When your friend calls you up and says that he has a great network marketing business opportunity, what do you do? What is he talking about? Network marketing is a business model for companies to sell their products. It is also known as multi-level marketing or MLM. In this model, companies use individuals as their sales force (often called distributors). If a distributor sells the products of company X, he receives a sales commission.
What makes this sales model different than other marketing is that if you find someone who also wants to be a distributor, you will make a commission on their sales as well. In this way you can build “levels” (also called your “downline” or your “team”). As more and more people sell underneath you, your commissions grow without additional work on your part.
Network marketing is popular because you have two ways to earn money: from product sales and the commissions from the distributors below you. For this reason, network marketing is often called a business opportunity.
Network Marketing Vs Pyramid Schemes
Multi-level marketing is often mistaken for a pyramid scheme because as you get sales people below you, you can map their relationship to you in a pyramid-like chart.
A pyramid scheme is very different from MLM, however. In a pyramid scheme, you earn money as people below you join the pyramid. There are no products to sell and if you don’t build beneath you, you lose your initial investment.
MLM’s are a legitimate business model which have been around since the 1940′s. They have real products to sell and recruiting sales people below you provides additional income to product sales. You can still make money from an MLM even if you don’t recruit distributors.
Pyramids are illegal. Run from them if you are presented with one.
Advantages of a Network Marketing Business Opportunity
Network marketing business opportunities are attractive to business people for many reasons.
- They are easy to start with relatively low start-up costs.
- They are relatively easy to learn. Many people are successful without having to get expensive business degrees.
- There are multiple ways to earn money: product sales, and commissions.
- They offer a means to passive income if you grow your sales team.
- They offer a way to leverage other’s work by building your sales team.
- Business systems and marketing materials are provided for you. You don’t have to reinvent the wheel.
Disadvantages of a Network Marketing Business Opportunity
- Many company train their distributors to use old style sales methods–pressure selling to family and friends, bothering people in grocery store lines, cold calling, etc. Without proper training in attraction marketing, this can lead to frustration, burn out and the industry’s 95% failure rate.
- Without attraction marketing, the efforts required to build your business can feel more like a job than an independent business. You need proper training to avoid being enslaved to your network marketing business opportunity.
- Because of the poor marketing training for its distributors, the network marketing industry has gained a bad reputation. To build a strong MLM business, you need win your customer’s respect.
- Often people join their MLM company rather than start their own business. This is a subtle difference in mindset that has huge ramifications. If you align yourself with your company, you can fall victim to changes in your company’s policies and compensation plan. If you start your own business (using your MLM as an income stream), you are master of your own destiny and can respond to company changes in a positive way.
A network marketing business opportunity offers a great way for individuals with little capital to start a business. But to avoid frustration and burnout, you need proper marketing training.
I teach attraction marketing, where you attract customers who want what you have. I help you build a business where people come to you for your products and request to be in your downline.