29 November 2013
How to Explain Network Marketing in Detail
network marketing is basically an affiliate program with a continuity-based compensation plan and an incentive for referring other affiliates. That's how you explain network marketing in one sentence, but let's break it down:
First, what is an affiliate program? An affiliate program is a program that allows you to partner with the company, and become a reseller or referrer of their products and services in exchange for a commission. It would be like you selling Wal-Mart's goods and services, and them paying you a commission for that.
Network marketing allows you to "partner" with a parent company, and promote their products and services in exchange for a commission. Those commission are distributed through a compensation plan that typically rewards both the selling of products or the service (usually on a monthly continuity basis) as well as the recruiting of other affiliates (they are usually referred to as "distributors" or "consultants").
This is how network marketing is structured - it's a puzzle of getting paid for selling product as well as recruiting other product resellers. The balancing act that a network marketing company must complete is incentivizing the recruitment side without overemphasizing it. The reason being that the FTC (Federal Trade Commission) takes a negative view of companies that over-promote the business-opportunity, make-money by recruiting other biz-op seekers side of the equation. Any company they deem as doing so they label a "pyramid scheme". A pyramid scheme is network marketing with no product or service - it's just a compensation plan that recruits others into a pyramid. By attaching a product or a service to such a compensation plan, you now have a business that can legitimately promote a product AND a business opportunity at the same time. Voila!
Network marketing companies that offer products and services that are truly effective and pay out fairly on the basis of product consumption as well as rewarding the building of an organization (or a "downline") are totally legit. Many companies often get tarnished by over-zealous distributors that make exaggerated or outright false product or income claims. However, with a fair compensation payout and a quality product, network marketing can be a great way for an entrepreneur to get started in understanding how to develop a people-based organization.