Network marketing or MLM (multi-level marketing) is a marketing strategy that individual business owners are compensated not only for their sales they personally generate but share in the sales of those they recruit. This creates a hierarchy of multiple levels of compensation. The industry as a whole refers this to a “downline” of distributors. Each building their own business but yet financially benefit from the effects of others.
The network marketing industry is word of mouth marketing. Selling products directly to consumers thus building a relationship with that customer.
MLM companies over the years have been targeted not only with criticism but also with lawsuits. Critics have tried to compare network marketing with pyramid schemes. They have suggested or focused on price fixing of products, emphasis on the what they consider recruitment of lower-tiered salespeople over actual sales, initial high start up costs, encouraging salespeople to purchase and use the company’s products, the possible or potential what they call exploitation of personal relationships which can be used as new sales and recruiting targets, the compensation plan as complex and sometimes exaggerated, and finally the cult-like technique used by some organizations to enhance members enthusiasm or devotion.
Network marketing misconceptions have surfaced over the years. Inexperienced network marketers and critics alike have both their share of responsibility for the misinformation of the network marketing industry. Three of the most popular misconceptions are getting rich quick with network marketing, network marketing is a pyramid scheme, and is my warm market my target group.
Many individuals joining a network marketing company are under the impression they can get rich within a short period of time after joining the company. The secret of network marketing is that it is a business just like any other business whether it is a traditional business or a franchise. Hard work and dedication are still required. Knowledge of the business and products are still key to your success. The main difference is that with network marketing, you can achieve your financial goals much quicker without the large outlay of cash needed for both the traditional business or franchise. Even in network marketing it takes time, marketing effort along with sales to be success in the industry and generate sales.
With network marketing there is a proven plan for your success already in place. Unlike tradition business in network marketing there are successful leaders willing to mentor you to your success. The saying you are in business for yourself but not by yourself is very true in the network marketing industry.
Another misconception is that network marketing is a pyramid scheme. First of all pyramid schemes are illegal. It is a non-sustainable business model. Instead of supplying any real sale of product or service, it involves promising participants payment or service primarily for enrolling individuals into the scheme.
Throughout the networking industry it is widely accepted that multi-level marketing plan was first introduced in 1945 by the California Vitamin Company later known as Nutrilite. The compensation plan allowed the Nutrilite distributors that had at least 25 regular customers recruit new distributors and to draw a three percent commission off their sales. This was a recurring payment as long as the customer continued to re-order . This allowed the direct sellers to build an organization while generating a residual like income unlike a traditional direct selling company.
The third misconception is that your warm market is your main target group. Although your warm market initially might be your best target group, you will eventually run out of your warm market. They should be a starting point. With your warm market you can ask them for referrals. Each person knows at least 30 individuals. Most knowing more than that probably closer to 200 or more.
Once you feel comfortable with your warm market branch out to your cold market. These could be individuals you meet at your kids sporting event, PTA meeting, or even your local community service event.
It is important to get started. Remember your warm market, cold market, and their referrals. Always ask for referrals. It is a must for your success.