In this article, we discussed about the meaning of network marketing, the types, benefits we also talked about how it works, the pos and cons.
Definition
Network marketing, also known as direct sales, involves product sales directly to consumers. Instead of a middleman, the products get sold to real customers, whether it be in-person sales, by phone, or through email.
Network marketing is an organizational structure that has a decentralized system for the sale of products from a production company. Instead of the company employing a full-time sales staff, individual sales professionals sell the products. This commonly involves the salesperson purchasing products from the manufacturer in bulk and then selling them on their own, often at sales nights they host for friends and family.
How does network marketing work?
The ideal structure of a network marketing organization is one in which sales professionals purchase high-quality products and sell those products to people for a profit. For a company like this to work, it’s essential for these products to fulfill a need in the market.
There are two main types of network marketing programs: direct sales and multi-level marketing. Direct sales are a type of network marketing where you earn money from products you have already sold. You make the sale, and the money gets deposited right into your bank account.
In multi-level marketing, you earn money when people sign contracts with you and get a commission on the sales of people they recruit. People involved in multi-level marketing often have a “business opportunity” they’re trying to sell (whether it be a product or service).
Types of Network Marketing
Direct Sales
This is a sales model that involves making sales directly to end consumers. The company does not pay a network marketing commission. Rather, the salesperson earns a sales commission based on retail sales of the company’s products.
Multi-Level Marketing
This sales model involves sponsoring independent distributors that sell products to end consumers. The distributors do not pay a commission. Rather, the salesperson makes a commission based on the distributor’s sales, either to the public or to other distributors.
Marketing Opportunity
This is a business model that involves selling an “opportunity.” In other words, an “investment” to join a business opportunity and make a profit.
Affiliate Marketing
This is a type of marketing where a company pays the person only if the product happens to get sold. Similarly, there is also Advertisement Marketing. This is a type of marketing where a company pays the person based on the number of clicks they get on advertisements.
Compensation Plan
Sometimes, the compensation plan is just a percentage of sales. It can also be performance-based.
Backend Sales
This is a sales model that involves selling a product that must be purchased immediately. Often, the person doing the selling receives a commission on the product.
Direct Marketing
This is a sales model that involves selling to a distributor that then resells the products to end consumers. The reseller does not pay a network marketing commission. Rather, the reseller earns a commission from retail sales of the products.
Pros of Network Marketing
You Get to Meet People: One of the advantages of network marketing is that you get to meet lots of different people. If you’re interested in real estate, for example, you might approach other people in your network and ask if you can talk about what they do at a local level.
You Get to Learn New Skills: As you meet people, you can also pick up new skills and experience in your field from people you talk to.
You Get to Build a Network: It can be an effective way to build a network if you’re not very social and meeting new people is difficult for you.
Financial Stability and Independence: Most companies require you to buy inventory. You then sell it in order to make money. This can be a good way to build financial stability and independence by learning how to make purchases on your own.
Cons of Network Marketing
It Takes Time and Effort to Build a Network: It takes a significant amount of time and effort to build a network in any field, not just network marketing.
You Have to Procure Products to Sell: In most cases, network marketing companies require you to buy a certain number of products to sell. You may not like the products or find it difficult to procure them.
You May Not Make a Profit: Many network marketing companies do not provide enough training or guidance for new recruits. As a result, you may find it difficult to make a profit.
You May Feel Pressured to Recruit: Network marketing companies often pressure you to recruit more people.
Benefits of network marketing
Helps you work within your schedule
Although there may be rules about how you can sell or market the products from a network marketing company, you may have a lot of freedom in how you make your sales. That means you can have the flexibility to work as much or as little as you want, giving you the freedom to adjust your schedule according to your interests. You also can choose your approach to sales, ranging from in-person events to online sales through advertising or developing a mailing list.
Allows you to follow your passion
Because there are many types of network marketing companies, there’s likely a company selling products you know and enjoy. Caring about the items you’re selling can make it more enjoyable to do the work. Selling a product you’re enthusiastic about may also influence others to purchase it, leading to an increase in your commission.
Enables you expand your network
One of the most popular methods is hosting a party where you can display the products you’re selling, usually to friends and family. These parties are a fun way to show off your products while also spending time with others and can be enjoyable and profitable. Selling products through this structure also allows you to build your network, which may lead to further opportunities for growth.
Allows you to give and receive mentorship
A senior salesperson usually recruits new sales professionals to the company. This may present you with the opportunity to get mentorship from the recruiter. They can teach you the technical aspects of the job and help you grow your sales because it also benefits them. Boosting your sales increases your commission and theirs, creating a mutually beneficial partnership.
Conclusion
Network marketing companies offer a diversity of sales and marketing programs. But many involve some level of investment. While the income can be good, it’s important to understand what you’re getting into and the risks involved.
READ: Market Structure