What is Networking Business?
Network Marketing, also known as Multi-Level Marketing (MLM) is a legitimate business model that uses direct selling and relationship referrals as a method of selling a company’s products or services. In a typical networking model, individual associates (often referred to as distributors) essentially contract or act like a franchisee to the parent company and are paid a commission based on the volume of product or services that are sold as a result of their own organisation’s efforts.
To fully appreciate this home-based business opportunity, we encourage you to look at it from the perspective of both the company as well as that of the business operator.
Why Would Companies Choose to use the Network Marketing Distribution Model?
Just like any other company that sells goods or services the ultimate goal of a network marketing company is to make sales and increase its customer base. In a traditional manufacturing company who sell their products to the general public there is normally a large amount of costs associated with advertising and distributing their product (ie the middleman is responsible for a lot of the cost), before it is then sold at a retail outlet who again add a profit margin.
Instead of using the traditional method of manufacturing and delivering their products, MLM companies choose to bypass the middleman, selling direct to the customer. They use referrals and a word-of-mouth approach to develop their customer base as opposed to a large advertising budget and as such the money that would normally go to the middleman and advertising can now be used to reward business operators (distributors) a commission for helping the company to make a sale.
There are a number of reasons why many companies are now choosing to use this increasingly popular business model. Firstly, it allows start up companies to build a customer base through referrals without having to try to outspend their competitors advertising budget. Essentially network marketing levels the playing field and allows small businesses the same opportunity as their competing international heavy weights. It also allows the manufacturing company to build a relationship direct with their customers creating better customer satisfaction and loyalty. Selling direct to the customer and bypassing the middleman also helps the customer to save money (without compromising quality), which additionally makes their products more appealing.
Robert Kiyosaki explains Network Marketing: