What is network marketing, exactly?
It depends on who you talk to.
Talk to someone who joined a network marketing opportunity, learned the ropes, took action and went on to build a wildly successful business that pays them a solid six-figure, even multiple six-figure annual business and they will tell you:
“Network marketing is the greatest opportunity in the history of mankind for the average person without a lot of money to invest to become financially free.”
Talk to someone who has joined a few different opportunities over the years but who never really got in and got busy doing what is required to build a profitable MLM business and they might say something like this:
“Network marketing doesn’t work. The only people who make big money are the people who get in early.”
Both are right.
But neither answers the question:
What is Network Marketing?
Network marketing is a distribution model in which sales reps are compensated for sales they generate, and also for sales made by reps they recruit, creating a downline of distributors and multiple levels of compensation based on group sales volumes.
Whew. What a mouthful.
How Does MLM Marketing Work?
When you join a network marketing company you are “signing up” to represent that company’s product, services and business opportunity.
You sign up by making a small investment (usually $500 to $1,500) and by completing an Independent Distributor agreement.
You earn commissions based upon the volume of products sold through your own sales efforts as well as that of your downline organization
In other words, to make money…
You need to personally sell stuff AND teach your team to sell stuff because you earn commissions on the total amount of product that moves through your new business.
But the business of building a profitable MLM business goes a bit deeper than that.
What are the Benefits of Network Marketing?
There are six key benefits of network marketing or multilevel marketing:
- Low Start Up Costs
- Low Business Overhead
- Work From Home
- Flex Hours
- Potential Tax Savings
- Unlimited Income Potential
Network Marketing is popular home business opportunity for people looking to create additional income. The MLM business model requires minimal start up costs, yet offers unlimited, upside income potential.
Network marketing is a direct-to-consumer marketing model in which independent sales representatives are compensated not only for sales they generate, but also on sales made by reps they recruit, creating a downline of distributors and multiple levels of compensation based on group sales.
Consider a franchise operation like McDonald’s.
McDonald’s is one of the largest fastfood organizations in the world. They have more than 33,000 restaurants that serves more than 64 million people in 118 countries each day.
More than 80% of MacD’s restaurants are owned and operated by independent business owners or contractors.
Now if YOU owned the mother-ship corporation, you not only earn money by selling burgers, fries and shakes from the 20% of the restaurants YOU personally own and operate… you also earn a tiny percentage on all the sales made by the entire organization including the other 80% you do not own or operation.
Meaning you are now earning a LEVERAGED income generated by the time, talent and energy expended by the other business owners on your team.
Here’s another way to look at it…
Let’s say you earn a $100 commission for selling a particular product and it takes you two hours of “work” to make a sale. Break that down and your time is worth $50 per hour. Put in a full 40 hour work week and you can expect to pocket a nice $2,000.
Let’s also say you have spent some time “recruiting” a few people to join your team who also want the chance to earn $100 per sale… and you earn a nice $10 check for every sale THEY make.
Over time you have built a team of 100 people. They each make 20 sales per week – independent of your time and effort.
- YOU = 40 hours, 20 sales, $2,000
- TEAM = 4000 hours, 2,000 sales @ $10 each = you get $20,000
See the magic?
You get paid on the time and effort of other people.
This is leveraged income versus linear income.
So perhaps a good way to answer the question: “What is network marketing?” would be quote J. Paul Getty, one of the richest men in his time:
I’d rather have one percent of the efforts of 100 people than 100 percent of my own efforts.
Is Network Marketing a Pyramid Scheme?
A legitimate network marketing opportunity is not a pyramid scheme. Illegal pyramid schemes do not involve the sale of products or serves. They are a form of illegal investment in which paying participants recruit further participants, with returns being given to early participants using money contributed by later ones.
Unfortunately, many pyramid schemes attempt to present themselves as legitimate MLM businesses and, often, it can take many years for the FTC to finally step in and close down these fraudulent companies… so BEWARE! Do your due diligence and avoid any opportunity that emphasizes recruiting members and getting paid, rather earning commissions for the sale of products and services.
One of the safest ways to protect yourself from aligning yourself with a potentially fraudulent company is to consider joining only top direct marketing companies with a proven track record.
Top Network Marketing Companies
MLMCompanies.org offers a list of the top 25 network marketing companies ranked by these 5 criteria to determine the best-of-the-best in the direct marketing arena:
- Legal network marketing business
- Company is at least 10 years old
- Company website has a Google Page Rank score
- Company website ranks on Alexa
- Company name is trending in Google Trends
Most new MLM companies never make it past the five year mark, so lasting more than 10 years is pretty impressive.
And as you take a closer look at these top network marketing companies, understand there is a TINY percentage of IBOs (independent business owners) making hundreds of thousands (even millions!) of dollars every year in each of these companies.
Yet MOST of the people who join will never make a dime.
Because they don’t operate like a real business…
Is Network Marketing a Legitimate Business?
No matter how you slice it, the only way you will ever build a highly profitable network marketing business is to be willing to MASTER the art and science of sales, marketing and leadership. Because MLM is form of “direct sales” and no one makes a dime until products and services are sold. And it’s that way in every business, not just network marketing.
So the KEY is to join a company, track down who is currently enjoying a level of success you aspire for, find out what they are doing… and simply be willing to DO the same things. Which, of course, may require you learn new skills and actually a few things (sales and marketing) you are not comfortable doing in the beginning.
So what is network marketing?
- Network marketing is a career choice and a profession.
- Network marketing is a path to fame, fortune and time freedom.
- Network marketing is a leadership development platform.
- Network marking is fun, fast and exciting.
- Network marketing is a proven “million dollar” business model.
Bless and be blessed,