What is Network Marketing?

This is a very brief overview of network marketing. I hope that it will give you an idea of how the process works without specialising too much on any one particular compensation scheme.

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Network marketing is, in short, a "business in a box". For a nominal fee, you can register with a certain company in order to build up an organisation based around their products or services. You are classed as an independent business owner: registered with, but not employed by, the parent company.

Over our lives, we have all recommended goods or services to those we know. Think back to the last time you went to see a film in the cinema (or, if this doesn't help, think about the last time you ate out at a fine restaurant or listened to some music.) If you saw a film that you really enjoyed, the chances are you would have recommended it to people you know. Why? Because you wanted them to be able to enjoy the same experience that you had been fortunate enough to find.

So let's say that you told six friends, and all six of them went to see the same film on your recommendation. They probably bought some popcorn with their film, and maybe a drink. Perhaps they paid some money to park in the cinema car park. All told, they might have spent at least forty pounds together. That's forty pounds that the cinema got thanks to your efforts. But how much did you get paid for doing them such a favour? Not a penny! The cinemas and the film-makers spend all of their money on hugely expensive advertising campaigns and rely on these to encourage people to see the movies. Except that there are two problems: Firstly, millions of dollars are spent advertising to people who have already seen the movie, or have no intention of ever doing so; Secondly, have you ever been to see a movie because it looked good from the commercials, but actually it was terrible?!

So network marketing came about to solve these problems. Network marketing companies sell practically everything you could ever think of, but very few of them ever advertise. They rely on 'referral marketing' to spread the word about their products. That is to say, they make sure that they have an exceptionally good product, and then rely on people to spread the word for them. In thanks for doing this, they pay those people for each sale made as a result of their efforts. This is much more efficient than blanket advertising, because the company is only paying for sales made, so it saves a huge amount of money which can be funneled into producing better, cheaper products, and paying its distributors (that is, those who are doing the 'referring') very well indeed.

Wait - it gets better! Imagine the cinema situation again. Now imagine that four of the friends whom you told about the film also really loved the experience and each told half a dozen of their friends about it. That's another 24 people who will go to the cinema and probably spend well over a hundred pounds between them. Now, those people only went because the film was recommended by their friends. That's just like what you did in the first instance - you told half a dozen people about the film and they all went to see it, so you did the cinema a favour. If the cinema worked by network marketing then you would get paid for telling your friends about the film, just like your friends would get paid for telling their friends about it. However, these 24 new people also only went to see the film because you started the ball rolling by telling the people whom you knew. So in a sense, you should get paid for them too. Not as much, as before, naturally, because you didn't actually do the work in getting them there.

So let's expect that two thirds of those 24 people also told six friends. That's another 96 people going to see the film, or 126 extra people in total who have now seen the film because of you. Even if the cinema only gave you a few pence for each one of those, you would still be able to earn a few pounds just because you did a few people a favour. That's network marketing. And because sales are now happening on recommendation, really bad films wouldn't ever get any viewers because they wouldn't get recommended - nobody wants to annoy their friends! So that would force the cinema only to show the very best films and to guarantee the highest quality services.

In a real network marketing business, every person joining the company forms the head of their very own business. They usually do some personal retailing, which may involve talking to their friends and relatives about a particular product or service. Some organisations encourage the development of a substantial retail base, which is always a good idea. As you will be making a tidy sum of money on the side, you might now want to recommend this business model to some of your friends. After all - they probably want to earn some extra money too! They start at the head of their own business, and they also build up a small retail turnover. They make exactly the same money from that as you do from your own retail business. However, because you introduced them, you also get a small bonus payment from the company by way of a reward for spreading the word. After all, because of your efforts, the company is now making more money.

This first person is a member of your downline. They are on your first level. As time goes on, you will introduce other people to the organisation, and these people will in turn introduce a second level and so on. These are all members of your downline, and you are their upline. Your own upline is the person who introduced you to the business. Your upline will offer you help and advice because they won't succeed until they help a number of their downline also to succeed! The more money you make, the more money they make. Clearly your organisation will never be as large as theirs, because yours is a part of theirs, but most network marketing companies reward those who bring in most of the distributors. If you do very little work, but just happen to register someone who works extremely hard, then it is only fair that they should get far more money from their group than you do.

So network marketing is a fair and ethical way to do business. It avoids waste, it rewards people for the work that they do, and does so on a continual basis - as long as the company continues to make money from your efforts, you will get paid. Even if those efforts were ten years ago! Moreover, it encourages people to help you to succeed, which for many people is a truly welcome break from the backstabbing and office politics that accompany so many conventional jobs.

Many people worldwide have developed a very substantial residual income from network marketing. A residual income is one that keeps coming in month after month based on work you have already done. The more work you do, the more your income increases. If you do no work then your income will usually remain about the same but you still get paid! If your ogranisation is big enough then it might even continue to increase without any further input for you - there are lots of people in your group making money too, and they want to make even more!

Remember - to retire from a job you don't need a lottery win - you just need to replace your income. If you could replace your current salary with a truly residual income which came in every month and sometimes actually grew, would you continue to work?

For more information, and to answer some of the questions that you may have regarding this business model, please see my network marketing Frequently Asked Questions page.




This page last modified 11/Feb/2006

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