Network Marketing is a business distribution model that allows a company to market their products directly to consumers by means of direct selling and referral, or word-of-mouth advertising. It differs from most other types of businesses in that there are no advertising, wholesale, or retail costs involved (no middle men!).
How Is 'No Middle Men' a Business Benefit?
The key benefit of not having middle men is that the company can spend more money on making the product better and more unique.
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.
These people are referred to as associates, distributors, independent agents, and other terms. They are unsalaried salespeople that basically have their own business, and develop their organization by either building a customer base that buys their company's products directly from the parent company and/or by recruiting a downline of independent distributors who also build their own customer base, thereby increasing the size of the overall organization.
Associates can earn money in the form of commissions based on the efforst of their organization, which includes themselves and everyone in their downlines. These commissions are calculated based on the individual company's compensation plan, which determines how an associate gets paid. There are usually many levels of people getting paid from one person's sales. Also, associates can earn money by retailing products that they buy from the company at wholesale prices.
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.
Multi-level Marketing is how the people in the network are compensated for their efforts. It simply means that commissions are paid on multiple levels of the organization, thereby creating leverage.
What do you mean by leverage?
When you are talking about leverage in this context you are talking about earning money from somebody else's efforts.
This leverage concept is used by any traditional business with employees. The company pays the employee a salary, which hopefully isn't is as much as he brings in. The owner of the company gets to keep the difference. He is leveraging his income by making profit from the efforts of his employee.
This is kind of the same as network marketing compensation plans, but there is a big difference: In a network marketing plan, the ones that are being leveraged off of are other independent distributors instead of employees. Therefore, there are no employee costs involved and hopefully these people will be more motivated because they also own their own business.
Wait a minute! Is this one of those "Pyramid Schemes"?
A company is a pyramid if the distributor mainly makes money from new signups or they have to buy more products than they can sell or use. Pyramids are illegal everywhere, but network marketing is legal in all states and most countries.
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.
Want to learn 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. - 15790
How Is 'No Middle Men' a Business Benefit?
The key benefit of not having middle men is that the company can spend more money on making the product better and more unique.
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.
These people are referred to as associates, distributors, independent agents, and other terms. They are unsalaried salespeople that basically have their own business, and develop their organization by either building a customer base that buys their company's products directly from the parent company and/or by recruiting a downline of independent distributors who also build their own customer base, thereby increasing the size of the overall organization.
Associates can earn money in the form of commissions based on the efforst of their organization, which includes themselves and everyone in their downlines. These commissions are calculated based on the individual company's compensation plan, which determines how an associate gets paid. There are usually many levels of people getting paid from one person's sales. Also, associates can earn money by retailing products that they buy from the company at wholesale prices.
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.
Multi-level Marketing is how the people in the network are compensated for their efforts. It simply means that commissions are paid on multiple levels of the organization, thereby creating leverage.
What do you mean by leverage?
When you are talking about leverage in this context you are talking about earning money from somebody else's efforts.
This leverage concept is used by any traditional business with employees. The company pays the employee a salary, which hopefully isn't is as much as he brings in. The owner of the company gets to keep the difference. He is leveraging his income by making profit from the efforts of his employee.
This is kind of the same as network marketing compensation plans, but there is a big difference: In a network marketing plan, the ones that are being leveraged off of are other independent distributors instead of employees. Therefore, there are no employee costs involved and hopefully these people will be more motivated because they also own their own business.
Wait a minute! Is this one of those "Pyramid Schemes"?
A company is a pyramid if the distributor mainly makes money from new signups or they have to buy more products than they can sell or use. Pyramids are illegal everywhere, but network marketing is legal in all states and most countries.
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.
Want to learn 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. - 15790
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