Jonny, what is network marketing? Is it a pyramid scheme or is it a legal business opportunity?
In a nutshell, network marketing is a business model that allows your average person to start a home business where they can buy products at a discount, sell them for a profit and teach others to do the same which will earn them a royalty bonus.
This is a question that I get asked frequently by people looking to earn an extra income around their 9-5 job and there seems to be a lot of confusion around this contentious business opportunity.
In an ideal world, this is how it SHOULD work…
- Sally finds a network marketing company with products that she loves and decides to sign up as a distributor.
- She purchases a range of the company’s products at a discount, sells them to her retail customers and makes a monthly retail profit.
- When Sally has enough customers that she can realistically manage on a daily, weekly and monthly basis, she shifts her attention to teach others(new distributors) to do what she has done and then she earns a royalty bonus based on the total sales volume of their businesses.
No splitting the atom or rocket science involved 😉
Now, some of you might say…
OK Jonny, if it’s that straight forward, why is there so much negativity around network marketing and MLM as a business model?
THE CONTROVERSY SURROUND NETWORK MARKETING & MULTI-LEVEL MARKETING
Let’s be honest for a second, Network Marketing has had a bad rap over the years. S
Since its inception in the 1940s through to the present day, a sad undeniable truth is this…
At least 70% of people who start a network marketing business make little or no money.
But Jonny, didn’t you say that it is the average person’s best hope of starting and growing a profitable home business?
Yes, but let me tell you why most people fail:
- They forget the term ‘marketing’ in the phrase network marketing – and don’t treat it as an actual business.
- They use outdated techniques that do not work in modern times such as, chasing family and friends, walking around shopping malls with surveys and flyers looking for new customers and distributors.
- They buy into the hype perpetrated by greedy distributors that they will make tens of thousands in their first year.
- ….and the list goes on.
One of the reasons that Network Marketing has been in the spot light in recent years is that the Federal Trade Commission realised that there were too many people promoting projected income estimates, and product health benefits, that were unrealistic and borderline criminal.
Unfortunately, many naive, desperate and innocent people got sucked in, lost valuable time and money and finally complained to government organisations because they had been deceived.
This resulted in numerous class-action lawsuits being filed against multi-national network marketing companies.
So, here’s the reality…
If you start and build a network marketing business using tested principles such as our Get-em, Keep-em, Grow-em method or any other viable method, it is highly likely that you will be more successful than most distributors in the industry.
You have to be realistic!
Look at it this way…
Most new online and offline business don’t become profitable in their first year.
So, I always advise people to manage a similar expectation when starting their home-based network marketing business.
I advise every new network marketing distributor to dedicate at least one year to building a business before seeing consistent retail and royalty bonus profits.
A year ?
Yes – A YEAR!
Over the course of a year, you are going to have to learn a lot about the industry, your company, your product range and the marketing plan upon which your retail and royalty income will be based.
You will need to:
- Plug in to your company’s weekly, monthly and quarterly meetings.
- Learn how to talk about your product range.
- Learn how to find the people most likely to buy your products.
- Learn how to cultivate and grow a team of distributors who successfully do what you teach them.
Look at it this way…
In 1 year you will be a year older.
If you look a year into the future and you are earning an extra 2-5k a month, would it be worth doing some work over the next 12 months to put you in that position?
Procrastination is the biggest cause of mediocrity and ultimately failure in life.
Unless you take action today nothing will change.
So, before you learn exactly what you need to do to build this like of business, it’s important to understand some of the lingo that is commonly used in this industry.
NETWORK MARKETING TERMS YOU NEED TO KNOW
There are a few terms that you need to know about if you want to make the most out of your marketing efforts.
Multi-level marketing networks have members who act as distributors, as opposed to having salespeople. The distributor is a sales representative responsible for selling the company’s products and finding other people who would like to build a home business.
Downline refers to those who have been recruited by the distributor. These people make up the downline. The distributor will profit from the sales that are made in the downline in the form of a royalty bonus..
As with a downline, you also have upline. All distributors in the hierarchy above a distributor are referred to as the upline.
Every product sold has a volume number assigned to it.
Every distributor will generate a volume figure each month based on:
- What they buy from the company to sell to their customers.
- The products that the customers buy directly from the company using a distributors ID number.
The volume is related to the sales turnover of a distributor’s business.
Let’s say, Sally has one distributor in her team called Fred.
Fred builds his business and gets 30 retail customers that buy products from the company which have a value of 100 volume points per product.
The total sales volume is 3000 a month.
Some network marketing company’s relate a volume point to a dollar.
Sally will now be paid a royalty bonus based on Fred’s volume for the month, which leads us on to…
Using the example above, if Sally’s ‘royalty’ bonus is 5% of Fred’s sales volume and the network marketing company uses the metric:1 volume point = $1, Sally would now earn a royalty check of $150.
This is her reward for helping Fred to build his business.
TYPES OF NETWORK MARKETING
There are different types of network marketing business models, some of which can be found below:
With single-tier, you will join an affiliate program. From there, you will sell products or even services through single-tier marketing networks. You do not need to concern yourself with recruiting other distributors and the direct sales will be your only source of financial income. Take Avon for example. They’re a cosmetics company and they have adopted this method of sales. Single-tier marketing can also include PPC and PPL affiliate schemes.
Two-tier marketing requires you to do some recruitment, but you will not be dependent on it in order to make a profit. You will be compensated for the direct sales that you make, and you will also be compensated for traffic or sales generated by the people who build their business in the level below you.
Some direct-sales companies have multi-level marketing schemes. This encourages distributors to recruit new distributors. They will then get a portion of the sales that they make going many levels beneath them.
EXAMPLES OF NETWORK MARKETING COMPANIES
This is one of the biggest MLM companies in the world. They were founded in the US in 1938 and there are also 40 Tupperware parties every single minute, hosted across the world.
Another example would be Avon. It’s possible to adopt a multi-level, two-tier or single-tier home business by selling these products.
Herbalife is a multi-level company that sell diet supplements. They were founded in the year 1980 and they have millions of distributors.
FOREVER LIVING PRODUCTS
Forever Living products is a multi-level company that sell diet supplements. They were founded in the year 1980 and they have millions of distributors.
ADVANTAGES OF NETWORK MARKETING
As mentioned previously, there are numerous advantages associated to the network marketing business model for the average person, some of which include:
- Low start-up costs – most people can start a network marketing business with between $150-$500
- Numerous tax benefits
- A great opportunity to make new friends and expand your current network
- The opportunity to quality for amazing travel opportunities in parts of the world that you wouldn’t have considered vacationing
- Consistent personal development – it’s difficult to be actively involved with a network marketing organisation and not have developed skills in areas such as marketing, sales, time management, money management and leadership
- You are your own boss and choose when to work and with whom
DIS-ADVANTAGES OF NETWORK MARKETING
As with any business model, network marketing isn’t for everybody.
This business model definitely ISN’T for people who:
- Want to get rich quick – you need to be prepared to work 10-15 hrs a week to get to an income of $2-5k/month in 12 months
- Want an automated system of passive income without much input or involvement – you will have to join calls, attend meetings and send emails etc
- People who need to earn a signifiant income to pay bills or debts fast (within a month or do)
- Don’t really like people and aren’t very sociable – people like this are better suited to online business models such as affiliate marketing
- People who believe that personal development is all mumbo jumbo and metaphysical nonsense
COULD YOU USE NETWORK MARKETING TO EARN AN EXTRA INCOME?
You are probably reading this post because you are looking to upgrade your lifestyle by earning an extra income.
It is likely that 20% of you reading this will have read the advantages and disadvantages above and are thinking to yourself,…
This suits me well because I’m sociable, I like to make new friends, meet new people and help people to achieve their goals in life.
If that sounds like you then I’m sure you have what it takes to succeed.
To succeed you’re going to have learn a strategy that will help you to achieve your income goals.
I’ve got you covered!
Click here to discover our Get-em, Keep-em, Grow-em strategy which is changing the way people approach network marketing.
I hope you got some value from this post.
Till next time.