What is Network Marketing?
Network marketing (also known as multi-level marketing, MLM, referral marketing, and direct selling) is a system for marketing and distributing products and services that relies on word-of-mouth advertising. It is a business model that invests in people rather than in expensive ad campaigns, celebrity endorsements, and traditional advertising. Independent distributors are compensated not only for the sales they personally generate, but also for the sales of others they attract into their organization. This creates a downline of distributors and a hierarchy of multiple levels of compensation.
With an estimated 65 million people worldwide involved in this profession today, independent distributors share products or services with consumers by means of relationship referrals. A lot of people each generating a small volume in sales will add up to a large volume. Imagine getting paid a small percentage on that total volume! This model enables independent distributors to leverage their income-earning potential through the efforts of many. Andrew Carnegie once said, “I would rather have one percent of 100 people’s efforts than 100 percent of my own.”
To put this into context, the Network Marketing industry generated $127 billion in revenue worldwide in 2010. The music industry generated $9 billion, and the movie industry generated $10 billion. This means that the Network Marketing industry is generating 600 percent more revenue than these other two thriving industries combined!
If you don’t like sales, I have some great news for you! You don’t need to be a sales professional to build a thriving network marketing business. Some of the best network marketing professionals have backgrounds as teachers, counselors, and coaches. People in these professions understand that “sales” is really all about building relationships, sharing ideas, mentoring, and coaching. If you are not good at these things, working in this profession will provide you with the personal development training you need to develop these skills.
One interesting observation is that oftentimes great sales professionals do not do as well as one might expect in network marketing. Why? Although they can sell a lot of products themselves, they may have difficulty duplicating their efforts through the efforts of others on their team. They are so good at sales that their prospects cannot imagine doing what the sales pro does, so they turn down the business opportunity. I often tell my team members, “Share, don’t sell.”
Traditional marketing methods require companies to spend millions of dollars each year to market their products and services. Network marketing companies take the money they would have invested in advertising and they pay it to their distributors instead. Why? Because they want access to your network of friends and family! They know that word-of-mouth marketing is a far more effective than traditional online and offline marketing methods, because it comes from someone they already know, like and trust. Network marketing companies are happy to pay you to communicate their message to your network of friends and family.
This method of marketing is not about convincing your friends and family members to buy from you, but about learning the needs of those within your circle of influence and assisting them in addressing those needs.
When you see a great movie or dine at a wonderful restaurant, you share your experience with the people you care about. In network marketing, the company pays you to do the same thing with their products or service. That’s why some people call it “referral marketing.”
Why Network Marketing?
Read the excerpt from my book, Why Network Marketing?
