What is network marketing?
Network Marketing is a business model that is based on the distribution of companies and services by the company through the network of independent suppliers. Network marketing is also popular as multi -level marketing (MLM), affiliate marketing and graduated marketing. Some of the most famous network marketing companies around the world are Amway Corporation, Shaklee, Mary Kay, Tupperware and Avon.
To understand how network marketing works, it may be useful to think of a business model with which most consumers are familiar with, franchising. In the franchise, the owner pays the company for the right to do business through the products, services and names of this company. The parent company agrees to provide training, development, advertising and marketing support to the owner. While the name on the outside of the building is the name of the parent company, the actual location is privately owned by the independent owner of the company.
While network marketing is not actually a franchise model busUiness, it works in a similar way. In fact, some large companies MLM informally refer to their business plan as "private franchising". In network marketing, the company distributes its products and services through independent business owners (IBO), who in turn state these products and services on their own customers.
The key factor that has made network marketing so attractive is that independent business owners have not only the ability to sell products and services to retail customers that they are also able to expand their business by establishing others in their own companies. This is commonly called "sponsoring" in the MLM industry. The sponsoring of others allows the company the company not only to profit from what it sells directly, but also allows it to benefit from the sales production of those sponsored.
Here is an example of how MLM's business works: let's say aboutWner One is an existing IBO that sells goods worth $ 100 (USD) every month. In addition to any retail profit, which he earns, he also receives a monthly bonus for its sales volume. The owner decides to expand his business and sponsor two owners.
The owner of two develops a company that also sells goods worth $ 100 every month. Like One Owner, the owner of the two will receive a bonus for their sales volume over any retail profit it has achieved. By sponsoring the owner two, the owner of One, who generated $ 100 from the sale, is also credited for $ 100, which was created by the owner two. Therefore, the total volume of business sales is considered $ 200.
If the owner two decided to expand his company and three owners, the owner two would be credited for any sales volume that the owner produces three. Finally, because the owner of one sponsored owner two, the owner of One would also be credited for the volume of the owner of the owner two and the owner three. It is this oneThe ability to generate Ltiple Muscies, which has become a popular and profitable business for many.
For the structure of network marketing business, many people mistakenly believe that all MLM companies are illegal pyramid schemes. In fact, the legitimate companies of network marketing pyramids are not. The belief that MLM is an illegal pyramid schemes could be accused by the Amway Corporation of the illegal pyramid in 1975, when the Federal Business Commission of the United States (FTC). In 1979, however, the US federal judge determined that the marketing plan of the network used by Amway was a truly legitimate business model. This decision, in turn, helped legitimize other MLM companies.
However, this does not mean that all companies concerning legitimate enterprises are. The entrepreneur who considers network marketing should consider the following factors:
- The time the company was in business.
- Investment in the frontpart -to -do business. Many reputable companies do not require a large initial fee.
- Product return principles. Legitimate companies generally allow the return of products.
- amount of training and development available for IBOS.