When one searches about network marketing on the Internet, two quite opposite terms quickly appear: one is pyramid selling and the other is networking or network marketing (or multi level marketing). This article will help you to distinguish between these terms and you can analyse if you are interested in applying a strategy based on marketing networks in your business .
The so-called marketing networks refer to a group of independent distributors that sell products directly from the manufacturer ; these distributors can, in turn, associate others and obtain a certain profit for each sale of these.
These networks have become very popular in recent years due to the proliferation of self-employed profiles, freelancers or simply people who want to obtain a secondary source of income . However, it is believed that the pioneer brand of this sales technique was the American beauty product brand Avon (born at the end of the 19th century) and that today it has more than 6 million distributors worldwide.
Differences Between Pyramid Selling And Network Marketing
How much controversy surrounds the term “network marketing”! Sometimes it is difficult to distinguish if a marketing network is legal or behind it is a scam . Pyramid selling is prohibited in many parts, but not network marketing or network or multi level marketing.
If you think that network marketing could be an option for your business, make sure beforehand that you run away from the concept of pyramid selling , as well as stay away from aspects such as:
- that pricing is not done without taking into account its value in the market and the competition
- that the initial cost of participation of the distributor is null or very low
- that distributors are not forced to consume the company’s products
- that the compensation schemes are clear for distributors and for those who can reach the next levels
How Network Marketing Works?
Let’s take an example : suppose you have a company that manufactures cleaning products (or perhaps you are dedicated to importing them). You are clear that your product is not the typical basic necessity, since it offers something more to the consumer. Therefore, you are not looking for a massive distribution, but a more selective one . You have some stores but you would like to expand your sales network with a minimum investment . You could think of network marketing.
Your products , in addition to being in your stores, could be in the hands of independent distributors who help promote and sell the items . They would receive a commission for each sale and you would not have to invest in, for example, the creation of a new store.
Of course, just as it does not require the same investment, a distributor does not have the same level of sales as a store. Therefore, one way to encourage him and to grow your network is for that distributor to create, in turn, his own network and obtain profit from the sales of the distributors of this second network.
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