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Avon, Mary Kay Cosmetics, and Tupperware -- what is the common theme between these companies?
They fall under the category of network marketing businesses.
In today's time, various businesses employing this method have emerged in one way or another, and its global appeal has caught the attention of many people who are seeking flexible sidelines to augment further their wants and needs.
What is network marketing, anyway?
Will it guarantee success like conventional businesses?
Network marketing is a business model that requires a distributor network to establish a business. At best, these businesses are also multilevel marketing in nature since payouts happen at more than one level.
Network marketing programs contain a low upfront investment and the chance to sell a product line directly to friends, family, and other personal connections. The majority of network marketing programs also ask participants to recruit other sales representatives, which are called "downlines."
It can be perilous for a business if it compensates participants just for recruiting people instead of selling the company's products or services. A network marketing system that only relies on recruitment is known as an illegal pyramid scheme.
Experts recommend that research should be done before entering the industry.
Network Marketing employs three strategies to generate wealth:
1.) Lead Generation - the pursuit of new prospects.
2.) Recruiting - the addition of customers and business partners to the network.
3.) Building and Management - strategies employed to train, motivate and manage recruits.
It also has a variety of platforms.
1.) Single-Tier Network Marketing
- The participant signs up with an affiliate program to sell the product or service. Recruitment of other distributors is not required, yet the participant gets paid after a direct sale. Avon is an example of a company that utilizes single-tier network marketing.
Other forms include pay-per-click (PPC) and pay-per-lead (PPL) affiliate programs.
2.) Two-Tier Network Marketing
- The participant gets paid for direct sales (or traffic that refers to a website) and for direct sales or referred traffic via affiliates or distributors that the participant recruits. Ken Envoy's Site Sell is an example of this method.
3.) Multi-Level Marketing (MLM)
- A distribution-based marketing network which is two or more tiers "deep." MLM permits participants to make money five or more tiers deep. The Trump Network, Magnetic Sponsoring, Herbalife, USANA, and Amway are some of the companies under the said category.
However, companies that utilize this certain model have been the subject of criticisms and lawsuits. These are:
- similarities to traditional illegal pyramid schemes
- price fixing
- collusion and racketeering
- high initial entry costs
- emphasis on recruitment of others over actual sales
- invitation for members to purchase and use the products
- exploitation of personal relationships
- complex and exaggerated compensation schemes
- false product claims
- the company or leading distributors gaining profit off participant-attended conventions, training events and materials, advertising materials
- techniques to enhance enthusiasm and devotion
According to Dominique Xardel, "network marketing" and MLM are synonymous since both are direct selling varieties. Yet, other sources say that MLM is just a form of direct selling.
Words like "word-of-mouth marketing", "interactive distribution", and "relationship marketing" are used to describe MLM in an attempt to differentiate itself from Ponzi schemes, chain letters, and consumer fraud scams.
Pointers to Remember
A solid marketing team is a must-have for people seeking to establish a business that relies heavily on multi-level marketing. The said strong team can guarantee success in the future.
Not all of those who seek to sell services or products will be initially good at it, yet excitement is another factor to consider.
Sincerity (aka real enthusiasm about the company or product) is also a vital ingredient in this industry.
And lastly, hire people who are more excited about the company than you.