Advantages of Network Marketing

First of all, what I think we need to do is to fully determine what Network Marketing is, as I have found, in the past, that many people have varying ideas on what the concept is.

“Multi-level marketing (MLM), (also called Network Marketing, Direct Selling, and Referral Marketing) is a term that describes a marketing structure used by some companies as part of their overall marketing strategy. The structure is designed to create a marketing and sales force by compensating promoters of company products not only for sales they personally generate, but also for the sales of other promoters they introduce to the company, creating a downline of distributors and a hierarchy of multiple levels of compensation.“

(Wikipedia.org)

I think the above analogy explains the concept quite well. Essentially, it is a different distribution system to what most people are used to, the retail system. So in essence it is another way that a company can distribute its product.

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Advantages for the ‘Company’

As the company are enlisting Independent Distributors of their product, they are relying on them to generate the sales and recruit more distirbutors. This has 2 benefits -

1. The Independent Distributors will be coming up with their own marketing strategies for creating an awareness for the product. What the company is doing here, is leveraging the cumulative marketing experience of any enrolled distributors. In a traditional retail model, the company may hire a few marketing specialists to market the product, but this does not guarantee results and may be a large upfront cost to the company’s launch fees. By having a growing team of Network Marketers, what the company gets is a bigger marketing team over time with a greater base knowledge.
2. The Independent Marketers will  fund their own advertising costs for the promotion of the product. If you think the Coca Cola Company is estimated to have spent 2.7B on advertising in 2008 alone, you can see how this can streamline a company’s fixed costs and be especially beneficial for a start-up with little funding. What happens here is the company will only pay out after product(s) have been sold, making marketing and advertising costs directly proportionate to sales.

Advantages for the ‘Marketer’

1. The Independent Marketers will be able to gain increasing amounts of leverage, in time and earnings, by building a larger team of distributors beneath them. The more successful the team they build, the more return they will accrue. As a team grows (assuming all Marketers recruit new distributors in an equal amount of time) the original marketer’s team is expanding exponentially.
2. The Independent Marketers will also receive a fair amount of free business training to help build their businesses from the team above them in the network, as it is in everyone’s interest that all who are involved succeed. Trainings may come by way of company meetings, recorded CD’s etc.
3. Marketers involved will be earning a cumulative passive residual income stream. Once a marketer has built his business up he will keep earning month by month via his/her network. What often occurs is that a Marketer will be billed a subscription fee to be in the program (often a product ‘Autoship’), but he will also get a percentage of that fee from the Marketers he has enrolled, on a monthly basis. This can lead to a sizeable residual income that is earned whether the Marketer in question works or not!
4. Another benefit to the Marketer is (generally) a low start up cost to become involved in the business. Essentially what the Marketer will become is a franchisee for the main company. Traditional franchises can be overtly expensive, often due to the need for premises, but to become involved in Network Marketing can be far cheaper with similar rewards.

As you can see, there are many advantages for all who are involved in a Network Marketing distribution system. I personally believe that is a mechanism that will become more popular over time as people begin to understand the value and leverage available to the individual.

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