Why is network marketing so popular? Why should you even bother to consider this business model? Isn’t this just for people who can’t find a real job? Isn’t it like a pyramid scheme and illegal? Only losers and the gullible types fall for these schemes!
If any of those questions came to your mind, keep on reading, before you make a big mistake. Before we get into the definition of what Network Marketing – also called Multi-Level-Marketing-is, and what it isn’t, let’s look at some interesting facts and figures about this exploding industry.
Network Marketing has grown into a global industry with more than 61 million men and women involved in this type of business model. In the United States alone, over 15 million people are building their home-based businesses through Network Marketing.
More than $111 billion dollars of retail goods were sold globally through the Network Marketing industry! Over $31 billion dollars of those sales were here in the United States!
If so many people and so many companies are following this way of doing business, it’s a good idea to at least take a look at what it really is.
Once upon a time, if you’d mention MLM to anyone you’d get a range of responses- most negative. So what’s happened to make this once maligned industry into a viable business model that more and more companies are taking note of and incorporating into their structure?
Lots. For one there are more stringent controls and regulations on MLM companies.
Agencies like the Federal Trade Commission keep a sharp eye on this industry to keep the schemers and scammers out.
Second, the very structure of Network Marketing provides a strong opportunity for entrepreneurship- people who have never owned a company or ran their own business can often step into this industry and be successful.
Third, this model saves a company a lot of money, which is obviously very attractive to businesses in this economy.
So how does it all really work?
“Multi-Level Marketing is a legal system of merchandising products through multiple levels of distribution (distributors). These distributors purchase at wholesale and act as a middleman between the manufacturer and the consumer who pays retail.” This is one of the first formal definitions, published by Doris Wood of the MLMIA.
Network Marketing is a type of direct sales – companies that use distributors to directly get their product or service out there in the market place. Distributors are paid a commission based on the sale of these products or services.
Some direct sales companies just pay the distributor every time they make a sale. With multi-level marketing, you get paid not only when your customer purchases a product, but you’ll get paid from the efforts of other distributors who you have recruited to join your team. This creates a more varied income stream through leverage and residual income.
Network Marketing or MLM gives you the opportunity to build a sales organization, and get paid commissions based on the sales generated by your downline. By recruiting others into your organization, you build levels. Your distributors recruit others beneath them, and on and on it goes. How far down the levels that you will be allowed to collect commissions depends on the structure of the particular company you are working for.
In many Network Marketing companies, the more distributors that you have in your downline and/or the more sales you make, you’ll qualify for higher commissions or bonuses and higher ranking in the company.
Traditional business does not allow for advancement like this. Imagine if you got a job frying French fries at McDonald’s. What are the chances that you would advance to CEO or president, and get the big bucks? It’s possible, but for most of us, it’s highly unlikely.
The structure of Multi-Level Marketing provides the opportunity for an average person, who works hard and is dedicated, to move up through the ranks- and sometimes very quickly- and make the kind of money that CEO’s make in big companies!
Why are more and more traditional companies choosing to distribute their products and services this way?
It’s a more economical way to structure a company. Network marketing companies distribute their product or services to customers directly through distributors. This cuts out a long line of middlemen in the distribution line. There is usually no expensive marketing and advertising campaigns – network marketing companies rely on their distributors to get the product out there by word of mouth. This has proven to be effective and lucrative for both the company and the distributor.