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The Truth About Network Marketing

By Edited Mar 11, 2016 2 3

So What Is Network Marketing?

As an entrepreneur with my own online Health & Wellness business which follows a Network Marketing model, I wanted to shed some light on what Network Marketing actually is.  Starting up my own business, I was met with a lot of mixed reviews from friends, family and colleagues.  Thankfully, I am the kind of person who is able to make up their own mind about things rather than listening to what everyone else says!

So, what is Network Marketing?  Well, think of it this way...have you EVER recommended something to someone?  A great film, book or restaurant?  A shop?  A holiday?  Just think about all the additional business your recommendation has sent that their way - you tell a friend, who tells a friend, who tells a friend etc. Your word of mouth referral could have potentially generated hundreds of pounds or dollars for that business...but did you ever receive a "thank you" cheque for all the additional business?  Probably not!

People trust what their friends and family tell them rather than the overpaid celebrities plastererd all over the television and billboards (who probably don't even use the product or service anyway!!).  Network Marketing is "word of mouth" referrals and businesses choose to pay those who use their products or service and who tell others to do the same as a way of saying thank you for generating more business for them. 

Why Are More And More Businesses Choosing Network Marketing As A Viable Business Model?

More and more businesses are choosing the network marketing model over the traditional retail model.  So why is this?  Well think about it this way...when you go into a shop and buy a product, have you ever thought about how that product actually got to be in that shop?  No I don't either!  In the traditional retail model though, the cost of the product you are buying has been made up through all the means used to get that product onto the shelves and into your hands.  Think about it this way...you are paying for manufacturer, the warehouser, the wholesaler, the advertiser (who take a HUGE cut of the price, think of all the magazines, tv adverts, celebrity endorsements etc used to entice you to buy it!) and the retailer!  You are paying for the forklift trucks in the warehouse, the lorries to transport the products, the cost of the rent on the premises, the staff, the fishbowls and white coats in department stores, the lighting....you're paying for ALL of that in the price of the product.

On average, 85% of the cost of that product is made up of all those extra elements.  So essentially, the quality of the ingredients in the product can be compromised by using cheaper ingredients in order to give it a great value price.  But the network marketing model cuts out all of the middlemen!  Many companies will manufacture their products themselves and the products are distributed via a network of independent consultants/distributors in order to get the product in front of you, the consumer.  So, essentially, the quality of the product is much higher than that of a product sold via traditional retail means. 

Why Is There Such A Misconception Around Network Marketing?

Unfortunately, there is still a huge misconception surrounding network marketing which is a shame as it is such a great business model!  A lot of this misconception is based on people's ignorance of what this viable business model actually is....this is when people start to refer to network marketing as a "pyramid scheme".  How this makes me laugh!!!  A lot of people choose to use the "p" word as a way of covering up the fact that they don't actually know what Network Marketing actually is.  People don't like to admit that they don't know something and so will just go along with what a general idea is rather than asking for clarification.  For the record, a pyramid scheme is illegal and has been illegal since the 1980's.  Pyramid schemes were made illegal in order to protect people and their money as fraudsters would use a pyramid scheme in order to generate huge amounts of money for themselves...and those who'd paid into the scheme would see no return on their investment if they got into the pyramid too late.  Essentially, a pyramid scheme was a lot of people paying an upfront fee to join (with no product or service) and the earlier someone "got into" the scheme, the more money they would make.  Unfortunately, by the time people at the bottom of the pyramid realised that it was a scam, it would be too late and the fraudsters had already made huge sums of money and more than likely closed the "business" down.

Most organisations are based on a pyramid model...but that's not to say that most organisations are a scam!  Think about it this way...every SME or large organisation will have a CEO at the very top of the business, below them will be a number of directors, followed by senior management, managers and employees are at the very bottom.  This business model is in the shape of a pyramid as there will be a much greater number of employees than the CEO.  Now, for the employees to get to the top of the company to where the CEO is, they will have to move up through the ranks and more than likely they'll have to wait for the people above them to either get a promotion or leave the company.  In some cases, this could take years!  In legitimate Network Marketing companies, however, everyone starts at the same level and aspires to get to the top of the company where there is room for EVERYONE who wants to get there.  Remember this, Network Marketing is an effort based business - you cannot promote to the next level simply because you know the boss or because your face fits (like in a lot of traditional businesses I know!).  The only way you can promote to the next level is to work your business as much as possible and to create results...that is, to generate more and more product distribution and revenue through your network of consumers (i.e. your business builders who you've sponsored into the business or clients who just buy the products without building a network).   You cannot bring people into the business and sit back expecting them to do all the work to get you to the top of the business.  You have to help others to be successful and this is done by working with your team and helping them, not sat back watching.

Network Marketing is a VERY legitimate and viable business model.  Even well-known business men (Lord Alan Sugar, Sir Richard Branson, Warren Buffett) use this business model in their very own businesses or even speak highly of the industry.  The likes of Warren Buffett (billionaire business man and 3rd richest man in the world) really advocates Network Marketing and owns a number of Network Marketing businesses...even going on record to say that one of these businesses is his BEST investment to date.  Now, would a billionaire businessman such as Warren Buffett choose to get involved in a scam?!  Most likely not, his reputation is worth too much!  There are a large number of Network Marketing businesses that have been around for 30, 40, 50+ years....if they were a scam, they wouldn't have lasted a few years let alone a few decades! 

In 2011, the Wall Street Journal wrote a a 40 page supplement called "The Ultimate Social Business Model...Why Now Is Prime Time for Direct Selling" which features a number of articles about the direct selling industry (of which Network Marketing is a part of) and why this industry is booming in the world of Social Media.  Its worth a read and sheds light on the industry!

So Why Should You Choose To Get Involved With Network Marketing?

Most people work for someone else.  That is, you are in someone elses business making them money whilst you slave away (we've all been there!).  We are in the employee mindset which means that we work for money...so we work an hour and get paid for that hour.  You cannot make more money other than working more hours and getting paid for those hours.  In Network Marketing, however, you are building what is known as a "residual income".  This is an income that continues to come in long after the work has been done, so in effect, you get paid over and over and over again even if you are not still doing the work you did to get paid in the first place.  Let me explain this.  Let's go back to the example of word of mouth referrals.  Say you have a business which has products which are distributed through network marketing.  Your "job" is to tell others about that product and to create a distribution system for that company to distribute their products across your network.  So you find a great product that you love and you tell a friend who buys that product because they trust your recommendation as a friend and you get paid from the company a small percentage for generating revenue for the business.  Now, everytime that friend buys that product again, even if you don't tell them about it again, they are connected to you for life as it was YOU who introduced them to the product and the company and so you will continue to get paid that "thank you" from the company every single time they purchase a product...and that is the genius of Network Marketing!  The company wants YOUR network and wants you to spread the word about them across your network and across your networks network and across your networks networks network (you get the picture!)...so you are effectively building a network of loyal consumers who will continue to buy from this company and everytime they do, you get paid :-)  This is the idea of a residual income as you do the work once (i.e. tell someone once about a new product or service) and everytime they pay money to that company for a product or service, you get paid!  Companies realise that word of mouth is the best form of advertisement.  Rather than spending millions of dollars per year on advertisements which may or may not generate additional income for that company, they would rather pay YOU the loyal consumer to tell others about their products and so create a network of loyal consumers who'll continue to buy their products of service.

Final Thoughts

So as you can see, Network Marketing really is a fantastic and simple business model!  Its a way for companies to get their products or services out to the masses through YOUR network.  Furthermore, the massive rise of Social Media has become a HUGE tool for Network Marketing businesses to generate more interest...all for free!  Why pay huge sums of money on advertisements when you can pay someone to tell their network about the company and their products or services.  Think of the likes of Facebook, Twitter, LinkedIn and Pinterest...most of us use these social media platforms to connect with others in our life and we are choosing to share more and more information through these.  Social Media is a fantastic way to build your business online and to grow your network.

So next time someone tells you about their Network Marketing business, think about the fact you are already doing network marketing but you are not getting paid a penny for telling others about something you love....so maybe its worth just hearing about the opportunity first before making your mind up!  Wouldn't you rather get paid for something you are already doing??

 

Written by a successful business man who isn't involved in network marketing but who recognises the huge potentials for people to make a very lucrative income from this business model
Beach Money: Creating Your Dream Life Through Network Marketing
Amazon Price: $15.00 $8.07 Buy Now
(price as of Mar 11, 2016)
Fantastic book about how you can effectively get paid from your business whilst sat on the beach...now who wouldn't want that??
Your First Year in Network Marketing: Overcome Your Fears, Experience Success, and Achieve Your Dreams!
Amazon Price: $16.00 $5.21 Buy Now
(price as of Mar 11, 2016)
All about what to expect in your first year in Network Marketing...well worth a read!
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Comments

May 21, 2013 3:33am
amytrumpeter
An amazing article on the truth about network marketing, Leanne. Thanks so much for sharing. I loved Beach Money and I am half way through The Business of the 21st Century!
May 21, 2013 4:55am
leannedollive
Brilliant stuff!! Another great one to read is "The 45 Second Presentation" by Don Failla :-) (bit of word of mouth recommendation there!!)
May 22, 2013 2:36am
SuePickering
A well written article. As you say, the rise of social empowers the consumer to seek out what they want, rather than being influenced by traditional marketing methods. I do think the terminology 'Network Marketing' carries negative connotations, being tarnished by the pyramid schemes of the 80s and 90s - maybe it's time for a new name??
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