About Network Marketing

What is Network Marketing?

Network Marketing is a relationship business; it is about helping people build a business or focusing on your customers for your products and services. Network Marketing really is an unseen business and it is all about sales.

It is businesses in which anyone can invest a small sum of money and through sheer tenacity achieve staggering levels of financial reward and personal freedom. But it requires education based on market tested results.

Network Marketing does not have giant signs or large offices, yet according to the Direct Selling Association (DSA) over 13 million people in the U.S. are working in the network marketing / direct selling industry.

The Network Marketing / MLM industry has a very shady reputation. Many of the people you will talk to feel it is a scam. Are they justified in this opinion? In many ways they are justified, but you can make a difference with the way you market your business.

In the 1950s when Franchise first emerged they where labeled a scam, illegal etc. Fortunately a franchise is not labeled as such anymore or quite possibly you would not be enjoying your favorite hamburger today.

In network marketing there are reasonably priced products and services that people consume in a short time. Generally the commission structure is less up-front then the direct sales companies, but it has a benefit that most direct sales companies do not have and that is residual income:

• It costs much less to get involved with this form of business, a few hundred dollars.
• Allows more people to become involved.
• Builds Residual Income.
• Leverages the time of others.

Network marketing is all about sales and distribution, but a different kind of sales. It’s more of a soft sale or recommendation then the hard closing type that you’re accustomed to with the typical salesman or saleswoman in the direct sales. The best approach by far in network marketing is a consultative sales approach. This is used very successfully today.

Direct Selling Introduction

Direct selling is a dynamic, vibrant, rapidly expanding channel of distribution for the marketing of products and services directly to consumers. The purpose of this paper is to describe direct selling and the benefits that it brings to the marketplace.

Direct selling provides important benefits to individuals who desire an opportunity to earn an income and build a business of their own; to consumers who enjoy an alternative to shopping centers, department stores or the like; and to the consumer products market. It offers an alternative to traditional employment for those who desire a flexible income earning opportunity to supplement their household income, or whose responsibilities or circumstances do not allow for regular part-time or full time employment. In many cases, direct selling opportunities develop into a fulfilling career for those who achieve success and choose to pursue their independent direct selling business on a full time basis.

The cost for an individual to start an independent direct selling business is typically very low. Usually, a modestly priced sales kit is all that is required for one to get started, and there is little or no required inventory or other cash commitments to begin. This stands in sharp contrast to franchise and other business investment opportunities which may require substantial expenditures and expose the investor to a significant risk of loss.

Consumers benefit from direct selling because of the convenience and service it provides, including personal demonstration and explanation of products, home delivery, and generous satisfaction guarantees. Moreover, direct selling provides a channel of distribution for companies with innovative or distinctive products not readily available in traditional retail stores, or who cannot afford to compete with the enormous advertising and promotion costs associated with gaining space on retail shelves. Direct selling enhances the retail distribution infrastructure of the economy, and serves consumers with a convenient source of quality products.

An important component of the Direct Selling industry is multilevel marketing. It is also referred to as network marketing, structure marketing or multilevel direct selling, and has proven over many years to be a highly successful and effective method of compensating direct sellers for the marketing and distribution of products and services directly to consumers.

Direct selling should not be confused with terms such as direct marketing or distance selling which may be described as an interactive system of marketing that uses one or more advertising media to effect a measurable response and/or transaction at any location, with this activity stored on a database. Some commonly known types of direct marketing and distance selling techniques are telemarketing, direct mail, and direct response.

Although direct selling organizations occasionally use some direct marketing or distance selling techniques and technology to enhance their businesses, the primary difference between the two methods of marketing is the face to face, or personal presentation that is always an aspect of the direct selling relationship.

Benefits of Direct Selling

Research shows some of the most popular reasons people choose direct selling are:

• Direct selling is a good way to meet and socialize with people.
• Direct selling offers flexible work schedules.
• Direct selling is a good way to earn extra income.
• Direct selling is a good way to own a business.
• Earnings are in proportion to efforts.

Anyone can do it.
There are no required levels of education, experience, financial resources or physical condition. People of all ages and from all backgrounds have succeeded in direct selling.

Direct sellers are independent contractors. You are your own boss, which means you can:

• Work part-time or full-time – you choose when and how much you want to work.
• Set your own goals and determine yourself how to reach them.
• Earn in proportion to your own efforts. The level of success you can achieve is limited only by your willingness to work hard.
• Own a business of your own with very little or no capital investment.
• Receive training and support from an established company.

How Network Marketing Works

Today there are millions of people around the world building this unseen industry called network marketing. You do not see them but they are everywhere, some probably right in your own neighborhood. It is a business in which common people can invest a small sum of money and rise to staggering levels of financial reward and personal freedom.

Each day millions of people report to work, where your employer leverages your time to build his or her business and financial future.

In Network Marketing we help and assist others in building their business. We are also leveraging their time, with each of us is gathering customers along the way.

Hence the name Network. We get paid for this because we are assisting, coaching and helping them to establish their business. Helping them to reach their goals for their financial future. So Its only right that we also get paid for our time?

Just like your employer leverages your time, through network marketing you can leverage the time of others. What does this mean?

Lets take a look at a typical employer in a service industry with 100 or more employees. That has a labor rate of 60 dollars per hour. The goal of our employer is to keep each employee active and busy for each hour paid.

Out of this once all the costs of doing business are factored in such as wages paid, health insurance, unemployment insurance, federal taxes, state taxes, fica taxes, permits, maintenance, housekeeping, the list just goes on and on. The employer may get to keep 5 to 10 dollars per hour of that labor rate.

In Network Marketing, we have our initial start up costs anywhere from just a few dollars to several hundred dollars. Where most network marketers fail is they feel that they do not need a marketing budget for advertising, they do not seek out the education required to succeed.

One of the important things to remember is, you are in a real business, you no longer have a boss holding you accountable. Your network marketing success or failure is dependent upon you and your actions.

Your primary task will be to gathering customers for your products or services. To help and assist others get started in their own business partnered with you. You are looking at a business model that will take 3 to 5 years to produce the kind of results you’re looking for.

So don’t give up your day job just yet. It will require 5 to 20 hours of consistent time and effort each week to build a successful Network Marketing Business. It will require a marketing budget, most people do not even consider this. Once again this is a real business this is your business, not a get rich quick overnight program, although it has been hyped by a great many naive marketers and web sites.

Network marketing is based on word of mouth advertising which is the most effective form of advertising. Think about it when you go out, watch a great movie, you will go out and tell people about it. When Sam’s club or Costco moved to your area, you joined their buying club and started telling everyone how much you saved. This is the power of word of mouth advertising.

Major advertising agencies and companies count on this. This is one of the things that we do as network marketers. The major difference is that we get paid for our word of mouth advertising.

One of the most often asked questions is, will I have to sell products and services? The answer is of course yes. Think about it, no one likes to have a salesman or woman come to the door and sell them products right. We hate to go to the automobile dealers, where we are swarmed with 5 different sales people all trying to get you to buy from them right!

So how are we as a network marketer different? We recommend products or services that we like and personally use. If we know it’s good and personally use it, recommending it to our friends and family is very easy.

Avoiding Illegitimate Schemes

Don’t make a costly mistake!

Thousands of people have lost a substantial amount of money by participating in pyramid schemes. Many of the victims knew they were gambling (although they didn’t know the odds were rigged against them). Many others, however, thought they were paying for help in starting a small business of their own. These people were fooled by pyramid schemes disguised to look like legitimate businesses.

The purpose of this article is to help you avoid falling victim to pyramid schemes, whether simple or disguised. Simple pyramid schemes are similar to chain letters, while disguised pyramids are like wolves in sheep’s clothing, hiding their true nature in order to fool potential investors and evade law enforcers.

What is pyramid scheme?

Pyramid schemes are illegal scams in which large numbers of people at the bottom of the pyramid pay money to a few people at the top. Each new participant pays for the chance to advance to the top and profit from payments of others who might join later. For example, to join, you might have to pay anywhere from a small investment to thousands of dollars. In this example, $1,000 buys a position in one of the boxes on the bottom level. $500 of your money goes to the person in the box directly above you, and the other $500 goes to the person at the top of the pyramid, the promoter. If all the boxes on the chart fill up with participants, the promoter will collect $16,000, and you and the others on the bottom level will each be $1,000 poorer. When the promoter has been paid off, his box is removed and the second level becomes the top or payoff level. Only then do the two people on the second level begin to profit. To pay off these two, 32 empty boxes are added at the bottom, and the search for new participants continues.

Each time a level rises to the top, a new level must be added to the bottom, each one twice as large as the one before. If enough new participants join, you and the other 15 players in your level may make it to the top. However, in order for you to collect your payoffs, 512 people would have to be recruited, half of them losing $1,000 each.

Of course, the pyramid may collapse long before you reach the top. In order for everyone in a pyramid scheme to profit, there would have to be a never-ending supply of new participants.

In reality, however, the supply of participants is limited, and each new level of participants has less chance of recruiting others and a greater chance of losing money.

You Should Know About Pyramid Schemes

Things you should know about pyramid schemes

1. They are losers. Pyramiding is based on simple mathematics: many losers pay a few winners.
2. They are fraudulent. Participants in a pyramid scheme are, consciously or unconsciously, deceiving those they recruit. Few would pay to join if the diminishing odds were explained to them.
3. They are illegal. There is a real risk that a pyramid operation will be closed down by the officials and the participants subject to fines and possible arrest.

Why would anyone pay to join a pyramid scheme? Pyramid promoters are masters of group psychology. At recruiting meetings they create a frenzied, enthusiastic atmosphere where group pressure and promises of easy money play upon people’s greed and fear of missing a good deal. Thoughtful consideration and questioning are discouraged. It is difficult to resist this kind of appeal unless you recognize that the scheme is rigged against you.

Disguised pyramid – wolf in sheep’s clothing

Some pyramid promoters try to make their schemes look like multilevel marketing methods. Multilevel marketing is a lawful and legitimate business method which uses a network of independent distributors to sell consumer products.

To look like a multilevel marketing company, a pyramid scheme takes on a line of products and claims to be in the business of selling them to consumers. However, little or no effort is made to actually market the products. Instead, money is made in typical pyramid fashion, from recruiting. New distributors are pushed to purchase large and costly amounts of inventory when they sign up.

For example, you might have to purchase $1,000 of nearly worthless products in order to become a “distributor.” The person who recruited you receives $500 (a fifty percent commission) and $500 goes to the top (the company, in this case). Notice the similarity to the simple pyramid scheme described earlier.

Most disguised pyramids, however, are not this easy to unmask. Pyramid schemes often choose products which are cheap to produce but which have no established market value, such as new miracle products, exotic cures, etc. This makes it difficult to tell whether there is a real consumer market for the products. The best way to avoid a disguised pyramid fraud is to know what to look for in a legitimate income opportunity.

How to Protect Yourself

1. Take your time. Don’t let anyone rush you. A good opportunity to build a business in a multilevel structure will not disappear overnight. People who say “get in on the ground floor” are implying that people joining later will be left out in the cold. BEWARE!
2. Ask questions:
   • About the company and its officers.
   • About the products – their cost, fair market value, source of supply, and potential market in your area.
   • About the start up fee (including required purchases).
   • About the company’s guaranteed buy-back of required purchases.
   • About the average earnings of active distributors.
3. Get written copies of all available company literature.
4. Consult with others who have had experience with the company and its products. Check to see if the products are actually being sold to consumers.
5. Investigate and verify all information. Do not assume that official looking documents are either accurate or complete.