Network marketing: all about this type of business

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Network marketing: all about this type of business
Picture: Andrey Popov | Dreamstime

Network Marketing is a way to build your own business.

Some people think that this is the only way to achieve financial independence, while others are adamant that this is a scam. In order to judge this type of income for sure, it is worth understanding its positive aspects and “pitfalls”.

What is online network marketing, offline?

MLM represents the direction of the sale of goods from the manufacturer to the final consumer. The key sales tool is a recommendation, word of mouth.
Network marketing
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The essence of network marketing is the absence of a large network of intermediaries, due to speculative transactions of which the final price of the product rises noticeably. In addition, in this type of business there are no loud and screaming advertising stands, banners, records published in the media, posted on the streets. In this regard, the cost of promoting products is reduced, and the final cost is the most beneficial for the consumer.

History of the development of the MLM business industry

The history in the depths of which this type of activity was born has a close relationship with the name of Karl Rehnborg. He was able to implement the ideas that arose and gave birth to an entire industry called MLM – multi level marketing. While living in China in the mid-20s of the last century, a man was imprisoned and forced to eat a balanced diet in order to survive in harsh conditions. Rusty nails were his first addition to the food served to the prisoners, and over time he arranged with the guards to bring herbs to him.

USP – Unique selling proposition
USP – Unique selling proposition

In 1927, Karl, having been released and returning to his homeland in the United States, inspired by his own experience, began to develop food supplements based on alfalfa and other substances. He distributed the resulting drugs to his friends for testing, but they did not dare to supply their diet with them. The novice entrepreneur had no choice but to take money for his product, because free things are not worth the price. Over time, information about products spread, people began to look for ways to obtain information about it. And Rehnborg found the best solution by inviting his friends to tell their friends about the benefits of supplements. And for each unit sold, he promised to pay them a commission. This is how the first scheme of MLM work appeared.

Types and directions of MLM entrepreneurship

Depending on the scheme and principles of functioning, there are several varieties of MLM.

  • Single-level. This is a direct selling system in which the seller makes a profit solely through the sale. Attracting new people is not paid. Only 1% of distributors contact these companies.
  • Classic. The lion’s share of organizations is involved in this business. The bottom line is that you can be rewarded for the people you bring in and the work they put into their career development.
  • Binary. This is a relatively young direction in the MLM industry, but in a short time of existence, it has received intensive development. The plan implies the fulfillment of all tasks of the firm and the receipt of rewards.
  • Matrix. This is a dynamic type of entrepreneurship, involving schemes with divisible and non-divisible matrices filled by participants. A reward is received for each advancement up the matrix.

How network marketing works

The principle of functioning of this sphere is utterly simple: the more efforts a person makes in building his own structure, the more income he receives.

Network marketing
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Initially, there is a “sowing of seeds”, in which the novice distributor sells the product and attracts new people to this process. The more active participants are in its structure, the faster you can expect to receive passive income. That is, for a job done once (attracting people), you can receive a commission percentage (and its size is usually from 3% to 21%) throughout your life.

Network marketing: how to make money, all ways

There are not so many options for earning money for a novice distributor, but they are simple and consist in the direct sale of goods (current income) and attracting new people (prospective income).

  1. Money from direct sales. Some manufacturers make this aspect mandatory, and 80-90% of the cash flow of income received by distributors consists of direct sales. This principle works like this: the participant collects applications for orders from consumers and supplies them with a product (a product manufactured by MLM). Profit is accrued through speculative transactions: the distributor purchases the goods at the purchase price, and sells them at the retail price. Often the difference between them is significant.
  2. Earnings on an affiliate program. It is unlikely that you can count on quick money using this method. But with the successful work of attracted partners, you can receive passive income (without making any effort) for life. The essence of the work is to attract other people to such activities and to receive commissions for their sales and partnership deals. Its size depends on your level and status, and as you grow up the career ladder, the percentage also grows.

How to create a network MLM business

It may take more than one or two months to create a quality structure. If you ask the gurus of this field, they will say that building a team will take years of effort, thousands of attended trainings and meetings with people, sleepless nights and sometimes a lack of personal life. Yes this is true.

Franchising: business features
Franchising: business features

Despite the fact that MLM is used to be described as a “weekend business”, until several thousand hours have been spent on this occupation, one should not expect serious results. When considering the rules for creating a friendly team, it is worth taking into account a few rules.

  1. Regularly hold meetings, because this is not a matter of luck and luck, but a matter of statistics. Having developed statistics in your region, you will find out how many meetings you need to hold in order to make 1-2 connections.
  2. Must attend events: product workshops, personal growth trainings, presentations, exhibitions and seminars. Large organizations regularly organize such events for their partners for free.
  3. Referring to a sponsor for support is a basic rule to follow when deciding to build a large structure. A sponsor is a senior partner with a direct stake in your growth.
  4. Provide assistance to junior distribution partners. If you want feedback from the people involved and their dedication to a common cause, give them motivation and try to help in various situations.

How to attract people to work in network marketing

The direction of MLM is often called the “word of mouth business”, so the question of where to get new people is obvious. These are your acquaintances (hot market), acquaintances of your friends, and even strangers (cold market). It is important to know how to conduct a presentation in an ethical and unobtrusive way.

Network marketing
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To get a good result, it is worth attending training events, reading books and listening to audio recordings, and regularly watching videos. In these materials, you can find information about the rules for holding meetings, so as not to frighten the client, but to make him want to get acquainted with the activities in detail.

Network marketing: pros and cons

Like any type of activity, entrepreneurship of such a plan has its advantages and disadvantages. The positive aspects are in the following aspects:

  • the opportunity to create the life of your dreams and increase profits;
  • realization of oneself in the professional field, career growth;
  • meeting new people, interesting and eventful life;
  • dynamic development in terms of one’s own skills and knowledge;
  • use of quality products at a discount.
B2B sales – business to business
B2B sales – business to business

As for the negative aspects of this business, you should pay attention to the following points:

  • the need for start-up capital (in most firms, several hundred dollars are required to enter);
  • Colossal time spent on developing a network of clients and partners;
  • out of the “comfort zone”, especially for unsociable people.
Like any type of business, this direction has good and bad sides. If you do not pay attention to the shortcomings and concentrate on the merits, in a couple of years you can reach a decent level of income and become a professional in your field.