The Basics Of A Network Marketing Business
A network marketing business operates as a system where successive individuals in a hierarchy all profit to some degree from the sale of a product or a service. The incentive comes from the profit potential of individuals building their own downline of others doing the same thing.
There is the possibility of people becoming well-to-do from their efforts in building their portion of the business, yet the network marketing business has received its share of criticism over the years. Also called network marketing, this business model is maligned frequently because only a few people ever seem to make any money, while the vast majority of people barely make any money at all.
This fact is really not so much the fault of the business model as it is due to basic human nature of people. You have probably heard the old adage that 80 per cent of the work gets done by 20 per cent of the people, where the 80 per cent of the people really do little to nothing at all. This is the 80-20 rule that seems to prevail in everything.
There are laws that prevail in every state in the land that require that an actual product or service be sold in a certain percentage to avoid just the selling of an opportunity and nothing else. If there is no product or service that is being sold in the require percentages, then the business is termed a pyramid scheme, and is illegal. This is simply because a pyramid scheme only benefits the schemers, and no one else.
One of the early network marketing businesses that became successful was Amway, formed in Michigan in 1959 by Rich DeVos and Jay Van Andel. Amway originally stood for the American Way, and it is still in business using the same model for doing business.
The network marketing model has developed into a more workable model of marketing since the computerization of such an endeavor has become more sophisticated due to the technology that is present today. Originally, Amway distributors had to meet at specified locations to distribute the goods that were being sold to the downline, and now everything can be purchased online and shipped directly to the consumer.
If you stop and think about it, traditional business is a network marketing affair in the way that it operates, as each level of distribution depends upon different factions or levels. The manufacturer is one level that distributes to wholesalers, which is another level, who then distributes to retailers, which is still, another level.
In a network marketing setup, people become the different levels instead of wholesalers and retailers, and the result is much the same in that the levels are compensated along the way for their efforts.
One difficulty that arises in a network marketing enterprise is the different skill levels of people who join such organizations. It is obvious that people who are more skilled with people and the relationships that they are able to form will have an advantage in this sort of effort. The positive side of that, is that these gifted types can pass those skills on to others, if they are willing to learn. Since not everyone is not that open to learning new skills, there can be some conflict that will arise.
Consequently, when people drop out due to lack of effort or persistence, there can tend to be sour grapes, yet in most cases the blame lies square on them. Most multi-level organizations that are successful have definite steps that people can follow to not only market the product, but market the opportunity for others to get into the business.
A network marketing opportunity is truly a chance for an individual to get into business for themselves. The opportunity with this type of endeavor is no different than if they had come up with a product of their own and decided to compete with Proctor and Gamble, for example. While competing directly with a giant company like Proctor and Gamble would be a difficult task, there is probably a niche market where they could be successful.
Network marketing gives a person the chance to get into business for themselves with a product or service that can apply to meeting the needs of others in a specific area of their lives. It usually gives the opportunity for people to not only purchase the product or service at a discount, but enlist others to do the same, and thus earn a commission in the process.
As an individual “hires” others to take part in the business, those people also can enlist others to join, so everyone in the “upline” can get a commission on the efforts of the newer people as they sell and invite new people to join the business.
The fallout rate is, as expected, quite high, because most people are more used to a salaried job, but there are usually enough people that will become successful to some degree to make extra money for themselves.
Other companies who have had great success with the home business network marketing concept are Mary Kay Cosmetics, Avon, Tupperware, Pampered Chef, Watkins Products, and Herbalife.
As the operations of network marketing companies become more sophisticated and leadership and training have become more specific, the successes of businesses who utilize this model continue to grow and prosper. It is estimated that the network marketing model of distribution is here to stay, and the results continue to be positive.