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Network Marketing
 or Multi-Level
Marketing
Network Marketing or Multi-Level
Marketing (MLM) is a business distribution
model that allows a parent multi-level marketing company to
market their products directly to consumers by means of
relationship referral and direct selling.
Independent salespeople of multi-level marketing are referred to as operators and distributors
or associates, independent business owners, franchise owners,
sales consultants, consultants and independent agents.
They represent the parent company and are
rewarded a commission relative to the volume of product sold
through each of their independent businesses (organizations).
Independent operators and distributors develop their organization by either
building an active customer base, who buy direct from the parent
company and / or by recruiting a downline of independent
distributors who also build a customer base, expanding the
overall organization. Additionally, distributors can also earn a
profit by retailing products which they purchased from the
parent company at wholesale price.
Earn a Commission
Distributors earn a commission based on the sales efforts of
their organization, which includes their independent sale
efforts as well as the leveraged sales efforts of their downline.
This arrangement is similar to franchise arrangements where
royalties are paid from the sales of individual franchise
operations to the franchisor as well as to an area or region
manager. Commissions are paid to multi-level marketing
distributors according to the company’s compensation plan. There
can be multiple levels of people receiving royalties from one
person's sales.
Don't get sucked into a Ponzi
Scheme?
It is sometimes difficult to distinguish legal and reputable
Network Marketing and Multi-Level Marketing businesses from illegal pyramid or Ponzi schemes.
Network Marketing or Multi-Level Marketing businesses
operate in the United States in all 50 states, in Great Britain and in more than
100 other countries, and new businesses may use terms like
"affiliate marketing" or "home-based business franchising".
However, many pyramid schemes try to present themselves as
legitimate Network Marketing and Multi-Level Marketing businesses.
In the most legitimate Network Marketing and Multi-Level
Marketing businesses and companies, commissions are earned
only on sales of the company's products or services. No money
may be earned from recruiting alone ("sign-up fees"), though
money earned from the sales of members recruited is one
attraction of Network Marketing and Multi-Level Marketing
businesses arrangements. If participants are paid
primarily from money received from new recruits, or if they are
required to buy more product than they are likely to sell, then
the company is a pyramid or Ponzi scheme, which is illegal in
most countries.
How much inventory to buy?
New salespeople may be required to pay for their own training
and marketing materials, or to buy a significant amount of
inventory. A commonly adopted test of legality is that Network
Marketing and Multi-Level Marketing businesses
follow the so-called 70% rule which prevents members "inventory
loading" in order to qualify for additional bonuses. The 70%
rule requires participants to sell 70% of previously purchased
inventory before procuring new orders. There are however
variations in interpretations of this rule. Some attorneys
insist that 70% of purchased inventory should be sold to people
who are not participants in the business, while many Network
Marketing and Multi-Level Marketing businesses allow for self-consumption to be a significant part of
the sales of a participant. The Federal Trade Commission
offers advice for potential Network Marketing and Multi-Level
Marketing businesses members to help them identify those which
are likely to be pyramid schemes.
The Federal Trade Commission (FTC)
issued a decision, In re. Amway Corp. in 1979, which indicated
that multi-level marketing was not illegal per se. However,
Amway was found guilty of price fixing (by requiring
"independent" distributors to sell at the low price) and making
exaggerated income claims.
The FTC advises that multi-level marketing organizations with
greater incentives for recruitment than product sales are to be
viewed skeptically. In April 2006, it proposed a Business
Opportunity Rule intended to require all sellers of business
opportunities (including Network Marketing and Multi-Level
Marketing businesses) to provide enough information to
enable prospective buyers to make an informed decision about
their probability of earning money. FTC trade regulation rules
usually take 1-1/2 to 3 years before a final rule is
established.
Mind-Altering?
Criticisms have been raised against some Network Marketing and
Multi-Level Marketing businesses programs for being
mind-altering. Many Network Marketing and Multi-Level Marketing
businesses programs feature intense motivational programs, which
can be hard to distinguish from mind-altering propaganda.
Another genuine problem with Network Marketing and Multi-Level
Marketing businesses programs are those which have been set up to make most
distributors fail, as there is an incentive to continue to
recruit distributors even as the products have reached market
saturation, thus causing the average earnings per distributor to
continue to fall.
The Advantages
But, for all its faults, Network
Marketing and Multi-Level Marketing businesses are a way to have the
low-to-no-risk benefits of a proven, scalable, duplicatable and
repeatable business
system like franchising, and still enjoy the rich rewards of a
ground floor opportunity.
Network marketing and Multi-Level Marketing has taken the concept of franchising
(by providing independent entrepreneurs with a ready-made, low-risk,
proven, turn-key small-business opportunity) and made some
genuinely remarkable improvements on it.
First of all, Network Marketing and Multi-Level Marketing
businesses offer
Low Capital Investment, with little or no risk to loss of
capital above a low ceiling. Often there is no charge to
becoming an independent network
marketer. Moreover, there is usually no fee required to start
your Network Marketing and Multi-Level Marketing businesses. A
typical commitment of between a few hundred pounds to a
few thousand pounds may supply the complete sales kit, training
and sales and marketing materials, and initial product inventor.
The Benefits and Tax Advantages of a Home-Based Business
For most participants, a Network Marketing and Multi-Level
Marketing business is a home-based business, so there is no need
to have the high overhead of a retail or
office location. The equipment needed to begin a Network
Marketing and Multi-Level Marketing business
operation can be as simple as a telephone, desk and file
cabinet, a computer and the internet. And the potential tax advantages of owning and
operating a legitimate home-based business represent one of the
last forms of tax relief available to the average American
or Briton today.
Me Inc
A network marketer is an independent contractor - the CEO of his
or her own businesses. Think of it as "Me, Inc.". There are have
no "employees." The men and women with whom you will work are also CEOs, running their own independent
Network Marketing and Multi-Level Marketing businesses. In a
Network Marketing and Multi-Level Marketing businesses, the
operator or network marketing does not have or own a job, "you
are" as they say "your own business."
And unlike most entrepreneurs, the business does not own you!
You are in control of your work, and your life.
More Choices: Part-Time, Full-Time, Travel, National and Global
Businesses
Every network marketer is a volunteer. There is usually no
contract, such as an employment contract. "You are free to work
the days and hours you want, where
you want, doing what you want, and, perhaps most important of
all, you are free to choose the people with whom you work.
Although the majority of networkers and operators work their businesses
part-time (currently about 85 percent of the industry are
part-time) more and more men and women are pursuing network
marketing as a full-time career. Some work exclusively from
their homes; some choose to set up formal offices or retail
premises; others enjoy
travelling to other cities and even to other countries, building
their businesses on a global scale.
Personal and Professional Support
In a Network Marketing and Multi-Level Marketing businesses, it
is usually said that: "You're in business for yourself - but not
by yourself". This is because the Network Marketing and
Multi-Level Marketing business's success depends on the success
of the operators. In theory, your success should be their
success.
A good network marketing
company provides the product or service to market, plus
an R & D department, new product development, field training,
sales and marketing literature and promotional materials, a
distributor service department, the ordering and fulfilment
system, and more. And today most Network Marketing and
Multi-Level Marketing businesses are ideal for the Internet.
Is buying for you?
Buying a franchise is acquiring the right to market the product
or service provided by the parent company. It is much the same
in a Network Marketing and Multi-Level Marketing business,
except that there is usually no franchise fee to pay nor the
same huge start-up and overhead costs of a retail or business
location, the costs of equipment, and the complexity of hiring and
managing employees. Moreover, there are usually no geographic
restrictions on the operator's
marketing territory.
A Network Marketing and Multi-Level Marketing company does one
more truly revolutionary thing. It should give the operator the
ability to offer the opportunity to build a successful business
to others in partnership with the operator, too.
In a Network Marketing and Multi-Level Marketing business, one
not only get to earn income from marketing the company's
products or services (like a franchisee), one can also earn
income from the sales generated by people one has enrolled into
your own network organization.
And that is what creates one of Network Marketing's most
powerful and profitable features: it allows one operator to
leverage his time, talent and energy to earn commissions from
the sales made by all the other people has brought into the business. Andrew Carnegie said, "I would rather have one percent
of 100 people's efforts than 100 percent of my own." That is just
what a Network Marketing and Multi-Level Marketing business
should offer.
This also explains why so many "ordinary" people can achieve
extraordinary success in the Network Marketing industry.
Conventional sales and distribution methods depend on a few,
select high-performance sales superstars, who each do a huge
amount of sales volume. Network marketing is just the opposite:
it is based on a lot of people doing a little bit each.
As with all businesses, however, the quality of the product or
service must be excellent to create a successful outcome.
The Art of
Networking
Networking is the best and most cost-effective way to turn your
ideas into reality. However, networking is an art. It can be
done badly or it can be done well. At its worst, networking
involves standing around and making awkward small talk. At its
best it can be inspiring, fun and useful.
It’s important to remember that the main purpose of networking
is to attract opportunities. Rather than spending time, money
and effort chasing opportunities, you want to get into the
position where people offer you interesting opportunities. There
are three ways to do this:
1) Raise your profile
2) Create goodwill
3) Keep in touch
There are all kinds of ways to raise your profile - the
simplest way is to go along to more events or speak at events.
Write articles or a regular column, or a blog. Get in touch with
people you want to get to know and ask if you can pick their
brains about a particular topic over a coffee. Keep doing these
things and you will start to get known. The important thing is
that raising your profile needs to go hand in hand with creating
goodwill. It’s no good getting well known if nobody likes you!
To create goodwill, get into the habit of sharing useful
information
When you read an article that you've enjoyed, don't
keep it to yourself. Think about who else would find it
interesting and send the link in an email - do it straight away
- it only takes 20 seconds. Keep you eyes open for gems,
nuggets, intelligence and share it with people you've met. Let
people know about interesting events and invite them along as
your guest.
Be a connector
Make introductions between people who you think
would benefit from knowing each other. Again - just a simple
email to broker the introduction - then leave them to it.
Obviously make sure it's always a relevant article, invite or
introduction. People will really appreciate the thought you've
put in and remember you for it. You will become known as a
helpful, generous, connected person who passes on useful
information - people will always be delighted to hear from you.
Generating goodwill also gives you a great reason to keep in
touch with people. Sending people an email to say 'good to
meet you, let's keep in touch' is a waste - it just clogs up the
in-box. However, an email with a useful article, contact or web
link attached is a much better way to maintain contact or
re-establish contact with people you have met in the past. There
are lots of quirky, light touch ways to keep in touch too. I
heard of one company that sent each of their clients a lottery
ticket when the jackpot reached £5million. This certainly made
them stand out from the crowd.
The best way to keep in touch
with lots of people is to set up your own networking group. This
can be a simple, informal get together in a bar or café - invite
a mixture of people you have met so they can network with each
other. Oli Barrett, who writes a blog called the
Daily Networker,
does this once a month and uses Speednetworking to get people
talking. Alternatively, it could be a small peer group of four
or five of your strongest contacts who meet up regularly for
coffee to support each other.
Can the people you know become
your customers?
The key point to understand is that 80% of opportunities come
from people you already know. Every person you meet has a
network of people you can tap into. If you want your idea to
spread, you’ve got to communicate it in a way that is simple,
distinct and easy to understand. But you’ve also got to realise
that when you talk to someone, you’re not just talking to the
end listener.
They could be a powerful advocate for your idea by telling other
people they know. You want to get into a situation where your
ears are burning because other people are talking about your
idea even when you’re not there. In order for people to become
advocates, they need to ‘get’ your idea enough and like you
enough to spread the word on and on and on, increasing the
likelihood that your idea reaches the ears of someone who can
help.
If you follow the three key
principles and raise your profile, generate good will and keep
in touch, opportunities will be beating a path to your door. Find out about networking events in your area or how to start
up a local group to bring people and ideas together.
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