Understanding Network Marketing: Why it Works and Why it Won’t
Friday, December 25th, 2009Larry Rivera asked:
To say that the network marketing industry has been a success would be an understatement indeed. Today, this business involves millions of people, with many programs and companies expanding in different countries around the world.
It has become such a top dollar earner that many of the authors, coaches and gurus we know today advocate it. But can people such as Robert Kiyosaki and Robert Allen be wrong? Here are reasons why network marketing works and why it won’t:
What is network marketing?
Network marketing is another term for multi-level marketing (MLM). It is a business model that involves the distribution of products and/or services from the main company through its network of distributors or retailers.
This network then promotes these products and services through direct selling to its end users, the consumers.
Distributors are considered independent of the parent company and thus are not salaried employees or personnel. In network marketing, they are allowed to build their own little business unit by recruiting other members who will serve as their ‘downlines’. These members, in turn, also recruit other members or downlines.
Why it works
When implemented correctly, network marketing can mean an excellent business and source of income for many. It also offers huge potential for unlimited income, provided set standards are in place and that all members of the downline perform.
The concept regarding income generation through network marketing is actually simple: all members (uplines and downlines alike) earn a commission out of the sale of the program’s products or services. They could also earn commissions through the earnings generated by their downlines.
In many business models, a commission may also be paid to the upline for recruiting a downline. This makes it a strong incentive for many distributors to increase the number of downlines they have.
Compensation plans used in network marketing vary, depending on the company. It could be one of the following: unilevel, binary, stair-step, breakaway and matrix.
The road towards successful network marketing
Network marketing is about building strong, reliable referrals and soft selling. What differentiates it from similar forms of business models is that it actually has a good product or service to sell over a long period.
Network marketers rely on the consumer appeal of this product in order for it to generate income. Some of the most successful products have been those that catered to specialized needs or offered an alternative to what is already readily available in the market.
Most of these products are also produced or manufactured by the network marketing parent company itself. Without a product that has a mass appeal or at least a ready niche, no network marketing business will survive.
The trouble with network marketing
Network marketing per se is an excellent business model. The problem is that there are many individuals who take a few aspects of the business, twist it and use it for their own dubious plans. By simply changing a few things in the practice of network marketing, it turns into pyramiding, a structure that is not only illegal, it is also doomed at the start.
The key here is for both newbies and experienced marketers to ensure that network marketing is not stained by wrong practices. It is a business that has been proven to work and has in fact helped millions of people around the world improve their lives and that of others. It really is up to insiders in the industry to preserve the business and make it work.
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To say that the network marketing industry has been a success would be an understatement indeed. Today, this business involves millions of people, with many programs and companies expanding in different countries around the world.
It has become such a top dollar earner that many of the authors, coaches and gurus we know today advocate it. But can people such as Robert Kiyosaki and Robert Allen be wrong? Here are reasons why network marketing works and why it won’t:
What is network marketing?
Network marketing is another term for multi-level marketing (MLM). It is a business model that involves the distribution of products and/or services from the main company through its network of distributors or retailers.
This network then promotes these products and services through direct selling to its end users, the consumers.
Distributors are considered independent of the parent company and thus are not salaried employees or personnel. In network marketing, they are allowed to build their own little business unit by recruiting other members who will serve as their ‘downlines’. These members, in turn, also recruit other members or downlines.
Why it works
When implemented correctly, network marketing can mean an excellent business and source of income for many. It also offers huge potential for unlimited income, provided set standards are in place and that all members of the downline perform.
The concept regarding income generation through network marketing is actually simple: all members (uplines and downlines alike) earn a commission out of the sale of the program’s products or services. They could also earn commissions through the earnings generated by their downlines.
In many business models, a commission may also be paid to the upline for recruiting a downline. This makes it a strong incentive for many distributors to increase the number of downlines they have.
Compensation plans used in network marketing vary, depending on the company. It could be one of the following: unilevel, binary, stair-step, breakaway and matrix.
The road towards successful network marketing
Network marketing is about building strong, reliable referrals and soft selling. What differentiates it from similar forms of business models is that it actually has a good product or service to sell over a long period.
Network marketers rely on the consumer appeal of this product in order for it to generate income. Some of the most successful products have been those that catered to specialized needs or offered an alternative to what is already readily available in the market.
Most of these products are also produced or manufactured by the network marketing parent company itself. Without a product that has a mass appeal or at least a ready niche, no network marketing business will survive.
The trouble with network marketing
Network marketing per se is an excellent business model. The problem is that there are many individuals who take a few aspects of the business, twist it and use it for their own dubious plans. By simply changing a few things in the practice of network marketing, it turns into pyramiding, a structure that is not only illegal, it is also doomed at the start.
The key here is for both newbies and experienced marketers to ensure that network marketing is not stained by wrong practices. It is a business that has been proven to work and has in fact helped millions of people around the world improve their lives and that of others. It really is up to insiders in the industry to preserve the business and make it work.
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