direct sales. People who engage in network marketing often start small, gradually building up their networks.
Network marketers direct sell products to customers through multiple channels – online, in person, at sales events, over the telephone, through email contact lists and newsletters, or even through social media platforms.
Most network marketers don’t buy in to television or radio advertising; instead, they personally market and sell the product to people who either already want to buy or are willing to buy the product. This is called direct selling.
While some direct sellers do market to family and friends, this is generally perceived to be an extremely self-limiting approach. Marketing to such a small network produces sales burnout fairly quickly; thus, most successful network marketers focus on network expansion early on. The larger and more targeted the network developed, the more often conversions and direct sales will succeed.
Team Expansion, Downstreams, and Recruits
The second facet of network marketing is recruiting others to sell under you. In a healthy MLM or network marketing program, sellers reach a point where they, too, begin taking on their own sellers, who in turn sell and generate cash flow for both parties. This downstream or trickle-down effect is why network marketing is often referred to as “Multi-Level Marketing” in the first place.
Successful network marketers never stop this process. They continuously develop their downstreams and encourage others to develop their downstreams, too, ideally cultivating a many-layers-deep organization or program with multiple levels. The main goal is to cultivate a network large enough that sales occur organically, with less immediate or direct selling required.
Network expansion isn’t as easy as just adding people to your friend list on social media and posting now and again. Instead, it requires careful thought, market research, and analysis to determine who, when, where, and why you should add specific individuals to your network. For example, if you are selling cosmetics, expanding your network to include women will be much more effective than expanding to include anyone you can grab (including men). In microniches and complex industries, this process can be time-consuming and difficult (but very much worthwhile).
What Network Marketing Isn’t
“Isn’t network marketing a scam?”
This is probably the most common misconception heard in relation to network marketing and/or MLM programs. Network marketing is not a scam, nor is it a re-organized version of a pyramid scheme.
The idea that network marketing programs are somehow unreliable or untrustworthy stems from unscrupulous companies who have taken advantage of sellers in the past. But this phenomenon isn’t limited to network marketing; the potential for unsavory individuals to take advantage of workers or sellers exists in every industry and every business model in the world. Ultimately, prospective sellers must do their research and be sure the network marketing program they use is viable and reliable.
Success rates also vary deeply depending on what you put into your network marketing efforts. When worked with dedication and responsible choices along the way, network marketing can be every bit as or even more profitable than an everyday job. Low entry obstacles also makes it a very easy and attractive way for new entrepreneurs to step safely into sole proprietorship.
The difference between network marketing programs (MLM) and pyramid schemes is simple: in pyramid schemes, there is effectively no product or service sold. Instead, the company or upstream makes money only when they successfully recruit another individual. Pyramid schemes often have extremely high entrance fees and may promise sellers the world, giving little real-world proof of potential other than shady images or documents. Pyramid schemes are 100 percent illegal in both Canada and the United States.
Conversely, network marketing programs feature a real-world product or service that has inherent value. Some MLM programs may overpromise, but at the end of the day, there is an actual product sold to the customer rather than empty promises.
Entrepreneurship (Be Your Own Boss)
Network marketers are not employees; instead, they are entrepreneurs and/or contractors. Each individual within the MLM structure makes money by generating sales and/or recruiting people who make sales. As the downstream deepens, the money made by every seller in a higher tier also increases. The more effort the entire team or program puts into generating sales, the better nearly everyone does right across the board.
If you decide to enter the world of network marketing, you need to understand that you are effectively your own boss. This means you are completely and totally responsible for every facet of business, including self-education, financial management, taxes, development, and yes, marketing, too. Your success in network marketing is directly proportional to the amount of time and effort you put in; dedicate yourself to learning and improving and you stand a much better chance of succeeding down the road.
Business Opportunities vs. Jobs
Network marketing opportunities are not jobs – they are business opportunities. When you spend money on an upfront fee for a program, you are investing in the future of your business. Depending on your level of skill, understanding, talent, time investment, and dedication, that investment may or may not pay off.
Like any other business opportunity, not every investment pays off; this is just a fact of life when running a business. Making good decisions about what you invest in and whether or not you will see a Return on Investment (ROI) is one of the most important tasks in network marketing as a whole.
When Does Network Marketing Work?
Network marketing, like any other business model, isn’t necessarily suitable for every person, every business owner, or even every product and/or service. What this means is that not every network marketing program will be a wise investment.
If you’re considering running a network marketing program for your own product or service, the situation becomes even more complex. Can you afford to support inventory and orders? Do you have the resources available to manage what could turn into hundreds or thousands of people working under you? Nail your numbers down first before you make a decision. You should have real-world proof and projections that show success before you even attempt to push forward.
Network marketing works best for people who are prepared to put in time, effort, and patience. It isn’t a get-rich-quick scheme, nor will it give you a way to make money passively (at least not right away). If you’re willing to dedicate yourself to it just as much as you would any other job, including self-education and adopting the most valuable or useful tools of the trade, you will reap the benefits of your dedication. More freedom, a relaxed lifestyle, residual income, tax breaks, and working from wherever you feel most comfortable are just a few of the many benefits network marketing has to offer.