Network marketing, also called MLM or multi-level marketing has been considered by some as a pyramid or scam.
In fact, even though it has had a bad reputation in the past, network marketing is really just another way of distributing the products from the manufacturer to the consumer. It is regulated by the Federal Trade Commission, as well as expensive franchises, and is a legitimate way to bring products to market.
Where franchise opportunities can cost tens of thousands to more than $ 1 million dollars, most network marketing opportunities provide the same type of systems and infrastructure provided by a franchise for less than $ 500.
Hence the reason why network marketing appears to be the best way for most people to start a business of their own.
Did you know that both Donald Trump and Warren Buffett have bought multilevel marketing companies and that many gurus like Robert Kiyosaki (Rich Dad, Poor Dad) now endorse as the best way for the average person to achieve financial independence?
You are already familiar with the other two major ways companies bring products from the manufacturer to the consumer:
1. Through retail stores (or online retailers)
2. Through direct marketing (mail order, home shopping TV or infomercials)
Multi-level marketing is the third method of distribution. While manufacturers must provide large discounts to retailers, wholesalers, distributors and direct sellers to get their products sold, multilevel marketing uses those same margins that pay commissions to their representatives (resellers) instead.
It is tremendously expensive to launch a consumer product through retail or direct response channels and, from a manufacturers point of view, making them put in direct competition with the largest consumer products manufacturers in the world of space On shelves or air time.
Network marketing offers a manufacturer of a word-of-mouth distribution channel without launching or advertising retail or direct response costs.
You may have also noticed that it is the most suitable for the products you need a more complete explanation to be sold instead of just sitting on a shelf. In fact, most nutritional supplement type products are sold with multi-level marketing that are sold in stores!
Due to the cost of finding and keeping customers / distributors, you will also see that most products are sold this way are consumable and are sorted and reordered each month in some sort of “auto-shipping” program. (Think cosmetics, household goods, nutritional and health products).
What about that reputation “pyramid”?
Actually, think of the army, government, church or any corporation. How are they structured? They all have someone at the top who has a limited number of people who depend directly on them, who each have a certain number of people reporting to them, and so on.
All these types of structures are pyramids!
Network marketing structure closely looks like that of a diamond, because although there are a lot of people towards the bottom of the structure, there is much more in the middle levels.
In business, government, and military, it is unlikely that you will make more money than your boss and the norm is for those at the top to get the most out of it.
Network marketing is different.
To comply with the laws of the FTC, no matter how many people are already in a multilevel marketing company, it should always be possible for any new distributor to exceed the very superior people’s income without replacing them in the structure.
Another feature of network marketing that makes it very different from all the other structures mentioned above is that your success depends on your ability to help others succeed.
Unlike a society in which you may be competing with your peers for a promotion, in multi-level marketing, it is in your best self interest to help others by doing that by increasing your own income.
In fact, my definition of network marketing is a business structure where. ..
“You have a team of people who are helping to get what you want.”
Is it not great?
So, if you have been thinking about having your own business and do not have the big investment needed to buy a franchise or an existing business, take a look at network marketing.
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Until next time.