What is network marketing, exactly?
It depends on who you talk to.
Seriously!
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.
Think Franchise!
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.
Why?
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,
Thanks for the kind kudos, Shay. I’ve found a lot of network marketing “tool” programs offer a blog so I think a lot of people simple don’t know what to blog about… how to promote their content… or even how to target a specific audience. Tragic, but true. Fortunately, programs like MLSP teach all of that. It takes time, but it works if you work it.
They Crazy thing about network marketing is that nobody blogs anymore. Look at how powerful this post is. Awesome Post Rob.
Thanks for the kind kudos, Shay. I’ve found a lot of network marketing “tool” programs offer a blog so I think a lot of people simple don’t know what to blog about… how to promote their content… or even how to target a specific audience. Tragic, but true. Fortunately, programs like MLSP teach all of that. It takes time, but it works if you work it.
MLM or Network Marketing is a very real, potentially profitable way for the average Joe to make a significant living. LOTS of well-known names are actively engaged in MLM either as owners, distributors or spokespeople. Gotta love it.
MLM or Network Marketing is a very real, potentially profitable way for the average Joe to make a significant living. LOTS of well-known names are actively engaged in MLM either as owners, distributors or spokespeople. Gotta love it.
Great explanation about network marketing. I’m from Brazil and get into a powerfull company named Polishop todo network marketing. I will reach the top!
What a fab article, thank you for this explanation Rob. Spencer, what you aspire too is more than possible. I know people who have built their network marketing business online and have had great success 🙂
This is FIRE!! I love Network Marketing! I am a 19 year old entreleader out of Fort Wayne, Indiana and it is a career and something that needs mastered! It is very legit and my company is rock solid! If I can do it at 19 years young, anybody can get it done! I believe this will be one of the biggest industries in the millenial generation. Lets get it!
Hey Aaron… building a profitable MLM business takes time, talent and skill. Plain and simple. You must master the art of marketing, communication and leadership.
The internet helps us get our BRAND in front of more people easier, but we still need to master the skills needed to build a real business.
Now it’s easier than ever with new technology like blogging and social media and things like Facebook LIVE to build a network marketig business, right? Old prospecting really sucks but I’m glad I came across your site because it got me to thinking and dreaming again. Thanks.
Hey Aaron… building a profitable MLM business takes time, talent and skill. Plain and simple. You must master the art of marketing, communication and leadership.
The internet helps us get our BRAND in front of more people easier, but we still need to master the skills needed to build a real business.
Thanks for the shout out. Appreciate your feedback.
Awesome Post, Rob!
Love this post and the way you explained about this awesome profession. Still so many people don’t understand what Network Marketing is all about and they call it as scam or “just a game”. With this article finally people will be able to understand how great this profession is. Thanks Rob for awesome article!
Thanks for the shout out. Appreciate your feedback.
MLM is the big business that changing lives for every individual and have more knowledge experience to create a new life to make successful in the long run
One of the better descriptions of network marketing I have come across. Well written. Thank you.
I am interested because I have this personal vision “to create a team of champions.” And really I never knew what that meant other than I wanted to help others excel at life. Maybe network marketing can fulfill that vision. I keep tossing the idea around in my mind.
And I don’t want to bug my family and friends. I want to build something online. I want to created an electronic force of network marketers that are champions and fulfilling their own dreams. The jury is still out on wether this is possible or not.
Anyway, thank you for a nice article about what network marketing really is all about.
i have gotten the whole concept it works on paper but in real life it isn’t as easy as they say. whats the best way
It all boils down to mastering the art & science of marketing. Pick a marketing method and see it through until you are producing results. Then do more…
I have been approached by some people in the past that never could really break down a clear, usable explanation of what Network Marketing was and how it works though practical application, this article did exactly that thank you. God Bless, Joe
Thanks, Joe – appreciate your feedback. MLM is pretty much just a word-of-mouth consumer-to-consumer or business-to-distributor/consumer distribution model. Works well when it works… not so much when it doesn’t.
Thank you for posting more clear information about Network Marketing Industry…..iloveit!…..
Thank you. I really liked and appreciate this article about network marketing. I feel inspired.
Best regards, Steve