Network marketing or multi-level marketing, as it is sometimes called, is a strategy where the members in a network get compensated for the sales that they personally make, and for the sales that the people who they recruit make. The people who are listed are known as the member's down-line. The strategy is for people to sell and market the products or the services to people directly through personal relationships and referral marketing.
Typically a network marketing company will be selling products or services that are available in regular retail outlets, and the object of the network marketing concept is to purchase from yourself, and count the commission as a discount. If everyone performs in this manner, then the endavor will be a success.
Those who participate in network marketing are called distributors, independent business owners, dealers, independent agents, etc. They are representatives of the company who makes the products or services that are being sold. They earn a commission based on the volume of merchandise of services sold by them and through their down-line. The organization that is developed by the distributor consists of an active base of customers who purchase from the company at a discount, through their responsibilities and a down-line of active distributors just like them, and in turn also builds a down-line.
Those opposed to this system of marketing like to quote figures such as only 10% of the distributors of XYZ Company actually make a profit. While this may be true to an extent, it is large due to the people getting involved and then not really working at the endavor as a business. It really does make sense to purchase from yourself on a wholesale basis, instead of paying retail prices at the store.
To really make a network marketing company work, the product has to be something that people use all the time. It also has to be of superior value compared to what can be bought at a retail store and the retail price of the item has to be close to what retail is in the stores. Using this model, the commission will offset the trouble of getting involved in this, and down-line decisions will make it attractive enough to work at the business end of things.
Where many of the network marketing companies make a mistake is trying to sell a product for $ 39.95, for example, when you can pick it up at Walmart for $ 9.95. If a person is considering getting involved in a network marketing company, they should do their homework and compare some products in stores around them and just see how the proposed products from the multi-level marketing company compare.
People are not fooled and they are somewhat unrelated anyway to get involved in any more multi-level companies. However if the product is unique enough, and the price is right, you will have a much easier time getting people on board. Companies like Papered Chef, Watkins Products, Avon, and Tupperware are going strong because of the uniqueness of their products and their emphasis on retailing their products, along with a multi-level mix.