What is Network Marketing? Definition, Types, Example & Advantages

What is Network Marketing? Definition, Types, Example & Advantages-feature image
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Marketing is the art of connecting the audience with your product at the right place and time. When we think about marketing, several images pop up in our head like ads, social network marketing, influencers, etc. Our thinking graph rises from the smallest grocery shop in our area and takes a peek at the big brands that have smashed their competitors by winning at the marketing and branding playground.

Although marketing has immensely evolved with the evolution of technology. It has gained various dimensions and widely expanded the territory. We have witnessed its journey from newspaper to a never-ending pop-up.

In this article, we will get to know about one such type of marketing known as Network Marketing.

what is multi level marketing

What is Network Marketing?

Network marketing is a business concept that counts on individual representatives for direct, person to person selling. MLM (Multi level marketing) businesses bring onboard independent agents to sell products/services. Businesses need to develop a strong network of partners and salespeople to work on lead generation and closures.

How Does Network Marketing Work?

In network marketing, businesses first recruit people who are interested in the products. Instead of paying monthly salaries, companies offer them products at a discounted rate which they can sell in the market at full price. Therefore, the discounted rate becomes the profit margin for them.

They once again reinvest the money to buy a few more products and sell them to earn profits. Because of this reason, network marketing is also referred to as referral marketing as it encourages more people to be a part of your sales funnel.

Interestingly, sale people aren’t paid any basic salary but with network marketing, they earn:

  • Either by direct selling or sale done by other members.
  • They recruit new members & make the chain bigger.
  • The longer the chain is, the more money they can earn.

What are the Types of Network Marketing?

Types of Network Marketing

There are three basic types of network marketing:

  • Single-Tier Network Marketing

    In Single-tier network marketing, people sign up for the program, start selling the company’s products or services and end up earning commission based on the sales conversions they make. However, it’s not compulsory that they recruit further sales agents to do their work. They can focus on sales and customer relationship building.

    To understand single-tier network marketing, we can take the example of brands like Amway, Betterware, Kleeneze, Avon, etc. which have made great sales through this technique. Some online platforms also follow this marketing technique, where people get paid for the traffic they drive to the website.

  • Two-Tier Network Marketing

    In two-tier network marketing, companies recruit people. However, the payment for these employees is not just limited to it. They can earn compensation through direct sales or traffic they drive to a website. Besides, they also earn commission on the sales generated by those who joined the program through their referral.

  • Multi-Level Marketing

    As the name signifies, multi-level marketing or MLM works in two or more tiers of marketing. It encourages existing distributors to employ more distributors under them in exchange for a percentage of the margin earned by them. It is mostly based on distribution networks. Here people also earn money when the tier becomes five or more times deeper.

Suggested Read: How YouTube Marketing Can Improve Your E-Commerce Sales

History of Network Marketing

Network Marketing is almost a 50-year-old concept. In 1934, a California-based Company came up with this concept. They started out as a direct sales company, which signed up people who would use the product for their personal use and sell it to their family and friends.

In the process, they would earn an extra $50 each month, which was a substantial income. Their friends and relatives not only liked the product, but they realized it could benefit them financially. They bought the product at a wholesale price and sold it at market price.

California Vitamins renamed it to Nutralite Corporation in 1943 which was the first Multi Level Marketing compensation strategy. Everyone in the company got paid on numerous levels of sales.

Richard Marvin DeVoss and Jay Van Andle joined Nutralite Corporation in 1949, as Members and for the next ten years, the company grew and prospered. They believed that people who drive sales should be paid as per the benefit earned by the company.

In 1959 Jay and Richard went in a different direction and started their own Multi-Level company called Amway. Amway became the biggest MLM distribution company at that time.

In the early 80s, the Multi-Level Marketing term became Network Marketing. Right now, Network Marketing is poised to become a giant that will outgrow any other form of conventional business. It is the fastest-growing method of distribution in the world that opens multiple growth prospects for a business that they can prosper for years.

Things to Consider When Entering Network Marketing

If you’re planning to start your career as a network marketer, you need to consider a few things and research first.

Ask yourself these 6 questions before entering the world of network marketing:

  • How old is the organization?
  • Do you find their products/services valuable?
  • How generous is the pay distribution?
  • What is the integrity of the company?
  • Does the company have good momentum and timing?
  • Will the company offer support or training?

Keep it at the top of your mind that it’s a business and you are your own boss and your own employee. If you want to call the shots, you need to be ready for failure and try again.

Also, note that not everyone in your network will be supportive.

Clearly understand how this affects your taxes and finances. You might need to hire a CA to handle your accounting. There are so many people around you who specialize in dealing with network marketing businesses. Start building a network with them to understand the nitty-gritty of this marketing world.

Suggested Read: Advantages and Disadvantages of Computer Networking

How to Start Network Marketing?

how to start network marketing

Before diving into the world of network marketing, you must follow the following steps:

  • Study the market: Know what excites people, what are the trends, and also what is the market rate of those products or services.

  • Identify your TG (Target Group): Target customers with a strong online presence, as you can get more clients from their reviews or references.

  • Ensure affordability: Depending on your TG, set the rate for your products. Your prices should be affordable for the people.

  • Reach out to network marketing companies: To boost up your business successfully, quickly, and easily then start by working for a network marketing company. Amazon affiliate marketing is the best way to kick start.

  • Get your credentials: Get your hands on posters, banners or business cards to tell people about your business.

  • Look for opportunities: Always know that opportunities will not knock at your door. You need to go out there and grab it.

Advantages of Network Marketing

what is network marketing business

There are several benefits of network marketing, such as:

  • Individual Branding

    By sharing your personal experience, you are persuading people to buy the products. People buy your stuff because they believe in you and your principles. When you add new people to your network, you grow your business. Once you’ve established yourself as a community expert by using your voice, your network marketing success will skyrocket and be unbeatable.

  • Global Business Owner

    Network marketing gives you the advantage to work from anywhere you want; all you need is a smartphone/laptop and connections to get started. Network marketing is a business that entails building a network of individuals so that you can meet new people, talk to them about your business, and recruit them as downlink members.

  • Low Investment

    Starting a network marketing company isn’t difficult. You can start a network marketing business by investing a small amount and having a competitive mindset. MLM or multi level marketing is a business in which you make more money than you can in other types of enterprises.

  • An Ever Growing Network

    MLM provides people with the opportunity to learn how a business operates and prepares them to become vendors. If you have an extensive network of contacts, you can sell the products to them and make money. Besides money, it’s a network of people’s business. New businesses will be added to your network and the business wil expand.

    You will be given a business that is already set up, including a replicated website, marketing materials, and a sales tracker. You just need to manage and maintain the business.

  • Collaborate with Community

    It’s a business that requires a community of like-minded people. The business expands as the people expand. MLM is a business where most team members and like-minded individuals. If one acts solely of their own, it will impact the entire network.

  • Work Life Balance

    In network marketing, you have complete autonomy over their working environment, work culture, and ability to build your firm as quickly as possible.

    Multi-level marketing is a business with strong marketing skills and a strong network-building foundation, which makes it easier to succeed in this field. This type of job not only provides a good salary but also a way of life, which is why so many individuals choose these programs.

Suggested Read: What Is Enterprise Marketing Management in CRM

Best Multi-Level Network Marketing Software

  • Infinite MLM Software

Infinite MLM Software is a Network Marketing Solution that solves network marketing concerns of the users in real-time. It features compensation plans, such as Party Plan, Binary MLM Plan, Matrix Plan, Unilevel MLM plan, etc.

It offers vast integration options, such as e-commerce integration, automatic payment, replicating websites, e-wallet, e-pins, and many more.

Infinite MLM Software has the following features:

  • Easy to operate
  • Customizable
  • Fast, secure and reliable
  • Multilingual
  • Multi-user management
  • Genealogy tree, etc.

  • Epixel

Epixel is another network marketing software that helps you launch your network marketing business and grow 10x faster using its intelligent workflow automation module. It is a fully-featured, truly customizable solution.

Epixel software combines your brand-specific requirements with scalable features for multi-level marketing management. Epixel MLM Growth Platform enables you to manage customers and teams quickly while also tracking sales.

Epixel has the following features:

  • Bonus, Loan & Advances Management
  • Inventory Management
  • Payment Gateway Integration
  • Performance Management
  • Lead Management
  • Commission management, etc

  • MLM Solution Hub

MLM Solution hub is basically an MLM product supplier, which also makes people aware of the best company having stability in the market. Multi-level marketing companies can avail its wide range of product and services.

MLM Software hub has the following features:


  • Hybrid MLM

Hybrid MLM is a customizable MLM Software that skyrockets the growth of any multi level marketing business. It is a web application loaded with features through which businesses can keep a complete tab on its down lines and commissions.

Hybrid MLM software has the following features:

  • Open source Laravel framework
  • Flexible and Module Theme
  • Seamless Configuration Manager
  • Build-in Menus with Privileges
  • Superior Mail System
  • Drive Module

  • Global MLM

Global MLM software helps start MLM business with customized products and services. This solution is integrated with software like Codeigniter, Mongo Database, and Solar technology to handle millions of users with no downtime. They offer the best hosting services to help you make your presence global.

Global MLM has the following features:

  • KYC management
  • Invoice generation
  • Shipping management
  • Member management
  • Ads management
  • Crypto payment

FAQs

  1. Is network marketing a good career?

    Presently, there are so many companies whose business model is based on network marketing. Some of the biggest examples are Avon, Amway, Herbalife, and 4life.
    If you are good at building and managing large contacts, then network marketing is a good career option. In this job, you are your own boss and employee. It’s perfect for people who can’t go out for work.

  2. Is network marketing a good idea?

    Every experience teaches you lessons for life. Similarly, network marketing is good because it helps enhance your selling and negotiations skills. It lets you make quick money by selling products directly to people in your network and convincing them to join your multi level marketing program.

  3. Is network marketing easy?

    Starting a career in network marketing isn’t difficult. You can become a network marketer with a small investment and a competitive mindset. MLM is a form of business in which you can make money by working from home or anywhere. All you need to do is sell products and refer and recruit new people to the same model.

  4. Why choose network marketing?

    You can choose network marketing as a career because it helps you earn money by working from home by leveraging your contacts. It enhances your skill sets and helps you make more money by selling products person to person and onboarding new members to the distribution program.

  5. Does network marketing make you rich?

    Network marketing makes you rich by money and by skills. It provides people with the opportunity to learn how a business operates and prepares them to become entrepreneurs. If you have an extensive network of contacts, you can sell the products to them and make a lot of money.

  6. Is networking marketing legal?

    Multi-level marketing is legal as long as it conforms to disclosure of rules and provides clients with a tangible product ‌ to sell and earn money. Multi level marketing schemes can help in making quick money, but you need to be aware of fraud MLM schemes.

  7. What is the future of network marketing in India?

    By the end of 2021, we can expect the network marketing industry to be worth INR159.3 billion, and INR645 billion by 2025. We may easily conclude that network marketing's growth in India is highly promising.

  8. What is a network marketing business?

    A business model based on person-to-person sales of a product or service is known as network marketing. It entails assembling a team of individuals who can pitch products to a diverse set of potential clients. The MLM scheme allows you to make money through direct selling and by adding new members to the scheme.

  9. What is MLM marketing?

    MLM, also known as multi-level network marketing, is a form of pyramid selling, in which the MLM company’s revenue comes from a group of non-salaried workforce who sell the company’s products. And the participants’ earnings come from either through commission on direct selling or by recruiting new members to the distribution network.

  10. What is MLM business?

    MLM business is related to person to person selling. Such businesses bring onboard people who can buy their products at discounted rates and sell those further among their contacts. The MLM business profits through higher conversions, while the distributor earns margin on sales.

  11. Is network marketing good?

    Genuine network marketing schemes can make you rich but ponzi schemes are not worth your time. Look for a profitable MLM scheme that allows you to earn extra income and grow in your career.

  12. What is Multi-Level Marketing?

    Multi level marketing is the practice of direct selling where a person earns commission by selling products or services on behalf of a company. Participants earn commission on every sale as well as the conversion done by any person whom they bring onboard.

Related Categories: MLM Software | Marketing Automation Software | Online Reputation Management Software

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