If there is a marketing model that has been around for decades, it would be network marketing. This marketing strategy is all about selling products at a fair price. It is important for the products (or services) sold to be absolutely legitimate. Network marketing is also known as MLM marketing. It overrides the traditional ways of selling products through stores made of brick and mortar. Here, companies use a network of talented marketers to distribute their products. As the network grows, news about the business and its products is bound to spread. This is when the business makes more sales, and eventually seed a return on investment.
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Why do companies like Network Marketing?
Most of the time, companies admire the network marketing strategy. Mainly because they don’t need to hire and maintain a full-time workforce for accomplishing the same task. Network marketing is a cost-effective way of promoting products and services. When it comes to marketing expenses, the company needs to make a nominal investment. However, if it excels, it will be able to have hundreds (if not thousands) of distributors working for them. Brands that operate from the comforts of their home, find the MLM model useful. It gives them the freedom to start a new business, and even work at flexible hours.
In the network marketing model, there are several stages of distribution. Likewise, the payouts at made at different levels. (This is why the network marketing model is also known as the multi-level marketing strategy.)
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How does network marketing work?
In the beginning, the brand hires a team of sales professionals who will be passionate about the product, and be willing to spread the word. Instead of giving these sales professionals a salary, they sell their products at a reduced price. These professionals are encouraged to sell the product to “others” at the whole price. Every time they sell a product, the profit made goes to the pockets of the sales professional. Most of the time, these sales professionals choose to reinvest in the product and sell more. This is how they see a “good deal” of money. The income made through network marketing strongly depends on the number of products sold.
In addition to encouraging the sales professionals to marketing, sell more products, and see better revenues – the companies ask the sales professionals to recruit. This is where new sales representatives would work for the “primary” sales team. Whenever a recruit makes business, the “primary” salesperson who hired the recruit will see some profit. Another term that is used to identify this model would be “Referral Marketing”. The term referral identifies the process where a distributor identified another “salesperson” for the brand.
The model doesn’t end here. Instead, it goes to an extent where customers are actively engaged and encouraged to share details about the product with friends, family, and colleagues.
When all of these activities take place, the company constantly makes money. Its products are sold, the brand becomes famous and a lucrative income is seen on a daily basis.
Network marketing and Pyramid marketing
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Many a time, people wonder if networking marketing is equivalent to the pyramid model. Well, there are marked differences when the second level of distributors is reached. This is where MLM marketing becomes different and more productive.
Also, the pyramid model is not legal in various parts of the world. But, the network marketing strategy is officially approved. In fact, many famous brands like Herbalife make use of this marketing model. Currently, Herbalife has nearly 300,000 distributors around the world. This is how established and profitable networking marketing is.