Network marketing, multilevel marketing (MLM), and referral marketing are the names used to describe selling methods designed to replace the retail outlet as a route to market certain products. Although referral marketing has been around since the early part of the last century, for many people it’s still unfamiliar territory.
Network marketing is one way of starting a profitable, full-time business with little or no investment. It’s also a method of starting a second or part-time business to run alongside your existing business or career. Network marketing is one of the fastest-growing business sectors. Industry turnover has grown from £1 billion ten years ago to £2 billion today.
In most cases, network marketing involves selling a product or service that a parent company produces and supplies. You take on the responsibilities of selling the products and introducing other people to the company.
You get paid a commission on the products/services you sell yourself and a smaller commission on the products/services that the people you’ve introduced to the company sell. In addition to this, you often get a percentage commission based on the sales of the people that the people you introduced to the company also introduce, and on and on.
Advocates of network marketing maintain that, when given identical products, the one sold face to face (without the cost of maintaining a shop and paying employees and insurance) is less expensive than the same product sold in a store.
Additionally, network marketing fans believe that buying a product from someone you know and trust makes more sense than buying from a shop assistant behind a retail counter.
A wide variety of good-quality network marketing companies from all over the world exist for you to choose from. They offer products and services from a wide range of industries – health, telecommunications, household products, technology, e-commerce, adult products, and so on.
Household names include Amway, Avon, Betterware, Herbalife, Kleeneze, and Mary Kay Cosmetics. Choose a product or service that you’re interested in because, when it comes to sales, nothing beats enthusiasm and confidence in the product.
Evaluating the pros and cons
Like any other type of business, network marketing has its upside and its downside. Some of the positives are:
- Little or no start-up costs: With most companies, the investment in a business kit and a range of sample products rarely exceeds £100. The law governing network marketing doesn’t allow an investment of more than £200 in the first seven days.
- The potential to build a substantial business: By recruiting more and more people to join the company and by those people recruiting more people, your percentages of their sales grow and grow. And, of course, you’re still selling at a high rate yourself.
- A proven business formula: Network marketing has been around since the early 1900s.
- Low risk: Unlike a brand-new business idea that you may have uncovered, network marketing products and services are usually tried-and-tested business concepts. That doesn’t mean they can’t fail, but if you follow the rules you’re less likely to hit the buffers than you would on your own.
- A great deal of support and advice is often given: The parent company and the person who brought you into the company have a vested interest in helping you succeed because the more you sell, the more money they make.
- Flexible hours: You can sell on a full-time or part-time basis during the hours that suit you and your customers.
- Highly expandable: You don’t have territory restrictions like conventional salespeople, and with e-commerce capabilities, most parent companies can supply to many countries.
- Location: You can run the business from your own home.
- Personal development: You build your confidence and increase your communication skills.
Again, as with any business, network marketing isn’t all good. The following list shows some of the disadvantages:
- Restrictions on your business practices may exist, for example, recruitment, advertising, and so on.
- Your business relies heavily on the success of one parent company and its ability to deliver its products/services on time.
- You may not feel comfortable selling to your friends or to strangers.
- Even the best network marketing companies may be thought of as pyramid schemes.
Distinguishing pyramids from network marketing
Pyramid selling schemes are sometimes disguised to look like network marketing schemes, but commonly have the following characteristics:
- They encourage participants to make substantial investments in stocks of goods, by offering rewards to participants for getting others to do the same.
- They make little reference to direct selling and the need to achieve consumer sales. Instead, they imply that the main source of rewards comes from getting others to make substantial initial investments.
- They don’t offer contracts to participants, nor cancellation rights or the opportunity to buy back unsold goods – all of which are required under UK law.
Quality network marketing companies make sense for people who really believe in a particular product and want to sell it but don’t want to, or can’t, tie up a lot of money buying a franchise or other business, or don’t have a great idea of their own.
Just remember to check out the network company using trade associations such as the Direct Selling Association (www.dsa.org.uk). You won’t get rich in a hurry, or probably ever, but if you take care you probably won’t lose your shirt either.