Network Marketing, a type of retail method, is also referred to as Direct Selling or Referral Marketing or Multilevel Marketing. It involves salespeople selling products or services directly to consumers without any intermediaries in between.
The salespeople, commonly known as Distributors or Direct Sellers or Network Marketers, are used by Network Marketing companies to carry out their sales in person or via word-of-mouth.
The main idea behind the Network Marketing type of retail is to promote more Direct Sellers and grow the salesforce exponentially. The Direct Sellers earn commissions for their sales. The companies can increase their revenues by avoiding spending on costly advertisements and overhead costs.
Are you aspiring to become an entrepreneur but restricted due to a lack of funds in starting your business? Network Marketing can be a great way to get going at the earliest.
However, you need to know how to choose your Network Marketing company wisely after making an informed decision.
It would help if you collaborated with a Network Marketing company whose compensation plan appeals to you and is beneficial to you. This article discusses the different compensation plans that Direct Selling companies incorporate as part of their business strategy.
Factors to Consider Before Collaborating with a Network Marketing Company
Before applying or joining any company, you are likely to research the company and determine if its job description matches your skills. Similarly, when you think of joining a Network Marketing company, you need to consider a few factors.
The best thing about Network Marketing is that anyone can join it regardless of their age or gender and qualification or experience. Anyone can easily acquire the skills required to succeed in a Network Marketing business.
- When joining a Network Marketing company, you need to visualize how much time you can devote to your business. Network Marketing is not a get-rich-quick scheme. It will help if you put in dedicated and smart efforts.
- Before joining a Network Marketing company, it is always advisable for you to verify its existence and credentials. The company should have existed at least for five years. The company’s financial status should be robust to sustain itself in the long run.
- Before joining a Network Marketing company, you should know about the products or services it sells. It would help if you were comfortable and passionate about selling them. You should ensure that the products that the company offers are unique and of the highest quality.
- Before joining a Network Marketing company, you should be satisfied with its compensation plan. Ensure that the company incorporates the MLM business model that allows you to earn a residual income.
- Before joining a Network Marketing company, you should ensure that the company offers effective training and supports you with relevant printed materials, brochures, and sample products. You may verify it by talking to the Direct Sellers who are already registered with the company. You may even check with them if the company payments are timely.
Network Marketing can be a great source of income for someone new to the business who is passionate about the product. Network Marketing can also help you hone up your business skills or be an addition to your resume.
Beware of Pyramid Schemes
Unfortunately, Network Marketing has often been thought of as a pyramid scheme. Several instances have occurred when a company has operated as an MLM company but incorporated the illegal pyramid business model. These companies sprung up and vanished in no time. They duped innocent investors giving a bad name to the Network Marketing industry.
Pyramid business schemes are fraudulent schemes disguised as a Multilevel Marketing strategy. When a company incorporates the pyramid business model, it does not involve selling any real product or service.
The investing salespeople who join these companies make money solely by recruiting new members. These companies promise big returns in a quick time without doing anything! Therefore, you need to identify companies implementing pyramid business models and avoid them.
Compensation Plans of Network Marketing Companies
When you join a Network Marketing company, its compensation plan matters, the compensation plan is critical for the success of your business.
Most new startups design their compensation plans internally with basic finance knowledge. And they tend to consider just the basic profitability aspect visualizing the short-term goal. And perhaps that is their biggest mistake.
A company’s compensation plan is not just a payout; it is a nerve line to sustain their business operations. Therefore, companies need to consider key factors when designing their compensation plan to attract more investors into their network.
A good compensation plan has enough incentives and rewards for all – starters and senior leaders. A good compensation plan helps to excite the target audience to aspire and engage. A good compensation plan helps to fulfil the delivery of product consumption. And it helps to provide long-term career growth to the members of the network.
When joining a Network Marketing company, you need to choose the right company whose compensation plan is to your satisfaction. Compensation plans are either Single Level or Multi-Level. In the section ahead, we will find out the difference between the two.
The Comparison: Single-Level Vs Multi-Level Marketing
Single-Level Marketing (SLM) is a type of Direct Selling business model that does not require you to build a network of salespeople or build a team for this type of business. In Single-Level Marketing, your earnings are restricted to the commissions for the sales you execute.
Multi-level Marketing (MLM) is a type of Direct Selling business model that requires you to build a network of salespeople for your growth. In Multi-Level Marketing, your earnings include commissions on sales executed by you as well as incentives for recruiting new salespeople placed in the company’s sales network under you – known as the downline.
In Single-Level Marketing, you have the right to sell the company’s products. However, you cannot register anyone to give the company’s franchise to sell their products.
In Multi-Level Marketing, you not only have the right to sell the company’s products, but you can also register salespeople and give them the company’s franchise to sell their products.
Single-Level Marketing involves goods like food products, cutlery, cosmetics, health & wellness, etc. Consumers pay a high price for these items and may not require them again for a long time.
Multi-Level Marketing offers goods that are affordable and less costly. Goods offered by Multi-Level Marketing companies include daily need or monthly needed products like detergents, immunity boosters, wellness products, etc. And they are guaranteed to be repeat sales.
Single-Level Marketing mainly involves the selling of products or services of a company. The Internet and social media have changed the way Direct Sellers approach their sales. Earlier salespeople went door-to-door to make their sales. Now they leverage the usefulness of Facebook, Twitter, YouTube, Linked In, and other social networks to attract prospects. You can make a good earning via commissions, incentives, and bonuses in a Single-Level Marketing business model. But your earnings stop at the sales you make!
Multi-Level Marketing also includes sales, and you also earn commissions on the sales you execute. However, in a Multi-Level Marketing business model, your earnings go up substantially when you recruit more salespeople who are placed under you in the company’s sales network – popularly known as the downline. Your commissions for sales could be comparatively lower than in a Single-level Marketing. But you also earn a percentage of the commissions on the sales made by your downline and downline’s downline!
Is Multilevel Marketing Right for You?
Joining a Network Marketing company to have your own business is safe and affordable compared to starting any other traditional business. It shows you the path how to attain financial independence and become an entrepreneur. Anyone can join a Multilevel Marketing company.
There are no criteria needed to start your Multilevel Marketing business. You do not need to have any experience nor any hi-fi qualification. But it would help if you had a passion for sales. It would help if you had the interest to meet new people and make friends with them.
However, even if you do not have those skills, still you can acquire them even after joining a Network Marketing company. However, you should know if the Network Marketing business is right for you.
You need to ask yourself if you can put in the effort and become a salesperson in your quest to become an entrepreneur. You need to ask yourself if you have a robust sales plan, whether your friends or close acquaintances will accept your business, and you will be able to sustain it in the long run. You need to ask yourself about your income expectations from the business. And whether you take the monetary risk to dive into Network Marketing and devote enough time to it to succeed.
Once you are sure about your decision, you can go ahead in researching, shortlisting, and finalizing your Network Marketing company. But always ensure that it complies with all the government guidelines and regulations. And also, ensure that its compensation plan meets your expectations.
Conclusion: Single-Level and Multi-Level Marketing are similar in some ways. But advantage Multi-Level Marketing!
Single-Level Marketing involves a face-to-face or in-person marketing strategy – either in person or using online ways.
Multi-Level Marketing is a step further than Single-Level marketing – it compensates via commissions and incentivizes Sales Representatives for recruiting more salespeople. Multi-Level Marketing allows you to earn an income in a variety of methods, including a residual income.
It is always advisable for you to make an informed decision before joining a Multilevel Marketing company. You should always ensure that the company does not incorporate the illegal pyramid business scheme. You should ensure that the Multilevel Marketing company complies with all the government guidelines and regulations. And finally, the most important thing related to your income – you should know and be satisfied with the compensation plan of the MLM company.
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