MLM IS IT FOR YOU

How Does Network Marketing Work?

Network Marketing is a business model in which companies distribute their products to the end user through a word-of-mouth, direct selling type of method. This eliminates the middle man – there are no advertising, wholesaling, or retailing costs involved whatsoever.

What’s the problem with “Middle Men”?

When companies use “middle men” they spend money, and lots of it, on things that don’t enhance the product. If they don’t have these costs, they can spend more on research and development. This means that they can produce a higher quality, more unique offering.

The benefit that probably means the most to you? It’s the fact that some of that money that’s freed up by not paying for advertising, wholesalers, and retailers, can go in the pocket of the person who is promoting the product by telling his friends and family about it.

These people have their own business, generating income by recruiting like-minded individuals who want to work for themselves, or customers that just want the products and purchase them directly from the parent company, or a combination of the two. They are called associates, distributors, or independent agents, depending on the company. All three mean the sam.

Indepedent agents earn their money in at least two ways – through the efforts of their downlines, and by purchasing products from their company at wholesale prices then turning around and selling them for a profit. Commissions are paid based on what’s called a “compensation plan”, which determines how many levels of people will be receiving income from one person’s sales.

I’ve heard of multi-level marketing, or MLM. What’s the difference between this and network marketing?

There is no difference! These two terms, network marketing and multi-level marketing actually refer to different aspects of the same type of business.

First, network marketing. This term describes how the products are promoted, which is through a bunch of different people talking to each other, or networking.

Multi-level Marketing is how the people in the network are compensated for their efforts. It simply means that commissions are paid on multiple levels of the organization, thereby creating leverage.

What exactly is leverage?

When you are talking about leverage in this context you are talking about earning money from somebody else’s efforts.

The leverage concept is nothing new. It’s used by all for-profit businesses that have employees. The company charges money for something that the employee produces, then only pays the employee part of that. The owner of the company then keeps the rest, thereby leveraging the employees hours to create income for himself.

This is similar to the concept of network marketing compensation plans, with the distinct difference being that those that the distributor is leveraging off of are independent distributors themselves. This means that there are no employee costs involved, and that these people are going to be much more motivated to succeed.

Wait a minute! Is this one of those “Pyramid Schemes”?

A company is a pyramid if the distributor mainly makes money from new signups or they have to buy more products than they can sell or use. Pyramids are illegal everywhere, but network marketing is legal in all states and most countries.

Network marketing companies are not pyramids, though some pyramid schemes try to pass themselves off as legitimate MLM businesses. In most legitimate MLM companies, commissions are earned only on sales of the company’s products or services. No money can be earned from recruiting alone, as in sign-up fees.

Want to learn more about the industry of Network Marketing?

These resources, from a third-party perspective and not created by any specific company, are Brilliant Compensation by Tim Sales and The 45 Second Presentation That Will Change Your Life by Don Faila. I recommend both of these as not only informational, but as good resources to use in your prospecting efforts with skeptical people.

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