Network Marketing: What is it?

June 1st, 2006 by Bill Perry in Network Marketing, Business, Marketing

This is the first in a series of articles dealing with Network Marketing. Here, I will be going over what Network Marketing IS and what it is NOT. Network Marketing is a marketing system and business model in which a company uses a sales force of personnel who are called associates, distributors and a host of other monikers.

There is a general amount of confusion in the public as to whether or not Network Marketing is the same as a Pyramid. The widely accepted definition of a Pyramid is an organization where all the people at the TOP of the pyramid make all of the money while the ones at the BOTTOM of the Pyramid do all the work. I submit that many of the world’s companies that user a corporate structure are Pyramids in structure.

So, to find a better definition of a Pyramid, we’ll ask the Folks at GreekShares. According to our friends there, a Pyramid is defined as follows:
In pyramids, commissions are based on the number of distributors recruited.
Most of the product sales are made to these distributors - not to consumers in
general. (1)

The notable difference between a Network Marketing/Multilevel Marketing company and a Pyramid is the fact that legitimate NM/MLM companies will not pay you a commission for recruiting someone. The only commissions that are paid are based on actual sales made. If you are looking at joining a company that claims to be a NM/MLM company, and promises to pay you exorbitant sums of money for recruiting someone, think very hard about joining that particular company. Check out all you can about the company. At the end of this article, I will put a few links you can use to research companies.

One resource for checking up on a company and products is the Better Business Bureau (BBB). The BBB tracks reports of customer complaints and how long it takes the company to resolve the complaints. This will not, however, tell you specifically about the company itself, only how the company handles complaints from customers. It may also just be a result of the complaining customer being in a bad mood that day.

In all honesty, Network Marketing isn’t for everyone. There are some people who will see just one negative article or report about a company, and shut down all future thought of joining that company. This is like some people who absolutely will not see a movie because a friend or relative told them “this movie SUCKS!”. What sucks for one person might be gold for another. Research all you can, then trust your own judgment.

Part of the promise of building an organization in a legitimate NM/MLM company is that you CAN recruit people into your sales team, depending on a particular company’s compensation plan. I will get very in depth into recruiting and compensation plans in future articles for this series.

In the next article, entitled “Network Marketing: Selling your Products and Services”, I’ll get into the nuts and bolts of the most important thing you can do for yourself if you are building a network marketing organization: Learning Your Presentation.

Take Care of Yourself and Others!

Business Research Resources:
New York Stock Exchange
American Stock Exchange
Hoover’s
Better Business Bureau

Reading References
(1) Pyramids and Multilevel Marketing Plans

Posted in Network Marketing, Business, Marketing |