What is Network Marketing?

Network Marketing means different thing to different people. For many, it is a means to financial freedom or more time with the family.

But what is Network Marketing really?

This article provides a very basic and unbiased description of Network Marketing – also known as Multi-Level Marketing (or MLM) – for those of you who are new to the business.

The basic definition of Network Marketing is “a business-distribution model that allows a parent company to market its products directly to consumers by means of relationship referrals and direct selling”.

Stated simply, Network Marketing companies count on YOU, once a member, to refer their products/services to others instead of directly marketing the product themselves.

Most Network Marketing companies do provide you with the materials that they believe can help you generate sales and keep your business going. However, the majority of successful network marketers look elsewhere for the tools to promote their businesses.

Network Marketing businesses operate and in more than 100 other countries. The Direct Selling Association (DSA) estimates that over 17 million people are working in the network marketing / direct selling industry.

There are literally thousands of Network Marketing opportunities to choose from and the list continues to grow. Many new companies fold within the first five years of their business lives but some companies have been around for over 50 years and are still going strong.

Nypros http://www.npros.com/directory.asp is one site that offers an updated list of current MLM opportunities.

What is Network Marketing: How do you become a Sales Representative?

It’s not hard to get into Network Marketing. Anyone above the age of 18 can join for a relatively small fee and some opportunities are even free. Most Network Marketing employees will tell you that “Anyone can succeed in this business”. And although that is simply not true (in fact, about 95% of people setting out to try network marketing fail), the reasons for such a high failure rate might surprise you.

You will learn that there are many interchangeable terms for a Network Marketing “Sales Representative”. MLM Sales reps can be referred to as distributors, associates, independent business owners, dealers, franchise owners, sales consultants, consultants, independent agents, and the list goes on and on. So, don’t be confused (like I was in the beginning!) if you come across different terms in your various MLM resources. They all mean the same thing.

An initial sign-up fee is charged by most Network Marketing companies to get you started as one of their representatives. This fee usually covers the cost of the marketing materials your company provides you with as well as some of the company’s products. There could also be an additional monthly charge or annual renewal fee to continue but these vary from company to company.

What is Network Marketing: Compensation Plans

Once a member of any Network Marketing business, you get paid commissions when someone buys your product/service either from yourself or from your team. Anyone you recruit to the business is referred to as your “downline” and you are their “upline”.

The terms “width” and “depth” are some of the terms used to define the various compensation plans.

Depth refers to the number of levels under you. So, the first representatives that you recruit are considered a depth of 1. Those under them are a depth of 2. Those under them are a depth of 3, and so forth.

Width refers to the number of people at the same level. So if you directly recruit 4 representatives, the width of that first level under you is 4.

MLM compensation plans differ greatly from one business to the next. In any case, there can be multiple levels of people receiving royalties from one person’s sales.

Although most Network Marketing Compensation Plans fall under the following categories, these are not all-inclusive:

Unilevel plans

This is sometimes considered the simplest of compensation plans. With these types of plans, the commissions you are paid are based on the number of levels you are from the lowest person in your downline.

Commissions do not depend on the title or rank you achieve. By qualifying with a minimum sales requirement, you earn unlimited commissions on a limited number of downline levels.

Matrix Plans:

This type of plan is similar to a Unilevel plan except that it limits “first-level” representatives (those recruited directly by you). So, if you directly recruit more than the specified number allowed, the “overflow” is automatically placed in other downline positions under someone else you recruited.

When all positions in your downline matrix are filled (maximum width and depth is reached for all participants in a matrix), a new matrix may be started. As with Unilevel plans, representatives in a Matrix earn unlimited commissions on limited levels of volume with minimal sales quotas.

Binary Plans

A binary plan allows you to have only two front-line distributors. If you sponsor more than two distributors, the extras are placed at levels below your front line (such as in the Matrix Plan). This “spillover” is an attractive feature for new Network Marketers since you only need to sponsor two distributors to participate in the compensation plan.

However, in this plan, you must “balance” your two downline recruits in order to receive commissions. What this means is that the number of sales from one downline leg cannot be more than a specified percentage of your total sales. And you most probably will get paid based on the lower income of the two recruits.

Stairstep Breakaway Plans

If you enter a Network Marketing business which employs this type of plan, you are responsible for both personal and group sales. You earn commissions from recruiting representatives to work on your downline as well as selling your product or service directly.

You can also receive discounts or rebates if you bring in one or more downline recruits. Once you reach the established personal and/or group sales goals, you move up in rank. This continues until you “break away” and are no longer considered part of your upline.

Hybrid plans are compensation plans that are constructed using elements of more than one type of compensation plan.

What is Network Marketing: Why Do People Join Network Marketing Companies?

There are many reasons for anyone to get involved in Network Marketing. The hope of financial freedom, especially during downturns in the economy, is why many people are open to non-traditional business opportunities.

Network Marketing businesses are especially attractive because the initial investment is very low and the potential for gain is very high.

The desire to work at home is another reason that drives many to seek out Network Marketing opportunities. Any MLMer can work from home (or anywhere, really) and establish their own schedule, goals, plans, etc., instead of those of their employers.

Most Network Marketing companies offer reasonably priced products that can be consumed in a short amount of time. This makes it easier to get started right away.

The biggest perk offered by Network Marketing is residual income.

In simple terms, residual income refers to the continuous monthly payment or compensation that you receive even if you stop working. So, once you join a Network Marketing business, you get a portion of the company’s profits every time the customer you have referred to them buys the product. This means that even if you are not selling anymore or even recruiting somebody into the company, you can still earn money.

Network Marketers leverage the time of others. Once you have an established downline, they will go on to train others as you have trained them (hopefully), leading to more profits for you without you spending any extra time or effort. The most successful Network Marketers are also the best trainers.

Many start out on a part-time basis to substitute a second job – the thought of working a “night-shift” from home rather than at a factory, all-night supermarket, etc. is very appealing.

More and more people are becoming Home Business Owners as the economny struggles – Network Marketing home businesses are also on the rise.

Hopefully this answered your question about What is Network Marketing.