Network Marketing: Understanding The Basics Of This Business Opportunity

What You Need To Know Before You Miss Out

If you're still not sure what network marketing is exactly about, you're certainly not alone. The reason is simple: this otherwise vibrant small/home business industry is yet to really come alive in our economy. This article will try to break it down in the hope that you will become better-informed about this business ownership concept and begin to see what difference network marketing can make, even to your personal life.

Global Presence
Network marketing has been running in the USA since the 1950's and has already become an important part of the economy, a major mode of marketing and perhaps the most prolific creator of small and home businesses. It has also made a lot of people very rich. Network marketing has equally taken root in other major economies across the globe, from the Americas through Europe to Asia. It has also migrated onto the internet platform, not only as pure network marketing but in variants like affiliate marketing and viral marketing.

How It Works

Network marketing, also called multi-level marketing (MLM), is a marketing system that eliminates the middleman and sells directly to the consumer who usually signs up for preferred customer status. They may also enroll for product distribution and may be called distributors or something similar. The consumer is thus able to buy products at more favourable, wholesale prices. If they sell to other users, they make a margin since they will sell at a retail price. Registered consumers are, in addition, encouraged to introduce the product(s) to other potential consumers. These could be relatives, friends, office colleagues, club members or general acquaintances. If these other parties enroll and buy products, the recruiter gets paid a commission. The consumer continues to earn more benefits in commission and other incentives as more 'descendant' consumers are introduced even by those he introduced or those introduced by those he introduced and so on, down the line. The specific details of the commission structure and package will depend on what the particular company offers, but they are usually reasonable, sometimes very attractive, at least for two reasons:

  • to motivate consumers to register, continue to buy for personal consumption and, more importantly, to take steps to promote the product(s) to others. It is only rational to build in powerful incentives as these consumers constitute the channel for achieving whatever sales the company projects;


  • network marketing is direct, word-of-mouth and person-to-person selling which eliminates a huge chunk of advertising and marketing costs, which for large companies is a big budget. Such savings become distributable to the customers who as stakeholders are responsible for this cost-saving.

Compare With Traditional Marketing
The company relies on the customers-turned-distributors to get out its product(s), promote them on person-to-person basis and make sales. The key is to make them stakeholders. The model is such that each participant is not required to buy heavily or stockpile. Your basic obligation may just be to buy a pack of products monthly, for personal consumption. The rest is to strive to enroll others who will do just as well. This runs on our natural instinct to tell others about products we buy and use. Cumulatively, purchases come to a sizeable chunk and continue to grow as more distributors are enlisted. Interestingly, some of the very successful network marketing companies have registered sales growths far exceeding those by companies using traditional marketing.

In contrast, traditional marketing relies on an in-house sales force, supported by appointed dealers or distributors who make bulk purchases and go on to resell at higher retail prices to consumers. In a sense, the consumer has no stake at all. Because the reach of the sales team and appointed dealers is limited, heavy advertising is the hallmark of traditional marketing.

Contrast With Pyramid Schemes
The network of consumer-distributors in MLM will normally end up in the shape of a pyramid, as more people are introduced by the growing army of distributors who join the company. A member will typically have people above him, called his 'upline' and others below him called his 'downline'. A multi-level marketing system is however not the same as a pyramid scheme. The latter is usually a 'paper' arrangement, with no intrinsic product support and usually offers benefits that are not derivable from the value of underlying product transaction. Pyramid schemes tend to be fraudulent and are illegal in most countries. Multi-level marketing is an accepted, regulated marketing system that is already adopted by many top-performing companies worldwide. It is based on the marketing of legitimate products which must command meaning value, if the business is to be sustained.

Modest But Growing Presence in Nigeria
Network marketing has eventually arrived our shores but is yet to have a bang, as people grapple with the concept and try to take in the reality of its promise. Interestingly, the early birds are already making a kill. Granted, it's not yet common knowledge that people can earn a descent living purely engaged in network marketing. The idea of residual income, the big promise of a good network company is also yet to sink. Yet, the works of Robert Kiyosaki, which emphasize residual income, are very popular around here. While people in employment find this a convenient business option abroad, it's yet to be understood or embraced by working Nigerians. The reasons may not be far-fetched:


  • they are yet to be well-informed of the potentials of network marketing;
  • they may not know the existing opportunities, given that this business is advert-shy;
  • those involved in existing opportunities seem to pay more attention to retail sales than enrollment;
  • not many network marketing companies are yet willing to sell products in Nigeria, limiting the available offerings.

Progress is however being made. Today we can count Golden Neolife Diamite (GNLD), Tianshi Group, Forever Living Products and Tahitian Noni International and Formore as forerunners. While GNLD was the first to brave it, Tahitian Noni International seems to have hit the scene with more verve, flaunting a product that appears to command much attention and earn profuse testimonies from satisfied users. One can only expect more companies to come into our market as awareness increases and the market expands.

 

Copyright © 2006. Acceler8now.com. All rights reserved.

If you would like to receive coaching for launching and growing your online business or advisory support for building your offline small business, Acceler8now.com will provide the hand-holding to ensure your success. Contact us now for more information or visit www.acceler8now.com for online resources.