by Rohini Erram

Created on: July 26, 2008   Last Updated: July 28, 2008

Definition
What is Network Marketing?
Network Marketing is defined as a Business system in which a product or service is offered to a consumer through a network of individual distributors who are partnered with each other in a profit sharing basis.

Network marketing can be broadly categorized in two different types

Multi-Level Network Marketing (MLM network marketing) - Money flows from bottom all the way to the top of the organizational structure. Distributors in this type usually make less money in the beginning. Each distributor personally sponsors relatively less amount of people which cumulatively creates more wealth, stability and a residual effect.

Top Tier Network Marketing or Direct Sales Money only flows in one or two levels. Distributors in this type make larger amount of money upfront with each sale they make and each new distributor they sponsor, however they need to keep on sponsoring new people personally to keep on earning the same amount.

Some examples of MLM are Amway Global, Herbal Life, USANA, and Pampered Chef. Top Tier market is dominated by companies like Wealth Masters International, CarbonCopyPro and a lot of Individuals like the founder of Magnetic Sponsoring, Mike Dillard.

Negative Image of Network Marketing

Here are some common reasons.

Most people do not perceive it as a business opportunity.
Most companies providing this opportunity go bankrupt within 5 years leaving their distributors stranded.
People take advantage of people (money-wise) in MLM business.
Most MLM business opportunities are actually a scam or a pyramid-scheme which involves only money without offering any products or services.
Most people consider their friends and family as MLM leads and try to shove the opportunity down their throats without pre-qualifying them.
Some people over promise and under deliver their MLM home business.

How can Network Marketing Business work for a small business owner?

Let's first understand why a small business owner should consider a network marketing business opportunity.

Network Marketing can be compared to a traditional business on following points

Both have a product or a service which has its own value apart from the opportunity itself.
Both have a distribution chain traditional business distributes products through a sales team which is replaced by a network of business owners in network marketing
Both get paid on performance and not position. Higher the product/service sale higher the profits
Both require sincere effort and both require ongoing expense and investment.

Almost all companies now offer their opportunity over the internet and network marketing has been revolutionized by this move. Generating network marketing leads has never been easier because according to statistics by Google 2 million people search for business opportunities online every week.

An E-commerce network marketing business opportunity promise the following:
Low start up costs
Low business expense and low investment
A business coach and mentor who guides you
No overheads like office expenses.
No employees but a group of business owners - this is the USP of MLM Business.
Low risk since capital and time involved is less
Higher tax benefits can show some personal expenses as business expense (consult your lawyer).
Franchise like business model which is the most successful business model in the world.

Knowledge is power and getting the right information from credible sources can help a small business owner understand the opportunity and get started in the right type of network marketing business and make it big.

Learn more about this author, Rohini Erram.
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