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Network Marketing is a relationship business; it is about helping people build a business or focusing on your customers for your products and services. Network Marketing really is an unseen business and it is all about sales.
It is businesses in which anyone can invest a small sum of money and through sheer tenacity achieve staggering levels of financial reward and personal freedom. But it requires education based on market tested results.
Network Marketing does not have giant signs or large offices, yet according to the Direct Selling Association (DSA) over 13 million people in the U.S. are working in the network marketing / direct selling industry.
The Network Marketing / MLM industry has a very shady reputation. Many of the people you will talk to feel it is a scam. Are they justified in this opinion? In many ways they are justified, but you can make a difference with the way you market your business.
In the 1950s when Franchise first emerged they where labeled a scam, illegal etc. Fortunately a franchise is not labeled as such anymore or quite possibly you would not be enjoying your favorite hamburger today.
In network marketing there are reasonably priced products and services that people consume in a short time. Generally the commission structure is less up-front then the direct sales companies, but it has a benefit that most direct sales companies do not have and that is residual income:
Network marketing is all about sales and distribution, but a different kind of sales. It's more of a soft sale or recommendation then the hard closing type that you're accustomed to with the typical salesman or saleswoman in the direct sales. The best approach by far in network marketing is a consultative sales approach. This is used very successfully today.
Direct selling is a dynamic, vibrant, rapidly expanding channel of distribution for the marketing of products and services directly to consumers. The purpose of this paper is to describe direct selling and the benefits that it brings to the marketplace.
Direct selling provides important benefits to individuals who desire an opportunity to earn an income and build a business of their own; to consumers who enjoy an alternative to shopping centers, department stores or the like; and to the consumer products market. It offers an alternative to traditional employment for those who desire a flexible income earning opportunity to supplement their household income, or whose responsibilities or circumstances do not allow for regular part-time or full time employment. In many cases, direct selling opportunities develop into a fulfilling career for those who achieve success and choose to pursue their independent direct selling business on a full time basis.
The cost for an individual to start an independent direct selling business is typically very low. Usually, a modestly priced sales kit is all that is required for one to get started, and there is little or no required inventory or other cash commitments to begin. This stands in sharp contrast to franchise and other business investment opportunities which may require substantial expenditures and expose the investor to a significant risk of loss.
Consumers benefit from direct selling because of the convenience and service it provides, including personal demonstration and explanation of products, home delivery, and generous satisfaction guarantees. Moreover, direct selling provides a channel of distribution for companies with innovative or distinctive products not readily available in traditional retail stores, or who cannot afford to compete with the enormous advertising and promotion costs associated with gaining space on retail shelves. Direct selling enhances the retail distribution infrastructure of the economy, and serves consumers with a convenient source of quality products.
An important component of the Direct Selling industry is multilevel marketing. It is also referred to as network marketing, structure marketing or multilevel direct selling, and has proven over many years to be a highly successful and effective method of compensating direct sellers for the marketing and distribution of products and services directly to consumers.
Direct selling should not be confused with terms such as direct marketing or distance selling which may be described as an interactive system of marketing that uses one or more advertising media to effect a measurable response and/or transaction at any location, with this activity stored on a database. Some commonly known types of direct marketing and distance selling techniques are telemarketing, direct mail, and direct response.
Although direct selling organizations occasionally use some direct marketing or distance selling techniques and technology to enhance their businesses, the primary difference between the two methods of marketing is the face to face, or personal presentation that is always an aspect of the direct selling relationship.
Research shows some of the most popular reasons people choose direct selling are:
Anyone can do it.
There are no required levels of education, experience, financial resources or physical condition. People of all ages and from all backgrounds have succeeded in direct selling.
Direct sellers are independent contractors. You are your own boss, which means you can:
Today there are millions of people around the world building this unseen industry called network marketing. You do not see them but they are everywhere, some probably right in your own neighborhood. It is a business in which common people can invest a small sum of money and rise to staggering levels of financial reward and personal freedom.
Each day millions of people report to work, where your employer leverages your time to build his or her business and financial future.
In Network Marketing we help and assist others in building their business. We are also leveraging their time, with each of us is gathering customers along the way.
Hence the name Network. We get paid for this because we are assisting, coaching and helping them to establish their business. Helping them to reach their goals for their financial future. So Its only right that we also get paid for our time?
Just like your employer leverages your time, through network marketing you can leverage the time of others. What does this mean?
Lets take a look at a typical employer in a service industry with 100 or more employees. That has a labor rate of 60 dollars per hour. The goal of our employer is to keep each employee active and busy for each hour paid.
Out of this once all the costs of doing business are factored in such as wages paid, health insurance, unemployment insurance, federal taxes, state taxes, fica taxes, permits, maintenance, housekeeping, the list just goes on and on. The employer may get to keep 5 to 10 dollars per hour of that labor rate.
In Network Marketing, we have our initial start up costs anywhere from just a few dollars to several hundred dollars. Where most network marketers fail is they feel that they do not need a marketing budget for advertising, they do not seek out the education required to succeed.
One of the important things to remember is, you are in a real business, you no longer have a boss holding you accountable. Your network marketing success or failure is dependent upon you and your actions.
Your primary task will be to gathering customers for your products or services. To help and assist others get started in their own business partnered with you. You are looking at a business model that will take 3 to 5 years to produce the kind of results you're looking for.
So don't give up your day job just yet. It will require 5 to 20 hours of consistent time and effort each week to build a successful Network Marketing Business. It will require a marketing budget, most people do not even consider this. Once again this is a real business this is your business, not a get rich quick overnight program, although it has been hyped by a great many naive marketers and web sites.
Network marketing is based on word of mouth advertising which is the most effective form of advertising. Think about it when you go out, watch a great movie, you will go out and tell people about it. When Sam's club or Costco moved to your area, you joined their buying club and started telling everyone how much you saved. This is the power of word of mouth advertising.
Major advertising agencies and companies count on this. This is one of the things that we do as network marketers. The major difference is that we get paid for our word of mouth advertising.
One of the most often asked questions is, will I have to sell products and services? The answer is of course yes. Think about it, no one likes to have a salesman or woman come to the door and sell them products right. We hate to go to the automobile dealers, where we are swarmed with 5 different sales people all trying to get you to buy from them right!
So how are we as a network marketer different? We recommend products or services that we like and personally use. If we know it's good and personally use it, recommending it to our friends and family is very easy.
Don't make a costly mistake!
Thousands of people have lost a substantial amount of money by participating in pyramid schemes. Many of the victims knew they were gambling (although they didn't know the odds were rigged against them). Many others, however, thought they were paying for help in starting a small business of their own. These people were fooled by pyramid schemes disguised to look like legitimate businesses.
The purpose of this article is to help you avoid falling victim to pyramid schemes, whether simple or disguised. Simple pyramid schemes are similar to chain letters, while disguised pyramids are like wolves in sheep's clothing, hiding their true nature in order to fool potential investors and evade law enforcers.
Pyramid schemes are illegal scams in which large numbers of people at the bottom of the pyramid pay money to a few people at the top. Each new participant pays for the chance to advance to the top and profit from payments of others who might join later. For example, to join, you might have to pay anywhere from a small investment to thousands of dollars. In this example, $1,000 buys a position in one of the boxes on the bottom level. $500 of your money goes to the person in the box directly above you, and the other $500 goes to the person at the top of the pyramid, the promoter. If all the boxes on the chart fill up with participants, the promoter will collect $16,000, and you and the others on the bottom level will each be $1,000 poorer. When the promoter has been paid off, his box is removed and the second level becomes the top or payoff level. Only then do the two people on the second level begin to profit. To pay off these two, 32 empty boxes are added at the bottom, and the search for new participants continues.
Each time a level rises to the top, a new level must be added to the bottom, each one twice as large as the one before. If enough new participants join, you and the other 15 players in your level may make it to the top. However, in order for you to collect your payoffs, 512 people would have to be recruited, half of them losing $1,000 each.
Of course, the pyramid may collapse long before you reach the top. In order for everyone in a pyramid scheme to profit, there would have to be a never-ending supply of new participants.
In reality, however, the supply of participants is limited, and each new level of participants has less chance of recruiting others and a greater chance of losing money.
Things you should know about pyramid schemes
Why would anyone pay to join a pyramid scheme? Pyramid promoters are masters of group psychology. At recruiting meetings they create a frenzied, enthusiastic atmosphere where group pressure and promises of easy money play upon people's greed and fear of missing a good deal. Thoughtful consideration and questioning are discouraged. It is difficult to resist this kind of appeal unless you recognize that the scheme is rigged against you.
Some pyramid promoters try to make their schemes look like multilevel marketing methods. Multilevel marketing is a lawful and legitimate business method which uses a network of independent distributors to sell consumer products.
To look like a multilevel marketing company, a pyramid scheme takes on a line of products and claims to be in the business of selling them to consumers. However, little or no effort is made to actually market the products. Instead, money is made in typical pyramid fashion, from recruiting. New distributors are pushed to purchase large and costly amounts of inventory when they sign up.
For example, you might have to purchase $1,000 of nearly worthless products in order to become a "distributor." The person who recruited you receives $500 (a fifty percent commission) and $500 goes to the top (the company, in this case). Notice the similarity to the simple pyramid scheme described earlier.
Most disguised pyramids, however, are not this easy to unmask. Pyramid schemes often choose products which are cheap to produce but which have no established market value, such as new miracle products, exotic cures, etc. This makes it difficult to tell whether there is a real consumer market for the products. The best way to avoid a disguised pyramid fraud is to know what to look for in a legitimate income opportunity.
Retail is the sale of goods to the public in relatively small quantities for use or consumption rather than for resale.
Retailing consists of the sale of goods or merchandise, from a fixed location such as a department store or kiosk, in small or individual lots for direct consumption by the purchaser.[1] Retailing may include subordinated services, such as delivery. Purchasers may be individuals or businesses. In commerce, a retailer buys goods or products in large quantities from manufacturers or importers, either directly or through a wholesaler, and then sells smaller quantities to the end-user. Retail establishments are often called shops or stores. Retailers are at the end of the supply chain. Manufacturing marketers see the process of retailing as a necessary part of their overall distribution strategy.
Retail Price is the total price charged for a product sold to a customer, which includes the manufacturer's cost plus a retail markup.
Shops may be on residential streets, shopping streets with few or no houses, or in a shopping center or mall, but are mostly found in the central business district. Shopping streets may be for pedestrians only. Sometimes a shopping street has a partial or full roof to protect customers from precipitation. Retailers often provided boardwalks in front of their stores to protect customers from the mud. Online retailing, also known as e-commerce is the latest form of non-shop retailing (cf. mail order).
Shopping generally refers to the act of buying products. Sometimes this is done to obtain necessities such as food and clothing; sometimes it is done as a recreational activity. Recreational shopping often involves window shopping (just looking, not buying) and browsing and does not always result in a purchase.
Most retailers have employees learn facing, a hyperreal tool used to create the look of a perfectly-stocked store even when it is not.
Anyone who has ever bought anything is familiar with the term retail price even if he has never really thought about its meaning. Retail price is a concept that we hear and see nearly everyday but probably don't think that much about. Here is an overview of what it means and how it affects you.
Retail price simply means the price at which goods or services are sold by a retailer to a consumer. This is the purchase price that you pay whenever you buy a product from a retail store. Retail sales are designed for consumption and not for resale of goods or services rendered.
In order for a retailer to make a profit on a product, there is a mark-up on the item being sold. Mark-up is the difference in price between the wholesale unit price that the retailer purchases the item for in bulk and the retail price that he sells it to the consumer for. Often times there is a 100 percent mark-up between wholesale and suggested retail price. In other words the retailer sells the goods for double what he bought them for. This creates some room for dropping the price in sales, discounts and negotiations. Obviously, the retailer must sell the product for more than what he paid in order to make a profit on it. Other considerations like overhead costs go into formulating retail prices; a retailer can't make a profit if he is spending more on items like rent, heating, electricity and employee wages. In this way, retailers with low overhead, like websites with no physical storefront, are able to provide very low prices. This is why you'll often find deals online that are much better than what you find in stores.
Other types of prices that contrast to retail price are sale prices like those found during Christmas sales, blowouts or liquidation sales, wholesale, which is the price that the retailer pays for a bulk of product from the manufacturer or other agent intended for resale, and list price, which is the manufacturer's suggested retail price (MSRP).
MSRP is determined by a manufacturer of goods as a guideline for the price that should be used by retailers in selling a product to the consumer. This price is usually the highest price that you'll see the goods sold for, but retailers may choose to adjust their retail price below MSRP in order to compete with other vendors and attract business.
Often times retail prices and MSRPs are designed to be much higher than they need to be to make a profit. This allows the retailer to offer discounts and sales that look like a great deal but actually just reflect the considerably high mark-up. This is something that consumers should be aware of when shopping. It helps to study prices for an intended purchase item over a number of retailers to help determine the best deal.
Retailers sell in many different formats with some requiring consumers visit a physical location while others sell to customers in a virtual space. It should be noted that many retailers are not tied to a single distribution method but operate using multiple methods.
Nonstore retailing is a form of retailing in which sales are made to consumers without using physical stores. The non-store retailers are known by medium they use to communicate with their customers, such as direct marketing, direct selling and vending machines or e-tailing. Non store retailing is patronised to time conscious consumers and consumers who can't easily go to stores, or compulsive buyers. Most non-store retailers offer consumers the convenience of buying 24 hours a day seven days a week and delivery at location and time of their choice. Nonstore sales are now growing at a higher rate than sales in retail stores. Non-store retailing now accounts for more than 15% of all consumer purchases, and it may account for over 1/3 of all sales by the end of the century. The high growth rate is primarily due to the growth of electronic retailing. The growth of catalogue retail sales and sales in other nonstore retailing formats such as TV home shopping, direct selling, and vending machines are slower.
Retailers approach their customers via many different formats. While many of those retail formats are store-based and require consumers to visit a physical location, there is a rising relevance of alternative retail formats. The most prominent non-store retail format is certainly Internet shopping but other formats also exist, including conventional catalogue retailing as well as teleshopping.
Non-store retailing does not take place in physical retail outlets but relies on different media such as television, the Internet or even virtual worlds such as Second Life. Thus, traditional means of instigating buying decisions and retaining customers (e.g., store atmospherics and scents) are not feasible. On the other hand, information and communication technologies may also provide additional opportunities of engaging with customers. As an increasing number of customers make their purchase from within their own homes, non-store retailing is becoming an increasingly important part of the retail industry. With different types of non-store retailing being firmly established in many countries, the concomitant consumer behaviour should be of interest to marketers.
Some important considerations regarding consumer behaviour in NSR:
A supply chain is consisting of all parties and their supplied activities that help a marketer create and deliver products to the final customer.
For marketers, the distribution decision is primarily concerned with the supply chain's front-end or channels of distribution that are designed to move the product (goods or services) from the hands of the company to the hands of the customer. Obviously when we talk about intangible services the use of the word "hands" is a figurative way to describe the exchange that takes place. But the idea is the same as with tangible goods. All activities and organizations helping with the exchange are part of the marketer's channels of distribution.
Activities involved in the channel are wide and varied though the basic activities revolve around these general tasks:
Channel activities may be carried out by the marketer or the marketer may seek specialist organizations to assist with certain functions. We can classify specialist organizations into two broad categories: resellers and specialty service firms.
Resellers: These organizations, also known within some industries as intermediaries, distributors or dealers, generally purchase or take ownership of products from the marketing company with the intention of selling to others. If a marketer utilizes multiple resellers within its distribution channel strategy the collection of resellers is termed a Reseller Network. These organizations can be classified into several sub-categories including:
Specialty Service Firms: These are organizations that provide additional services to help with the exchange of products but generally do not purchase the product (i.e., do not take ownership of the product):
As noted, distribution channels often require the assistance of others in order for the marketer to reach its target market. But why exactly does a company need others to help with the distribution of their product? Wouldn't a company that handles its own distribution functions be in a better position to exercise control over product sales and potentially earn higher profits? Also, doesn't the Internet make it much easier to distribute products thus lessening the need for others to be involved in selling a company's product?
While on the surface it may seem to make sense for a company to operate its own distribution channel (i.e., handling all aspects of distribution) there are many factors preventing companies from doing so. While companies can do without the assistance of certain channel members, for many marketers some level of channel partnership is needed. For example, marketers who are successful without utilizing resellers to sell their product (e.g., Dell Computers sells mostly through the Internet and not in retail stores) may still need assistance with certain parts of the distribution process (e.g., Dell uses parcel post shippers such as FedEx and UPS). In Dell's case creating their own transportation system makes little sense given how large such a system would need to be in order to service Dell's customer base. Thus, by using shipping companies Dell is taking advantage of the benefits these services offer to Dell and to Dell's customers.
Having a strong product does little good if customers are not able to easily and conveniently obtain it. With this in mind we turn to a major marketing decision area: distribution.
Distribution decisions focus on establishing a system that, at its basic level, allows customers to gain access and purchase a marketer's product. However, marketers may find that getting to the point at which a customer can acquire a product is complicated, time consuming, and expensive. The bottom line is a marketer's distribution system must be both effective (i.e., delivers a good or service to the right place, in the right amount, in the right condition) and efficient (i.e., delivers at the right time and for the right cost). Yet, as we will see, achieving these goals takes considerable effort.
Distribution decisions are relevant for nearly all types of products. While it is easy to see how distribution decisions impact physical goods, such as laundry detergent or truck parts, distribution is equally important for digital goods (e.g., television programming, downloadable music) and services (e.g., income tax services). In fact, while the Internet is playing a major role in changing product distribution and is perceived to offer more opportunities for reaching customers, online marketers still face the same distribution issues and obstacles as those faced by offline marketers.
In order to facilitate an effective and efficient distribution system many decisions must be made including (but certainly not limited to):
When choosing a distribution strategy a marketer must determine what value a channel member adds to the firm's products. Remember, customers assess a product's value by looking at many factors including those that surround the product (i.e., augmented product). Several surrounding features can be directly influenced by channel members, such as customer service, delivery, and availability. Consequently, for the marketer selecting a channel partner involves a value analysis in the same way customers make purchase decisions. That is, the marketer must assess the benefits received from utilizing a channel partner versus the cost incurred for using the services.
The distribution channel consists of many parties each seeking to meet their own business objectives. Clearly for the channel to work well, relationships between channel members must be strong with each member understanding and trusting others on whom they depend for product distribution to flow smoothly. For instance, a small sporting goods retailer that purchases products from a wholesaler trusts the wholesaler to deliver required items on-time in order to meet customer demand, while the wholesaler counts on the retailer to place regular orders and to make on-time payments.
Relationships in a channel are in large part a function of the arrangement that occurs between the members. These arrangements can be divided in two main categories: independent and dependent.
Under this arrangement a channel member negotiates deals with others that do not result in binding relationships. In other words, a channel member is free to make whatever arrangements they feel is in their best interest. This so-called “conventional” distribution arrangement often leads to significant conflict as individual members decide what is best for them and not necessarily for the entire channel. On the other hand, an independent channel arrangement is less restrictive than dependent arrangements and makes it easier for a channel members to move away from relationships they feel are not working to their benefit.
Under this arrangement a channel member feels tied to one or more members of the distribution channel. Sometimes referred to as “vertical marketing systems” this approach makes it more difficult for an individual member to make changes to how products are distributed. However, the dependent approach provides much more stability and consistency since members are united in their goals. The dependent channel arrangement can be broken down into three types:
Like most marketing decisions, a great deal of research and thought must go into determining how to carry out distribution activities in a way that meets a marketer's objectives. The marketer must consider many factors when establishing a distribution system. Some factors are directly related to marketing decisions while others are affected by relationships that exist with members of the channel.
Next we examine the key factors to consider when designing a distribution strategy. We group these into two main categories: marketing decision issues and channel relationship issues. In turn, each of these categories contains several topics of concern to marketers.
Distribution strategy can be shaped by how decisions are made in other marketing areas.
The nature of the product often dictates the distribution options available especially if the product requires special handling. For instance, companies selling delicate or fragile products, such as flowers, look for shipping arrangements that are different than those sought for companies selling extremely tough or durable products, such as steel beams.
Besides issues related to physical handling of products, distribution decisions are affected by the type of promotional activities needed to sell the product to customers. For products needing extensive salesperson-to-customer contact (e.g., automobile purchases) the distribution options are different than for products where customers typically require no sales assistance (i.e., bread purchases).
The desired price at which a marketer seeks to sell their product can impact how they choose to distribute. As previously mentioned, the inclusion of resellers in a marketer's distribution strategy may affect a product's pricing since each member of the channel seeks to make a profit for their contribution to the sale of the product. If too many channel members are involved the eventual selling price may be too high to meet sales targets in which case the marketer may explore other distribution options.