What is Network Marketing? And Why all the Fuss?

by Chris Jackson on January 10, 2012

Has a friend or family member approached you about a new business opportunity lately? Have you been scouring the Internet for information on starting a home based business? Are you interested in network marketing and a little curious about the industry? Or are you thinking about joining a business soon? Before you make a decision, let’s cover a bit of the basics and thoroughly define what network marketing really is all about.

 What do critics have to say?

MLM companies have been a frequent subject of criticism as well as the target of lawsuits. Criticism has focused on their similarity to illegal pyramid schemes, price-fixing of products, high initial start-up costs, emphasis on recruitment of lower-tiered salespeople over actual sales, encouraging if not requiring salespeople to purchase and use the company’s products, potential exploitation of personal relationships which are used as new sales and recruiting targets, complex and sometimes exaggerated compensation schemes, and cult-like techniques which some groups use to enhance their members’ enthusiasm and devotion.

So what is Network Marketing?

Network marketing, also known as Multi-Level Marketing, is a legitimate business model whose method of selling is by distributing a company’s products and services through a network of independent distributors. These independent distributors use direct selling and network building to market the products and services to potential customers. They act as a franchise to the company and earn commissions based on the volume of merchandise sold, or equivalent to its point value, as a result of their group dynamics.

What do the experts have to say?

What do Warren Buffett, Richard Branson and Donald Trump all have in common?…You guessed it, they all own a network marketing company. In fact Buffett calls his purchase of a network marketing company one of his best investments ever. Noted Financial Author and Speaker Robert Kiyosaki sites Network Marketing as one of the best places to learn about business and develop the skills and mindset of an entrepreneur. These well-known business men understand a thing or two about running a successful business. This just illustrates the power of this business model. Companies such as AT&T, Coca Cola and Nextel have used some form of direct selling in their marketing in the recent years.

Why do Companies use this model?

The marketing company’s ultimate goal is to procure outstanding sales and gain a loyal customer base. Instead of using the traditional method and spending millions or billions (see GEICO) on costly advertising, they promote the business through word-of-mouth referrals. They bypass the middlemen and sell the products directly to consumers. This direct method, in turn, helps customers save more money by eliminating mark-ups on the products.

By using the network marketing model, they stay ahead of the competition against their traditional counterparts. Not only do they level the playing field by allowing small businesses the same opportunities which their competing large corporations enjoy, they also build valuable relationships directly with their customers which generates customer satisfaction and a loyal following.

Some companies even let their products speak for themselves by developing excellent quality and highly effective product performance. They allow prospects to taste their products, asking for feedback, ideas, and suggestions on how to improve the products. Satisfied customers will then provide testimonials to convey the benefits and advantages of using the merchandise. These testimonials will now be used by the companies as their promotional tools.

What makes this business model a highly popular choice by many is that it offers a virtually limitless potential that cannot be seen in any other traditional business. Independent distributors enjoy numerous benefits by operating their own “franchise.” Not only do they get to retail the products and services to consumers, they also get to expand their businesses by encouraging others to do the same.

In effect, the networking company provides marketing tools to its distributors to help them promote the business and reach their maximum potential. Aside from this, there is no better place to develop your Business IQ! Network marketing is a learn while you earn business, there are leaders who have the specialized knowledge to assist you in developing the skills necessary to launch and operate a successful business. Also, the company also offers personal development orientations, business opportunity meetings, marketing and sales training, and leadership guidance to new and existing members.

But perhaps the most appealing factor in venturing into network marketing is that in return for a low risk investment, distributors get a chance to take home a most-coveted residual flow of income. At the same time, they take pleasure in time freedom and an improved quality of life. They can work whenever they prefer and decide on how much effort they are going to put into the business to make the income that they desire.

So there you have it! The 411 on MLM and why businesses and people chose this model! Tomorrow I will cover the things to look for in a network marketing company to make sure you are choosing a reputable and solid company!

Yours in Success,

 

Christopher M. Jackson

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