The Network Marketing MLM Business Model

Network Marketing as a Functioning Business Model

While there are many critics as to the validity of network marketing, the bottom line is that network marketing is truly a functioning business model that legitimate companies can use as a method to effectively distribute its products & services to the marketplace. There is no difference in the legality of using network marketing as a means to distribute products as there is with any other method of distributing products, such as direct to consumer, manufacturer to wholesale to retail or any other channel of product distribution.

How does the network marketing business work?

The network marketing business model is based on the belief that the best method of product or service distribution for certain types of products & services is through the presentation of these products & services by independent advocates of the company. These independent advocates are known as independent associates, independent business owners or independent distributors. The parent company offers a opportunity for these advocates to develop an income by helping the company market its goods & services. These advocates receive a commission whenever they personally bring a new customer into the company. They also are able to offer the same opportunity to others in which they are financial compensated whenever the individuals they introduce to the opportunity bring a new customer to the company.

What type of product is an ideal product for the network marketing business model?

While a company can use any product to market through a network marketing business model, the ideal product for this form of distribution is a product that possesses unique attributes to the marketplace in which it is more effective to educate the market of these attributes through the form of a full presentation.

For example, suppose a company manufactures and develops a box of detergent with very little unique attributes compared to other brands of detergent. This company really wouldn’t need to use network marketing to promote the product. This is because the consumer is already educated as to the need of this product. The consumer simply seeks out the product when there is an establish need or desire for it.

However, suppose you developed a detergent that has very unique qualities that other detergents do not have. For example, maybe your detergent can wash clothes more effectively than other detergents by using less of it. Network marketing might be a better distribution channel for your product. The reason why is without a person to person approach your product might be confused with other products like it and the end users won’t see the value, particularly if you have a sales price higher than what other detergent brands charge for their products.

All products and services are marketed by either pull through marketing or push through marketing. Pull through marketing is when a company attempts to pull customers to inquire about its products and services usually through advertising and promotion. Push through marketing is where you develop strategies to entice other companies and people to go out and personally market your products and services. Network marketing is simply another form of push through marketing.

Network Marketing and the Ponzi Scheme...

Network marketing is often times mistaken for a ponzi scheme, illegal pyramid or a scam. The business model of network marketing itself does not make it a ponzi scheme, an illegal pyramid or a scam. Just like companies can abuse any other business model, companies can abuse the network marketing business model as well. It is when the business model is abused when it becomes a scheme. The key with identifying a legitimate network marketing company from a scam is that a legitimate company offers a product or service with unique value that can be enjoyed even if you choose not to participate in the business opportunity. Scams offer no product or a product that only has value by participating in the business opportunity.

What is Network Marketing?

Network marketing is a business system.  It’s also a business opportunity.  It’s a way to distribute products to the consumer.
 
It’s easier to understand network marketing when you compare it to a common business system we’re all very familiar with—the franchise.

When you go in and get a burger at Americas leading fast food burger franchise, do you think they have the best burger around?  Chances are your answer is no.  But do you think owning one is a good money making proposition?  Chances are your answer is yes.  But most people can afford only the burger, not the burger franchise.

But if they don’t have the best burger, why does everybody eat there at least a few times a year?  Because everybody knows the system, that’s why.  Find the sign, park the car, get to the counter, lay your money down, and get exactly the same burger as the other million or so burgers being served that day.  It’s predictable.   The system works like a well oiled machine, and it duplicates the same experience every time.  It may not be the best burger, but it sure is one heck of a business model.

What Is the Advantage of the Network Marketing Business Model?

The Network Marketing business model does the same thing, but with a two main differences.  First, Network Marketing products vary greatly and are generally perceived as the best in the industry.  Unlike the burger franchise products, Network Marketed products emphasize their superiority to ‘store bought’ brands.  The superiority is often backed up with tons of marketing research.  Those who buy Network Marketed products generally think that the product they use, whatever it is, is better than any other comparable product.  Second, most people can afford a Network Marketing distributorship.  The price tag to get into a Network Marketing opportunity typically is a few hundred dollars, not a few million.  The model provides any person with affordable, equal access to a market where they can market a product to the fullest of their ability to make a profit.
 
Network Marketing is an easy thing to take advantage of, both legitimately and illegitimately.  Unfortunately, Network Marketing scams exist side by side with legitimate opportunities.  The goal of the scams is to betray the confidence of the consumer.  That’s why they’re called ‘cons’ or scams.  There are regulatory agencies that monitor the Network Marketing industry, and their job is to alert consumers to frauds.  While these agencies are an effective tool in society, it is the consumer who must exercise due diligence to spot a Network Marketing scam.  But Network Marketing itself is not a scam, and many people around the world reap benefits of participating in a Network Marketing business.

What is the Reason People Join a Network Marketing Opportunity?

If you asked someone why they chose to work in a Network Marketing opportunity, you’ll get a lot of different answers.  Obviously money comes to mind first.  It’s the attraction to money that really gets anybody into whatever occupation they pursue.  But the Network Marketing opportunity is unique.   You can scale it to fit your needs.  A lot of people simply market product to get a few extra bucks for the family budget, while others take the opportunity to heights that bring huge incomes.  It’s an opportunity that is self directed by each individual.   You can take it as far as your ability allows.

But let me tell you, Network Marketing comes with some baggage.  In fact some people hate Network Marketing.  Network Marketing was born of a thing called Multi Level Marketing, but it has evolved.  Multi Level Marketing used questionable techniques to market product.  These techniques, sometimes called ‘harassment techniques’ let loose on society an army of untrained, unprofessional salesman who promoted questionable product.  It got so bad that a lot of people still conjure up terrible images when you mention Network Marketing.  But Network Marketing is working to clear up its image, and a true Network Marketer will cringe if you tell them their doing Multi Level Marketing.

MLM or "Multi-Level-Marketing"

Multi Level Marketing has been called ‘selling soap and hope.’  Meaning that if I sell enough soap, I hope I make lots of money.  It was ‘harassment marketing’ using things like the three foot rule which went something like ‘any breathing body within three feet is a prospect, let ‘em have it!’  It’s the person who, at a party, obnoxiously pushes a product or opportunity to everybody within ear shot.  If you ask around enough, you’ll hear stories like this.  Multi Level Marketing is ‘ancient’ when you consider the way modern Network Marketing interfaces with consumers.

Old school Multi Level Marketing uses marketing techniques that have been around since merchant’s started marketing thousands of years ago.  The biggest of which being word of mouth, that’s how Multi Level Marketing began to suffer image problems in the first place.  People opened their mouths too much, too loud, and the wrong way.  It’s the old school Multi Level Marketing stories you hear about when somebody’s talking about a garage filled with toilet paper, cleaning products or vitamins.  Multi Level Marketing may have been the birth place of Network Marketing, but since its birth, it has retained what it needed to retain from Multi Level Marketing and evolved itself into something completely different.

In its simplest form, the Network Marketing model is people collected in a sales hierarchy of uplines and downlines.  An upline is to downline as coach is to player.  The relationship in is critical.   Uplines are a downlines insight into both the ‘local’ network of associates, and a larger picture of the company as a whole.  It’s the fundamental business relationship building block of Network Marketing.  It makes up part of a three legged structure for a Network Marketing business, product, company and distributor.  Network Marketing businesses rest evenly on each of these three legs.

Network Marketing (MLM) Companies...

Network Marketing companies are the foundation of the Network Marketing industry.  If you can think of a product, then you can think of a company that’s distributing it through Network Marketing.  It’s the company that produces the product and does the extensive marketing research that drives product through the pipeline.  Network Marketing companies vary in, size, reputation and ability to meet demanding consumer market needs.  Without the company, there simply wouldn’t be anything to sell!  And selling the company’s product is what gets a lot of people out of bed in the morning; it’s only after a distributor sells the product that they get paid.  And getting paid is kind of important.

Getting paid in a Network Marketing opportunity will come from some form of a compensation plan.  The plans vary, but are built on a few similar principles.  Compensation, like product, flows through a network.  Regardless if it’s binary, unilevel, matrix or any other of the bookkeeping terms used, distributors of products are paid on a commission basis.  There is no salary other than commission.  The amount of commission is based on the volume of product sold, and also on if the distributor has a ‘network’ distributorship below them.  It’s impossible to capture every detail of each plan, so the best resource for the ‘inside story’ is an upline associate.

In a nutshell, Network Marketing is a business opportunity.  At its heart there is a product and a networked method of delivery to consumers.  It’s evolution over the years has been as staggering as the development of the internet, and in fact, many of the modern Network Marketing philosophies closely parallel the internet’s development.  

The Network Marketing Business Opportunity

The Network Marketing opportunity is the most freely available tool for any person to generate income.  Done well, and to its fullest extent Network Marketing can, and has amassed huge sums of money for individuals, but that does not need to be the case.  There are plenty of people who simply sell a little bit of product each month to earn a little bit of pocket money.  The choice of paths is yours alone.  That is one of the biggest benefits of Network Marketing.