Network Marketing

Women standing next to photos of individuals in her network

Network marketing, also known as referral marketing or multi-level marketing (MLM), is an innovative departure from the traditional business model. Unlike the vast majority of businesses, network marketing does not depend on a limited number of businesses selling to a large number of customers, but rather multiple businesses being involved in the sales process. This approach undercuts the traditional business value of striving for uniqueness while enhancing the capacity to network and develop a team of business partners to sell products. Accordingly, this approach creates a solid home business opportunity within the context of a multi-leveled “strength in numbers” marketing approach.

Advantages

The major advantages of network marketing pertain to the flexibility a multi-level marketing model allows businesses to achieve; in particular, success in the dynamic world of sales. From the outset, network marketing permits low start up costs for the reason that it allows a business to be resourceful in partnership with the producer. The distribution of products and acquiring business tools/supplies are essentially self-contained, where major processes such as order taking, research and development, and legal fees are within network marketing businesses’ own capabilities. This eliminates the need to rely on third-party companies specializing in the latter which can then reduce costs. Moreover, network marketing permits an owner to set their own schedule, fostering the freedom to run the business at their own convenience. In addition, since network marketing is teamwork oriented when a business aids in the development of another it will consequently be rewarded, and that cycle becomes embedded in the prosperity of future business endeavors. Furthermore this marketing approach promotes the creation of products that are as high of a quality as most traditional store bought products, such that the income potential is unlimited.

Disadvantages

The merits of a network marketing business also pose some disadvantages as well. Since the business model is dependent on the company it distributes for, factors such as price changes, business decisions, and the incidence of going out of business are beyond the network marketing business’s control. In this sense an owner does not have the peace of mind that overarching choices and decisions are of their own volition. When first starting out with a product company it is likely the network marketing business will have a low level of commission which could take some time to generate a profit. This may be compounded by some product companies requiring that the business maintain certain product purchase requirements or a group sales volume in order to receive payment for the business’s efforts. In addition, network marketing will require an owner to establish an interpersonal marketing approach which may be difficult if one is unaccustomed to establishing such relationships. Additionally, many network marketing businesses may also need to develop a team of business owners in order to start generating profits. Lastly, due to the unconventional nature of this model there are critics who think network marketing businesses are participant in a scam.

Controversy

Network marketing has been considered controversial on a variety of unsubstantiated claims. Since many people who make these claims are not economics or business experts, it has been assumed that the network marketing model itself is flawed due to the unlimited number of distributors selling their products, apparently leading to market saturation. However, contrary to this opinion it has been cited that many network marketing businesses continue to grow their companies after a year. Other claims relate network marketing to a scam. A very low number of product companies have given the industry a bad name in regards to this allegation, where they have gotten a network marketing business to distribute their products and then left hastily with the profits. Some “unscrupulous” network marketing businesses themselves have also tainted public perceptions of the industry by attempting to distribute their products to everyone, regardless of whether the potential customer is a suitable buyer. Unfortunately both these types of businesses do exist, yet when network marketing is done properly it elicits business outcomes that are highly effective at generating profits.