NETWORK MARKETING -WHAT IS IT?
Network marketing, or multi-level marketing (MLM), is a direct-selling approach that involves selling a product through a network of people. Network marketers make money by selling things directly or by recruiting people to sell products for them.
Here, money intended for the channel of distribution and advertising is used to pay independent distributors. Individuals sell the same goods, then recruit others to do the same, and so on, until there are many people who sell and promote the product, which is called “multi-level marketing.”
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Each distributor is effectively a sole proprietor or, to put it another way, an independent sales agent or entrepreneur. Each sales representative is compensated for both his or her own sales and those of the people he or she has recruited. Network marketers are often paid bonuses for getting new distributors and clients, as well as residual income.
They can have thousands of representatives and produce billions of dollars in annual income, despite the fact that many people who participate in some of these businesses make very little money. Some people might even lose money.
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Although losing money or failing to earn significant income from an MLM business does not always mean the organization is fraudulent, some MLM businesses are pyramid schemes. Yet others are legitimate businesses where people work hard and earn a huge income.
Understanding how MLM businesses function can save you time and money by preventing you from wasting your time and money on an opportunity that is either not a good fit for you or is a complete fraud.
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How Does Multi-Level (or Network) Marketing Work?
Multilevel marketing, also known as network marketing, consumer direct marketing, or chain selling, is a business model that relies on incentives to encourage growth. Individual sales reps, often known as distributors, are not MLM company employees.
They are self-employed salespeople or entrepreneurs who earn money by selling the company’s products to others.
Reps can also earn money by recruiting new reps and receiving a commission on their new recruits’ sales. In general, a sales representative earns more money as they sell more things through their network.
The term “level” in multilevel marketing refers to the business’s several levels of development. Through a sponsor, a new recruit joins an MLM company (i.e., the person who recruited them).
The sponsor’s “downline” refers to the recruits they bring in, as well as any new members those recruits bring in later, while their “up line” refers to the sponsorship chain above them.
A sponsor may educate and train their recruits during the start-up period in order to expand the sponsor’s downline network. To get some of the company’s products for sale, new employees must sign a contract and pay a fee at the start of their work at the company.
A sales representative’s network should ideally grow to the point where, in addition to their own sales, their down line generates a significant amount of cash for them. The compensation plan for the MLM firm lays out the actual commission structure.
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MLM’s red flags
One of the most serious dangers of joining an unprofessional MLM company is that a new member will not make any money and may even lose money.
However, well-structured network marketing companies, such as Bzzworld, a professional network marketing health company, do not allow distributors to purchase products to stock and sell, but rather require them to simply buy and supply a client whenever the customer makes a demand for the company’s products (bzzworld.com).
According to an AARP poll of MLM participants, only 25% of MLM participants reported making a profit. Approximately the same number stated they had lost money or were in the red. And nearly half of those polled (47%) claimed they had lost money.
Over half of respondents said the company’s depiction of financial success was “not too accurate.” Two-thirds indicated they would not have joined the MLM business if they had known what they know now about it.
That’s why it’s so important to do a thorough background check before joining any network marketing company.
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Pay close attention to the following questions:
What do they offer as products or services?
What are customers saying about their product, even if it exists? What is the efficacy of their product?
Do national and international laws certify the products?
What is their software or support system like? Is it independent or still a subsidiary of the product company?
Is it possible to begin earning as a new member, or do you have to work for your upline in order for them to make money while you remain broke despite big promises that your time would come?
Is it possible for you, as a new member, to catch up with and earn more than your upline without having to make additional large financial investments?
Is it encouraged by the firm for you to carry things around and sell them as if you were a product vendor? Or should you persuade customers to buy regardless of whether they need them?
Perhaps even more dangerous than joining an MLM that doesn’t work out is accidentally joining a pyramid scheme disguised as an MLM. Pyramid schemes are obvious scams, although some MLM enterprises may include compensation structures that favor top-level distributors and make it difficult for new recruits to earn money.
However, the boundary between a genuine MLM firm and an illegal pyramid scheme is frequently blurred. The more you develop your network in MLM, the more money you make.
MLM and the concept of financial freedom
Financial independence occurs when your network has grown to the point that money enters your account as members of your network continue to expand their own networks, while you sit back and enjoy what you’ve worked so hard for.
To establish a good network that can take you from financial security to financial independence, you’ll need hard work, good strategy, resilience, and a vision.
Avoiding a Pyramid Scheme disguised as a Multi-Level Marketing Company
The lack of a valid product is a classic pyramid scheme red flag, although the Consumer Awareness Institute reports that this is not always the case. While you should investigate the company’s goods or services, the Federal Trade Commission (FTC) warns that the actual devil may be hidden in the company’s marketing and financial plans. This is a big red flag if the MLM company makes most of its money by recruiting people rather than selling things.
The features listed below are also key warning signs:
• Unrealistic or extravagant income potential promises
• Using high-pressure sales tactics to manipulate people’s emotions (for example, telling recruits to throw caution to the wind and act now, etc.).
• To be eligible for commissions and promotion, distributors must keep buying more than they can sell (so-called pay-to-play).
This is not an exhaustive list. Pyramid schemes come in a range of shapes and sizes. A thorough and careful investigation is the best way to find out if an MLM offer is real.
Managing the Risks of Multilevel Marketing
There is no such thing as a risk-free business operation. It’s possible, though, to avoid many of the risks of the MLM model by paying attention to certain red flags and using common sense.
Consumers should first examine whether MLM is good for them, according to experts. Not everyone enjoys sales. To succeed, you’ll need the correct skill set and a well-thought-out strategy. The company also has a role in training you to acquire sales skills.
It’s also crucial to market a high-quality product or service.
Before joining an MLM firm, determine your earning goals and research the company’s history and pay scheme.
Learn how money is made, what expenses are involved, how much time the business requires, and what the company’s refund policy is. Current and former distributors might provide useful information.
Do not sign a contract unless you know exactly what you’re getting yourself into.