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| How Network Marketing Works |
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| Written by Matt Hellstrom |
| Friday, 28 November 2008 11:35 |
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Network Marketing is a way that companies market their products to the consumer. It is different from most other types of businesses because it doesn't have any advertising, wholesaling, or retailing costs involved in it. It is done entirely by direct selling and referral, word-of-mouth type of advertising. This eliminates the middle man. What do you mean by "No Middle Man"? 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. Distributors earn commissions based on the sales efforts of their organization, which includes their efforts as well as the efforts of their downline. Commissions are paid to distributors according to their company's compensation plan. There can be multiple levels of people receiving commission from one person's sales. In addition, distributors can earn profit by retailing products which they purchase from their parent company at wholesale price. What's the Difference Between Network Marketing and Multi-level Marketing, or MLM? In a word, nothing! The terms Network Marketing and Multi-level Marketing refer to two 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 simply the means by which the people in the network are paid for their efforts. Commissions are paid to multiple levels of distributors, which creates leverage. What exactly is leverage? Leverage in this instance refers to being able to earn income on someone 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 kind of the same as network marketing compensation plans, but there is a big difference: In a network marketing plan, the ones that are being leveraged off of are other independent distributors instead of employees. Therefore, there are no employee costs involved and hopefully these people will be more motivated because they also own their own business. Wait a minute! Is this one of those "Pyramid Schemes"? Pyramid schemes are illegal in all states and most countries, whereas legitimate network marketing companies are allowed in all states and most countries. A pyramid scheme is recognized when distributors are paid primarily from money received from new recruits, or if they're required to by more products then they can consume or sell. There are illegal pyramid schemes that try to pass themselves off as legitimate network marketing businesses. If a company is legitimate, the distributor can only earn commission from sales of the company's products or services, and not from recruiting sign-up fees alone. Here are a couple of good resources for learning more about the Network Marketing Industry. First is Brilliant Compensation by Tim Sales. Second is The 45 Second Presentation That Will Change Your Life by Don Faila. Both of these tools are highly recommended for your own knowledge and to show to skeptical prospects. They are both created from a third-party perspective and not for any particular company. About the Author: Discover the new techniques of attraction network marketing today! Can't stand network marketing?? Then visit our online home-based business blog for other lucrative internet-based businesses. Kindly provided by LJ-Marketing.dk You are welcome to use this article on your own website, if you include the link just before this text. |
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