One of the greatest problems for companies spending large amounts of money on advertising is that they know half of the advertising was effective, just not which half. If you could somehow only pay for the advertising once the customer has already purchased the product or service, then you would save half of your advertising budget.
This is where Network Marketing excels. Network Marketing rewards independant marketers (or distributors) for gaining new customers, by way of commission. From the point of view of the company who is providing the product or service this is excellent business, as it means they only ever pay for the marketing of the product when a sale has already been made. From the point of the distributor this is also very beneficial, as they are using a proven product that sells, and can scale their earnings by generating more leads to sell to. In most cases distributors work from home in their own time, and are not payed a salary, but solely on commission. Network Marketing could also be considered a type of franchise, and is also referred to as Multi Level Marketing (MLM).
Many Network Marketing Companies allow the distributors to recruit teams of other distributors so that they in turn can earn a commission in their sales, and their teams sales down the line. In most cases this is limited to certain number of levels 'downline' but in some Network Marketing companies this is unlimited. The ability to earn commission from an unlimited downline has an infinite upside!
Because the company saves so much on advertising, they can often afford to pass on these savings to the consumer. Perhaps this is why this model is so successful; because every stakeholder is better off for it! The frustrating thing for some distributors, though, is that network marketing is often confused for a scam, or 'pyramid scheme'. In a way the Network Marketing model is similar to that of a 'pyramid scheme', but the difference is that Network Marketing is actually selling a legitimate product or service to the end customer! A common barrier to entry for potential distributors is also the fee for becoming a distributor, which can again be confused as scam-like. In every legitimate network company though, there must be a fee in place to stop people joining on a whim and costing the company money. The company only profits from successful Network Marketers, and so does not want to take on people that are not prepared to invest some of their own money. In many cases the inital fee can be repayed if certain targets are met.
Some of the best Network Marketing Opportunities are those that pay a residual commission on sales, so as a distributor you not only earn from your intial sales, but for every month that your (and your teams') customers are still with the company!
At first Network Marketing can seem like an easy way to earn money for the budding entrepreneur, but there are certain pitfalls that are common across the industry. The biggest one by far is that of lead generation. Most new distributors start out by selling to family and friends, then neighbours and colleagues, but then they start to run out of leads. While they might make a nice amount of money from these early sales, they do not constitute a sustainable customer base for the business. To really earn from Network Marketing you need a reliable way of generating and converting your leads into sales on a regular basis. Many successful network marketers have used the internet to this effect and make a very handsome living.