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What Is Multi Level Marketing / Network Marketing ?


What is Network Marketing?

Multi Level Marketing, direct selling, Network Marketing, tiered compensation plans is in a different way of saying "profit share". For simple this article, i will be able to simply talk to these terms collaboratively as "Network Marketing".


Network Marketing is that the distribution  of products and services through a network of people, instead of through traditional supply chains. In simple terms, the philosophy of the owners this type of business simply say: instead of spending millions (or billions) of dollars in marketing and advertising their products through main-stream media (television, radio, billboard advertisements, newspapers and magazines etc.) they simply reward people to distribute their products by referral, word of mouth (the most powerful type of marketing), meeting people belly to belly, meeting people heart to heart.The more product that's moved or distributed through your network, the more profit share you are rewarded.


Where does the money come from?

The diagram below is an example of a typical supply chain and 'mark-up' that is applied to most household products sold. It is an example of a product that is sold for $2 to the end customer:

What Is Multi Level Marketing / Network Marketing ?


Network Marketing simply connects the customer to the manufacturer. It cuts out the 'middle-men'.

The traditional supply chain is virtually a dinosaur concept, the only issue is, there are so many millions and billions tied up in this model for product distribution that the major retailers are reluctant to change.

Below is an example of how Network Marketing impacts the traditional supply chain, especially since online shopping began:

What Is Multi Level Marketing / Network Marketing ?


What are  the benefits of Network Marketing?


There are two (2) key benefits from Network Marketing:

  1. Better than retail prices: Access to high quality products at better than retail prices (great for those who just want to link in and save money or take advantage of wholesale buying); and
  2. Asset creation: Network Marketing is the creation of an asset that pays a recurring income. This is great for people who want a 'spare tyre' on their finances or who want to transition out of their traditional jobs/small businesses to their own big business (i.e., a business that you can walk away from for 12 months and the income grows). This can be achieved by working a Network Marketing model on a part time basis (i.e., give up TV watching time!).


Are all Network Marketing organisations reputable and legitimate?

In short, no. Sadly, there are a number of Network Marketing organisations that come and go as quickly as the minute hand of a clock moves from minute to minute.

This should not discourage people from researching reputable Network Marketing companies that have stood the ultimate test - the test of time.

Some Network Marketing companies have been around over 50 years. Not only have they stood the test of time, they have withstood enormous public scrutiny and government investigation. The US government and 100 other governments around the world have given some of the best Network Marketing companies "the thumbs up". That is credibility. I would only focus my attention on Network Marketing companies that have government endorsement.

Who are the largest Network Marketing companies in the world?

The following link will take you to Direct Selling News who monitors this data  and has outlined the top 10 direct selling companies  (based on net sales ) (The List - Direct Selling News).

The top 5 direct selling companies for 2013 (in order of net sales) are:

  1. Amway - $11.3 Billion
What Is Multi Level Marketing / Network Marketing ?
  1. Avon - $10.7 Billion
What Is Multi Level Marketing / Network Marketing ?
  1. Herbalife - $4.1 Billion
What Is Multi Level Marketing / Network Marketing ?
  1. Vorwerk - $3.3 Billion
What Is Multi Level Marketing / Network Marketing ?
  1. Natura - $3.2 Billion
What Is Multi Level Marketing / Network Marketing ?


What is a pyramid scheme, why do people confuse it with Network Marketing?

Pyramid schemes are illegal.

Pyramid schemes pay people for position, Network Marketing pays people on performance (i.e., if you do nothing, you get nothing).

Pyramid schemes are targeted at those individuals who fall for the "get rich quick" propaganda. In essence, a money making scheme is commissioned promising unrealistic returns (40%-50%-100%) within a very short period of time.

Early investors invest, and begin to receive these returns (paid for by the capital of the later investors) and spread the word. Word spreads to the point where there are more people than money and the scheme eventually collapses. Of course the person who created the scheme (i.e., the guy at the top, the early investor) has taken a good portion of the monies invested.

Throughout history, there have been some epic pyramid schemes created where investors have lost millions (some billions). The two (2) most notable are:

  •  (namesake of the "Ponzi Scheme") who defrauded investors to the tune of $20 Million by the 1920's (that is $800,000,000 in today's dollars).
  • . Arrested in 2008. Madoff's missing monies and fabricated investments totaled $65 Billion in a Ponzi Scheme going back to the 1970's.


What makes a good Network Marketing company?

In simple terms: leadership.

Organisations rise and fall on leadership. There are good leaders and bad leaders. the good Network Marketing companies have programs to train great leaders. Leaders get tings done. Leaders drive results. Leaders lift and develop people to be all they will be.


Clear goal and strategy


Other organisations that are successful in this space have a transparent goal and strategy on how they're going to achieve their success. Not only that, they will teach others about achieving their goals by developing the proper strategy for his or her individual needs (not all strategies apply to all or any people, all the time)


Training


Training may be a critical aspect to good Network Marketing companies. the entire underlying concept of Network Marketing is that the ability to duplicate yourself (i.e., create more of you) to make a huge network. a huge network distributes more products and you create more of the profit share which suggests - "options".


If you think that about your specialised skills in your traditional job or small business, are you easily duplicatable? My role as a specialist in Insolvency, Corporate Reconstruction and Bankruptcy isn't a simple thing to duplicate. Why? It takes university degrees, just to get employment. It takes the Chartered Accounting Program or the CPA program, just to get qualified. It takes years of experience, just to be competent to handle reconstruction and bankruptcy work. It takes building a solid network of accountants, lawyers and bankers to develop the referral base to generate income. Not easily duplicated.


When it comes to Network Marketing, the 18 year old student must learn a similar content as a 63 year old retiree. The qualified accountant must learn an equivalent content as a certified engineer etc. Therefore, you would like a systemised, easily duplicatable training program to run along side your Network Marketing business. the most effective Network Marketing companies within the world have this and understand that the training program is that the real secret weapon and reason for achievement.


Products


Products are important as the people that connect in got to believe in the products and be proud to share the experience with people. Having said that, i might place more importance on the leadership than products. Why? Because great leaders get things done. you'll be selling chairs or cans of baked beans and, as long as you've got great leaders, you've got an excellent business.


Who else thinks Network Marketing is a good business?


Donald Trump - Investor in Network Marketing business

What Is Multi Level Marketing / Network Marketing ?


Warren Buffet - Investor in Network Marketing business

What Is Multi Level Marketing / Network Marketing ?


Bill Gates

What Is Multi Level Marketing / Network Marketing ?


Robert Kiyosaki

What Is Multi Level Marketing / Network Marketing ?

How does Network Marketing work?

Every Network Marketing company has a different way of building the structure for a network. Outlined below is an example of one (1) particular structure.

What Is Multi Level Marketing / Network Marketing ?

The above example demonstrates the following:

  • ME - I decide to build a Network Marketing business. I later sponsor two (2) people, the first person connects in to just shop and buy products at better than retail prices. The second person I sponsor is a "GUN" (meaning someone who sees the business opportunity and tears away with it)
  • YOU - YOU connect in from a referrer in the team, YOU shop and research the opportunity you are connected to.
  • GUN - is later sponsored by ME and comes into the network after YOU. GUN immediately sees the opportunity and goes for it. GUN sponsors a lot more people, and helps people in his network sponsor more people (i.e., GUN is duplicating himself).
  • Because GUN went to work and sponsored people into his network, and structured his business following the business system he is connected to, GUN will make more money than ME and YOU.
  • ME or YOU will still receive some benefit (mainly in better than retail prices for what we buy), but we wont make any income, until ME or YOU decides to follow the business system, sponsor more people, structure our business according to the philosophy of the business training system.


Why is it important to follow the business system laid out by Network Marketing companies?

Network Marketing company that has stood the test of time knows their numbers and has tested their systems. Just like in my professional consulting firm, we know that the number of networking events we attend, translates into the number of requests for our services, which translates in to the number of revenue generating files which converts to profit.

Not following a proven, predictable system is a bit like owning a McDonalds franchise and selling fish and chips. It just does not pay to not follow the proven system.

Do I have to sell anything to my friends and family?

The short answer is "no".

I find it most interesting when people say "they don't want to sell to their friends and family". This concept is a bit like opening up a coffee shop and saying to your friends and family, please don't come in and support me, your money is no good here.

This concept is also followed on by opening up a coffee shop and expecting your friends and family to be your only customers. How long in business would you last with this type of thinking?

Typically, when one launches their business in Network Marketing, it is only natural to initially invite your friends and family to come along and check out what you are doing, prior to expanding your business. Some of those people will come and shop just to support you. Some will go into 'witness protection' and you will never see them again. But you may also find a GUN who sees the same thing you do and wants to build an asset too. The key in Network Marketing is to not focus on 80% that do nothing, but to focus on the 20% who do something.

But think about this, if I got you to write out a list of the people that you know and a list of the people that you didn't know, which list would be bigger? Is it possible that in order to build a massive network, you may have to talk to people outside your existing network?

All business operates on the concept of connecting with people outside their existing network"It is not necessary to change, survival is not mandatory" [W. Edwards Deming].

Conclusion

In the immortal words of Thomas Edison (inventor of the light bulb):


Network Marketing, Direct Selling, Multi-Level-Marketing is an opportunity missed by most people because it takes work. There is no secret to these styles of business except, as my business mentors say: "work wins". The people who don't succeed typically don't follow the proven system or are too overcome by their fear of: "I am too scared of what my friends will think". To those that have this fear, I say to you: "when was the last time that your friends' opinion paid your mortgage, your private school fees and your cost of living?"

Here are a number of the explanations that I found important, once I chose the company I’m with:


  • It’s a stable company (no risky start-up)
  • The company is debt free (no risk of bankruptcy)
  • The company offers FREE training several times every week, about the products and about the comp plan
  • The company contains a diverse line. this suggests multiple avenues your customers can go right down to spend money with you!
  • When there are many alternative products that people can use and consume… it all contributes to the organizational volume in your organization.
  • The products are awesome – they support good health and age reversal. they're all made from the simplest natural ingredients and therefore the ingredients and formulas are protected by research and science. i might buy them for the anti-aging and health benefits even though there was no comp plan!
  • The products have mass market appeal and other people need or want to consume them on a monthly basis. this can be what creates stable residual income.
  • You’re paid a 20% commission on the net value of each customer sale (first order: 35%!)

…and what’s perhaps most important: I’m enthusiastic about what the company stands for, the products and I’m proud to be a part of its brand

When it comes to Network Marketing, the unsuccessful people ask "is it easy?", the successful people ask "it is worth it?".

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