Network marketing is an extremely effective way of marketing. Through this form, many businesses have been able to boost sales. Individuals can generate income not only from their sales but also from the performance of their recruited team members.

So, what exactly is network marketing? Let’s find out with Thimpress through the article below.

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What is Network Marketing?

First, let’s find out what network marketing is. Network marketing is a long-standing business model developed to bring the most optimal sales efficiency.

In general, it is a form of business with many layers in which the buying, selling, distributing, and advertising of products/services are carried out by completely independent individuals. They can be both customers and distribution partners for the company. There are three types of strategies commonly used in this model: generating potential customers, recruiting, and managing.

For example, initially, you are a buyer of company A and you feel that A’s products have great potential for business, so you decide to become a distributor for that company. That is, you will promote and invite others to buy the product. Not only do you sell, but you also convince customers to become your “subordinate” distribution partners. They continue to promote and convince others to join.

Just like that, a network marketing is formed. Participants in this distribution system earn income from their own sales and commissions from the sales of their “subordinates”.

This model often causes a lot of controversy and mixed opinions. Some people consider it a good business opportunity, allowing those with small business skills to earn additional income. Besides, there are people who do not understand what network marketing is and have been taken advantage of.

Therefore, the model has also been criticized for its potential to become a form of fraud or an opportunity to make money based mainly on recruiting more people instead of on the real value of the product/service. Some countries have introduced regulations and laws to control the activities of network marketing companies to ensure transparency and protect participants.

What is the history of the network marketing industry?

After understanding what network marketing is, you should also learn about the history of this model. Network marketing was born in the 40s of the 20th century in the US and went through many different stages of development, which can be divided into 4 stages:

From 1945 to 1979

This is considered the germination stage of network marketing. At this stage, it has not been officially recognized. There are quite a few companies doing business with this form with unreasonable regulations. However, legislators do not care, and there are no documents regulating it.

From 1980 to 1989

At this stage, people have defined what network marketing is, it also began to be supported by the government. There are more companies that decide to choose this model for business. However, the obstacle is that it is not yet popular with the public because it is quite new.

From 1990 to 1999

This is considered the development stage of the network marketing model. At this stage, the network marketing model is widely popularized to the people, officially becoming a real business model and being responded to by many people.

From 1999 to present

Starting from 1999 until today, what is network marketing is widely known, the network marketing model has developed strongly and spread globally. It appears in many different countries.

Characteristics of Network Marketing

In this section, we will learn in-depth about the characteristics of network marketing. This model has the typical characteristics that you need to know including:

This model is a low-cost marketing method with the purpose of increasing the retail sale of goods and services. It is really effective in consuming products.
Network marketing is operated and implemented by building and utilizing a network of participants at many different levels. Each participant is a distributor and can also be a consumer.
Not necessarily having a fixed sales point is also a prominent feature of network marketing. Sales can take place directly at the place of residence, workplace, or any location suitable for sales.
Network marketing participants aim to diversify income sources. In fact, participants have many ways to earn income, such as bonuses, commissions, or many other benefits from their sales, as well as their “subordinates.”

Network marketing is an effective sales method. It helps businesses consume products without spending too much money investing in things like distribution channels or sales staff. Companies doing business in this form of network marketing can be the units that directly produce products for sale, but they can also be organizations that redistribute products from other manufacturers.

What is the role of Network Marketing?

It is an undeniable fact that network marketing has existed and developed for many years, which proves the role and benefits it brings to businesses that apply this model. So what are the roles and benefits of network marketing, let’s find out together.

The first thing to mention is the savings ability of this model. The network marketing model helps companies save maximum advertising costs when they have successfully built a network. In addition, companies that apply the network marketing model can also save costs such as transportation, rental space, etc.

In addition, because there is a direct distribution network to users, the products are more reliable. This is obvious when the people who introduce the product to you can be your acquaintances.

Network marketing is also considered a solution to help customers buy products directly from manufacturers, minimizing the situation of buying fake or poor-quality goods.

Finally, it is a method to increase retail sales in an amazing way. This is beneficial for businesses when they can earn huge profits.

How does Network Marketing work?

When choosing a form of network marketing, it is very important to understand how it works.

Basically, we can understand that it operates on a hierarchical network model, in which participants can earn money from selling the company’s products or services and building their own network of downline distributors.

Specifically, companies following the network marketing model will create sales ranks. Those who join the network will be encouraged to recruit their own network.

Based on this model, those who create their own network (upline) can earn money on their own sales and on the sales of those in the network they create (downline). So on, the lower levels continuously grow, contributing commissions to higher levels.

Thus, the income of those participating in network marketing will depend not only on selling products but also on recruiting more members. Those who come first will have an advantage in terms of commission benefits.

What are the types of markets in network marketing?

Network marketing operates through different business structures. Here are some of the most popular types:

Single-tier Program

The first form that you need to know when learning what network marketing is a Single-tier Program, also known as one-level network marketing. This is a form that you can join and do not need to recruit new people in your network. Your revenue will depend entirely on your sales.

There are affiliate programs that are willing to pay you to be able to drive traffic to their channels. Single-tier Network Marketing also includes pay-per-click (PPC) or pay-per-lead (PPL) affiliate programs.

Two-tier Network Marketing

The two-tier Network is a little different from the above in that it will require some recruitment, but it is not entirely dependent on it.

Your income is still based on your direct sales (or the traffic to your website that you generate). In addition, you will have additional direct sales or referral traffic generated by the distributors you choose to work with.

Multilevel Network Marketing

Some direct sales organizations use multilevel marketing to encourage existing distributors to recruit new distributors in exchange for a portion of their sales. The recruited people are the distributor’s “downline.” Distributors also make a profit by selling products directly to customers.

Forms of Network Marketing

Network marketing comes in several forms. Each has its unique structure and earning potential. Here are the main forms:

Classification by scope of implementation

Based on the scope of territory and geography, network marketing can be divided into two types:

– Network marketing within the country is a form of network business only within the territory of a country. That is, the participants in the multi-level sales system live in the same country.

– Network marketing within the international scope: the multi-level network is developed in many different countries. Goods will be offered and distributed in many territories.

Classification by nature

This is an important part to support you answer the questions raised at the beginning of the blog. We should not equate legal network marketing with illegal network marketing. Businesses also need to pay attention to this to avoid the law “visiting them”!

– Disguised network marketing is a form of multi-level marketing aimed at illegal profit. What is illegal? These are multi-level networks that require people who want to participate as “subordinates” to pay for a product even if they do not want to buy it or have to deposit and pay to join the multi-level network. In addition, illegal network marketing also provides false information about the nature of the work as well as the quality of products/services to convince customers to buy products and join the network.

– Genuine network marketing is a form of multi-level marketing that complies with the law and does not profit through illegal multi-level marketing activities.

A few notes when choosing Network Marketing

Not everyone is patient enough to learn about network marketing, leading to many failures when applying this business method. Here are some important notes when choosing Network Marketing:

Don’t hang around with existing relationships

In reality, you should not market to family or friends around you because this is an outdated way of doing things, unintentionally causing many people to have a wrong concept about network marketing. Instead, you need to reach out to wider relationships outside to find potential seeds.

Develop relationships instead of taking advantage

Most people think that Network Marketing is just taking advantage of relationships. However, this is only true for those who do Network Marketing without expertise or without a long-term vision. They will only want to exploit existing relationships to gain benefits for themselves.

In order to find real talents, Network Marketers are encouraged to operate more professionally. They need to develop to become real sales and recruitment experts, not just struggling with familiar relationships. Therefore, Network Marketers need to develop relationships over time, long enough to be able to recognize who has potential.

Don’t miss out on potential seeds

You must always be mentally prepared so that the “seeds” you are holding can slip away from your grasp at any time. They can move on to other networks or businesses if they are not respected or recognized for their abilities. Time will help you learn to see people accurately, so don’t hesitate when you discover any potential individuals in your sights.

Create a list of loyal individuals

In addition, you should also list the new individuals you find. While explaining to them about the working model and the commission policy, observe carefully their attitude. Remember that people want to be helped, not taken advantage of. Develop a relationship based on mutual support. That is the most basic step to build loyal individuals for you.

So, what is the warning for those who want to participate in the Network Marketing model? You need to avoid profiting by forcing people who want to join the network to pay money or buy products they do not want. If you do not comply, you will face legal punishment!

Some examples of successful network marketing

Here is a list of some companies that have successfully applied network marketing:

Tupperware: This is one of the most famous multi-level marketing organizations in the world. The brand was founded in the US in 1938 and is associated with its entire product portfolio – plastic food containers. Every minute, about 40 parties using Tupperware products are held around the world.

Amway: Is the world’s largest network marketing corporation, with revenue of about $8.5 billion in 2020. Since its founding in Michigan in 1959, the company has grown to more than 3 million representatives selling health, beauty, and home care products in more than 100 countries.

Herbalife: Is a multi-level marketing company that sells dietary supplements. The company was founded in 1980 in California and today has millions of independent distributors worldwide.

Conclusion

The above article by Thimpress on what is network marketing has summarized the aspects you need to know about this model. Hopefully, the article has helped you understand more about network marketing.

What is Network Marketing? How does It Work & Examples