To expand a business, network marketing relies on a network of distributors. There are many types of network marketing, but one of the most popular types is called multi-level marketing.
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The key points in a nutshell:
- To sell a product, network marketing relies on a network of independent distributors.
- Multi-level marketing is a form of network marketing in which sellers also earn money by recruiting other sellers.
- To make money with network marketing, you need to invest time, money, and effort - possibly more than you would expect.
What is network marketing?
Network marketing is based on individual distributors marketing and selling a product to their network of friends, relatives, and acquaintances. Distributors make their money through commissions on the products they sell. They are often not employees of the company, but independent contractors.
Distributors in network marketing companies typically use three strategies to be successful: lead generation, recruitment, and building and management.
Lead generation is about locating new customers and clients who might be interested in the product. Recruitment is the process of adding customers and business partners to your network. And building and management are how you train, motivate and manage your recruits, and business credit cards.
Multi-level marketing
In some companies, distributors also get paid a commission for recruiting more distributors to sell the product. They can earn more money the more individuals they hire.
The result is multiple tiers or levels of sales recruits: the top, the initial story (called the "upline") and then one or more tiers below that ("the downline"). Each recruit can then recruit additional distributors, who then form the downline of that level. Multi-level marketing is the name given to this form of network marketing (MLM).
Some MLM programs allow you to make money five or more levels deep. The top level makes the most money because it receives commissions from all the levels below it. It is difficult for the youngest recruits to make money.
Amway, Magnetic Sponsoring, and LuLaRoe are a few MLM companies as examples.
Does network marketing pay well?
Not everyone makes the same amount of money from network marketing. The amount you earn depends on the sales you can make yourself and, in the case of MLM companies, the success of your downline.
There are several reasons why it can be difficult to make money with multi-level marketing.
First, the company may require you to buy their products, pay for training, or maintain a certain amount of inventory. These costs are often incurred before making your first sale, so you start with a backlog.
The exciting bonuses or prizes the company offers are then often only available to sellers who "pay to play" by purchasing a specific dollar amount as an incentive. This inventory must then also be sold if the seller is to make a profit. Sometimes these purchases are necessary if the seller is to advance, and resale is difficult because the seller must price the product above retail to recoup its costs.
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Finally, there are often operating costs such as computers, phones, Internet access, and "training tools" that the business needs. These costs further reduce the chances of profit because the salesperson must meet such stringent sales or hiring goals that it is almost impossible to move forward.
Not everyone who wants to sell something is good at it. However, sincerity and genuine enthusiasm for a company or product are a form of marketing in themselves. If the sales team's only incentive is money, they may cut corners or mislead others to make more for themselves. For network marketing to be successful, the salespeople must also be genuinely enthusiastic about the product.
Multi-level marketing vs. network marketing
Multi-level marketing is a form of network marketing with multiple levels of distributors. A large part of a multi-level marketer's success is based on recruitment.
However, there are two other, simpler forms of network marketing: single-level and two-level network marketing.
One-step network marketing
In one-tier network marketing, you sign up for a company's affiliate program to sell its products or services. You do not have to recruit other distributors, and all your compensation comes from direct sales. Avon, a well-known cosmetics company, uses one-step network marketing.
In some online affiliate programs, you are paid for the traffic you drive to the affiliate's website. Pay-per-click (PPC) and pay-per-lead (PPL) affiliate programs are other examples of single-tier networks.
Two-tier network marketing
Unlike one-tier network marketing, two-tier network marketing also involves recruitment, but your payment does not depend solely on it. You get paid for direct sales (or for the traffic you direct to a website) and for direct sales or referred traffic from affiliates or distributors you recruit to work with you. An example of a two-tier program is "Site Sell" by Ken Envoy.
Frequently Asked Questions (FAQs)
Can you make money with network marketing?
Yes, it is possible to earn money with network marketing. However, it is not easy. To be successful, you usually have to put in a lot of effort, time, and money. Casual sellers will quickly find that they lose money.
Is network marketing risky?
Yes, there are risks involved in network marketing. You risk the money you need to spend on start-up costs, buying stock, and training materials. You will also have to spend time and money filling out paperwork, filling and mailing orders, and recruiting new salespeople. To make your money back, you will need to sell a lot of products. And to keep making a profit, you need to sell even more (and sometimes recruit new salespeople to your downline). Consider whether your network has enough buyers to meet your company's needs and thoroughly research the network marketing company before you get involved.
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