written by | November 7, 2022

Definition, Details and Types of Network Marketing

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Table of Content


Network marketing is also known as multi-level marketing (MLM) and refers to a business model in which a company sells products through a network of distributors. These distributors are not employees of the company but are independent contractors. They are compensated not only for the products they sell but also for the sales of the other distributors they recruit, creating a pyramid-shaped structure. 

One of the fastest-growing industries in the world, network marketing is a $167 billion sector with over 16 million participants globally.

Did you know? MLM is the first network marketing company in India. It was established by Mr.Samir Modi in 1996 and presently has over 2.5 lakh members.

What is Network Marketing? 

Network marketing, also known as multi-level marketing (MLM), is a marketing strategy in which a company sells its products through a network of independent distributors. These distributors are not company employees; they are independent contractors who earn commissions on every product they sell.  

The network marketing model allows companies to reach new markets and earn revenue. The network marketing industry is expected to grow in the coming years. With the rise of social media and the internet, more people are interested in starting their businesses. The industry is also becoming popular in other countries, creating a global market for network marketing companies. 

Also Read: Smart Franchise business opportunities in India

Types Of Network Marketing 

There are many types of network marketing, each with its unique benefits and drawbacks. The most popular types of network marketing are as follows.

  • Single-tier Network Marketing
  • Two-tier Network Marketing,
  • Multi-level Network Marketing

These types of network marketing come with specific attributes and details, which can be understood by the following.

  • Single-tier Network Marketing, also known as direct selling, is the simplest form of network marketing. In this type of marketing, you sell products directly to consumers without using intermediaries. This type of marketing benefits includes lower costs, higher profits, and the ability to build close relationships with customers. However, the downside is that it can be challenging to find customers, and you may have to work hard to convince them to buy your products.  
  • Two-tier Network Marketing, also known as multi-level marketing, is a more complex form of network marketing. In this type of marketing, you recruit other people to sell products on your behalf. This type of marketing benefits includes higher profits and the ability to build an extensive network of salespeople. However, the downside is that it can be challenging to control the quality of products your salespeople sell, and you may have to pay them a commission on sales.  
  • Multi-level Network Marketing, also known as pyramid selling, is the most complex form of network marketing. In this type of marketing, you recruit others to sell products on your behalf and earn commissions for those products. The benefits of this type of marketing include high profits. 

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Network Marketing Example

The best way to explain network marketing is to give examples of companies that use this type of marketing. Network marketing, also called multi-level marketing (MLM), is a business model in which companies use a pyramid-shaped sales structure to promote and sell products or services.  

  • Amway is a direct-selling company founded in 1959 by Jay Van Andel and Richard DeVos. Amway sells various home, health, and beauty products through a network of independent salespeople called Amway Business Owners (IBOs or Independent Business Owners). IBOs earn commissions on the products they sell and on the sales of the IBOs they recruit.  
  • Herbalife is a nutrition and weight loss company founded in 1980 by Mark Hughes. Herbalife sells its products through a network of independent distributors called Herbalife Independent Members (HIMs). HIMs earn commission on the products they sell and on the sales of the HIMs they recruit.  
  • Mary Kay is a direct-selling company founded in 1963 by Mary Kay Ash. Mary Kay sells a variety of cosmetics, and skin care products through a network of independent salespeople called Mary Kay Independent Beauty Consultants (IBCs). IBCs earn commissions on the products they sell and on the sales of the IBCs they recruit.  

These are just a few examples of network marketing companies. Many other companies use this type of marketing, including Avon, Tupperware, and Pampered Chef. 

How does Network Marketing work? 

Network marketing is a business model in which products are sold through a network of independent distributors, known as "network marketers." These distributors earn a commission on every sale and receive commissions on sales made by the distributors they recruit. This structure allows network marketers to earn income from two sources: their sales and the sales of the distributors they recruit.  

The most successful network marketing companies have a strong product line and offer their distributors generous commissions. They also provide their distributors with training and support to succeed in their sales efforts. Network marketing is a beautiful way to earn income, but it is essential to remember that it is not a get-rich-quick scheme. It takes time, effort, and dedication to build a successful business. 

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Network Marketing Success and Secrets 

To build a successful MLM business, you need to know what your customers want and how they want to receive it. You need to understand their needs to find out what your customers want. This can be done by conducting market research or asking your current customers what they want. Once you know what your customers want, you must determine how they wish to receive it. This can be done by offering a variety of delivery methods, such as home parties, catalogues, or online ordering. By providing a variety of delivery methods, you can ensure that your customers will be able to receive the products they want in the way they want. 

The secret to successful network marketing is to treat it like a business. This means having a business plan, setting goals, and working hard to achieve them. Network marketing is not a get-rich-quick scheme; it takes challenging work and dedication to succeed. 

Pros & Cons of Network Marketing 

Network marketing is a business opportunity that allows you to sell products or services and recruit others to do the same. You can build a team of people who work together to help you reach your goals.  

Network marketing has some advantages, including the ability to:  

  • Build a team of people who can help you reach your goals.  
  • Earn commissions on the sales of products or services that you sell.  
  • Recruit new members to your team and earn commissions on their sales.  
  • Work from home or anywhere else that you have an internet connection.  
  • Be your boss and set your hours.  

Network marketing has some disadvantages, including the need to  

  • Invest time and effort into building your team and your business.  
  • Handle customer service and other administrative tasks.  
  • Be prepared to encounter rejection when recruiting new members or selling products.  
  • Be aware of the potential for pyramid schemes and other frauds.  
  • Understand and comply with government regulations. 

Network Marketing Plan   

The first step is to develop a business plan. The network marketing plan will help you determine your overall goals and objectives. Next, you need to identify your target market and determine how you will reach them. Once you have a plan in place, you need to find a way to fund your business. This can be accomplished through individual savings, loans, or investing. Finally, you must advertise your company and reach out to potential clients.

Also read: Epic Formula To Start A Confectionary Business

Conclusion:

If you haven't already, now is the perfect moment to get started with network marketing because it is about to reach its golden period. There are numerous MLM businesses that are flourishing in the Indian industry. The majority of network marketing businesses are focused on the same idea, namely customer pleasure. Customer happiness is crucial to the expansion of any MLM business.

A crucial component of the Startup India or digital India missions is the network marketing industry. State-level regulations must be put into place for direct selling organisations, and the Foreign Direct Investment (FDI) policy must be relaxed. The Indian government adopted a 100% FDI policy in most sectors to encourage network marketing and direct selling, making it a feasable career option.
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FAQs

Q: What is the best way to get started in network marketing?

Ans:

The best way to get started in network marketing is to find a reputable company with a strong product line and a good compensation plan. Once you have found a company you can trust, you should start building your network of distributors by recruiting friends, family, and acquaintances.

Q: What are the risks of network marketing?

Ans:

There are several risks associated with network marketing, including the potential for pyramid schemes, high investment costs, and the possibility of income volatility.

Q: What are the benefits of network marketing?

Ans:

There are several benefits associated with network marketing, including the ability to build a residual income, the potential to earn a high income, and the ability to work from home.

Q: What is network marketing?

Ans:

Network marketing, also known as multi-level marketing (MLM), is a business model in which companies distribute products or services through a network of independent distributors. Distributors earn income from direct sales of products or services and commissions on the sales of other downline members.

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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.