Are you exploring ideas to create an alternate source of income? Or are you looking to earn a livelihood? If your answer to any of those queries is YES, are you ready to invest some time and effort into starting a business? If again your answer is YES, Multilevel Marketing can be the right solution for you.
Multilevel Marketing (MLM), also called Network Marketing or Direct Selling or Referral Marketing, is a type of retail method seen as the future of business in the 21st century.
Multilevel Marketing business can help you to attain financial freedom and become an entrepreneur. It has been around in India for more than two decades now. Focusing consistently and putting in smart efforts have enabled many across the world to become millionaires. This article discusses the working process of a Multilevel Marketing Business.
The Onset of Pandemic Saw MLM Come Into Limelight
The onset of the deadly Covid-19 pandemic saw the economy recede further. It saw an increase in the unemployment crisis. Most industries struggled to sustain their growth and revenues. They were forced to lay off their employees and compelled to ask them to take a salary cut.
When most industries had tough times to keep their operations going, the Network Marketing industry stood out. It saw the situation as an opportunity. It took the online route and increased its eCommerce activities. MLM companies leveraged the advancements in technology and the affordability of the Internet.
Tech-savvy consumers are hooked on the Internet more than ever before. They were happy to compare the features and prices of products before placing their online purchase orders. Further, they were delighted to get their orders delivered right to their doorstep.
Just imagine – How consumers were confined to their homes due to the frequent lockdowns and were unable to buy their daily needs, essentials and other goods! How convenient it became to them to place orders with a Direct Selling company! And it also enabled the Direct Selling companies to grow their sales and revenues.
Government Initiatives and Regulations that Boost the MLM Industry
The Direct Selling industry supported the government during the pandemic with substantial revenues. Further, the industry was able to bring down the unemployment crisis by providing self-employment opportunities. It provided livelihoods to millions who lost their jobs during the pandemic. It showed many to attain financial freedom and become entrepreneurs.
The government was faced with the problem to revive the receding economy. The government was faced with the problem to sort the unemployment crisis. To tackle the economic crisis and unemployment woes, the government initiated several measures. It took steps to boost the industry at large. Its initiatives like Make in India, Skill India, Startup India, and Vocal for Local aimed to make India self-reliant.
Many who lost their jobs were looking at ways to sustain their livelihoods. Direct Selling was a good option, and also be self-employed. But many were hesitant in joining Direct Selling companies. At the back of their minds were the earlier days when many companies operated as MLM companies using the illegal pyramid business model. These companies duped innocent investors and vanished in no time.
However, today we are in a fast-transforming digital world where transparency matters. People are more aware of the steps taken by the government to safeguard the interests of people joining the Direct Selling business.
The government has drafted regulations and guidelines rendering companies that incorporate the pyramid business model as illegal. The government has also made it mandatory for companies to register with a governing body and have a permanent office address in India.
Now, people are more comfortable in joining a Network Marketing company. It has shown them a way to attain financial freedom and become entrepreneurs.
What is Network Marketing?
Before we delve into the working process of a Network Marketing business, you need to know what a Network Marketing business is all about.
Network Marketing is about person-to-person or door-to-door sales. Network Marketing is a type of retail in which the business strategy involves a multilevel structure. Network Marketing is a business model where people sell products directly to end consumers.
Network Marketing does not involve any intermediaries or retail stores between the Direct Selling company and the consumer. Direct Selling companies partner with salespeople, popularly known as Sales Representatives or Direct Sellers or Network Marketers, not directly on their payrolls.
Direct Sellers earn attractive commissions for the sales executed by them. Direct Sellers are also incentivized lucratively for recruiting more salespeople in the company’s sales network placed below them – known as the downline.
Your income as a Direct Seller does not stop here. You also earn a percentage of the commission on the sales made by your downline and their downlines – this income is popularly known as residual income. In the section ahead, we will see the working process of a Network Marketing business.
How the Network Marketing Business Model Works
Network Marketing that incorporates the MLM business model is the most risk-free business that you can start. It is one of the safest business models.
The Network Marketing business depends majorly on the number of participants in the sales network. Its MLM business model works at different levels. Network Marketing comprises three main entities – the Direct Selling Company, the Direct Seller, and Prospects or Consumers!
- The process begins when the Direct Selling Company hires salespeople, popularly known as Sales Representatives or Network Marketers or Direct Sellers, to sell their products or services.
- Next, the Direct Selling Company encourages its Direct Sellers to recruit more salespeople.
- For every product or service sold, the Direct Selling Company pays a commission to the Direct Seller.
- For every salesperson recruited, the Direct Selling Company incentivizes the Direct Seller.
- The salespeople recruited by the Direct Seller are placed under them in the company’s sales network. It is known as the DOWNLINE of the Direct Seller.
- The Direct Seller then becomes the UPLINE for all the salespeople recruited and placed under them in its sales network.
- Further, the Direct Seller also earns a percentage of the commission on the sales made by their downline and downline’s downlines. This income is called residual income. It is an income that is earned without any direct efforts but the efforts of the downline.
Some companies that incorporate this deep-layered Multilevel Marketing business model include Amway, Herbalife, Qnet, etc. Let us now try to understand the business putting you in the picture!
When you join a Direct Selling Company, you will be referred to as the Direct Seller or Distributor or Network Marketer.
You then sell the products or services of the company. You are not directly on the company’s payrolls, but you earn an attractive commission for every sale you execute.
Your company then encourages you to recruit more Distributors. These Distributors are placed under you and called your downline.
Once your downline and their downline start their sales, you also earn a percentage of their commissions. You earn this income without any effort from your side. It is known as your residual income.
Depending upon the income you make, your Direct Selling Company ranks you. For example, in some companies, the ranks are Silver, Gold, Diamond, etc. The higher the rank, it means the more money you are making!
Stages in a Network Marketing Business
Now that you know how the Multilevel Marketing business works, you need to know its stages.
Stage-01: The Joining Stage
An existing Direct Seller who is already in partnership with a Direct Selling company will always be on the lookout to expand his sales network.
The existing Direct Seller will approach you – either the Direct Seller is a known acquaintance, or you are one of the prospects generated via a lead generation process.
Once you are comfortable and like the business plan and made up your mind to join, you will sign an agreement contract with the company whose product you will sell.
Most of the companies will ask you to buy a starter kit to demonstrate or showcase your products and distribute brochures to your prospects and customers.
The Director who recruits is called your sponsor and is your upline.
On joining officially, you will be given training by the company or your sponsor. It will cover details about the products or services, their prices, and methods of selling them.
Further, you will also get training on the ways to recruit and develop your sales network.
Stage-02: Sales & Marketing
When you are in this stage, you will essentially focus on two things. Firstly, you will buy a few products for self-consumption for your family. Or you may decide to buy them periodically. It will enable you to receive discounts and save on your expenses.
Secondly, you will introduce your company products for selling to your close acquaintances – friends, colleagues, relatives, etc. It will boost your sales volume and earn you an income via commissions from your Direct Selling company.
Stage-03: Growing Your Sales Network
This stage is about recruiting salespeople in your sales network, i.e., your downline.
As you get going with selling products or services of your Direct Selling company, you will also meet many people. The people you meet will either be known to you, referred to by your customers, or leads generated by you using different online digital marketing strategies.
When selling and meeting people, you will now focus on recruiting salespeople in your downline. It will enable you to develop and your sales network.
The growth of your sales network and the network under them enables you to start getting incentives and higher discounts. A good sales network as your downline will ensure a substantial residual income in the times to come.
Conclusion: The Network Marketing business is easy to run and most cost-effective.
The government of India boosts the Direct Selling industry. The government has drafted resolutions that safeguard the interests of investors considering collaborating with Direct Selling companies.
There are no criteria to join a Direct Selling company. Anyone can join a Direct Selling business regardless of their age, gender, qualification or experience.
Direct Selling has recently been introduced in academics. The Indian Direct Selling Association (IDSA), in collaboration with the Shoolin University, offers a PG in Direct Selling starting the academic year 2021-22. It is now a viable career option for those aspiring to become entrepreneurs. Now that you know what Network Marketing is and know the working process, it will become easier for you to step in and start your business and rock the Network Marketing world!
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