Unraveling what is Network Marketing/ MLM meaning?
Coming to the question of what is Network Marketing or Multi-Level Marketing (MLM), it is described as a business opportunity that involves a pyramid-like structure of people for marketing the products of the company. As part of this model, the marketers are paid in the form of commission. The commission depends upon factors like making a sale or their recruited individuals make a sale. In other words, Multi-Level Marketing- MLM meaning that this model works on the concept of recruiting non-salaried individuals, who are paid whenever they or a person recruited by them make a sale.
There are companies like Oriflame and Amway who use the network marketing business model. When defining what is MLM, it can be referred to as a system that works by a cycle of known individuals where the consumers are those who participate, their family members, their friends and other acquaintances etc.
Characteristics- Network Marketing Business
• Direct Sales
The network marketing companies do not use any distribution channels instead; the participants directly sell their products. As per the network marketing definition, the products are provided to the participants who are paid on a commission basis on each sale they make.
• IBO (Independent Business Owners)
The participants are referred to as IBO, as the process of network marketing makes the participants feel that they are promoting and advertising their own business.
• Hierarchical System
MLM meaning a system where participants are paid on a commission basis;
imagine, individual A recruits individual B under them; this means that individual A will be paid a commission when they make a sale and also a part when individual B recruited under them makes a sale. If individual B wants more money, they will recruit an individual C under them and so on. This chain of recruits is a hierarchical system what is MLM.
• Lesser Advertising
With direct sales comes a great advantage to the company that is relying less on advertising. All those who are a part of the business world would agree that personal contact has a more impactful result as compared to different types of advertisements, thus usage of MLM meaning that the companies using this method of marketing requires lesser advertising.
• Accountability of Participants
One of the merits clearly visible in the network marketing definition is that the participants earn more if they sell more. This means that each participant is themselves accountable to how much they sell and earn. Keeping the company always at the profitable end!
• Commission Pay- No Salary
As discussed above, this type of marketing provides a commission-based pay to the participants, thus the company is not liable to pay any salary to these participants. Although seemingly biased towards the company, this characteristic is a golden goose for the participants, as they are not limited to how much they can sell!
Network Marketing Examples
• Tupperware with revenue of approximately $2.26 billion is one of the oldest network marketing examples. Since the 1950s, the founder of Tupperware created an opportunity for women to earn money without affecting their household responsibility with the help of direct sales.
• Amway with its headquarters in Michigan sells health, beauty, wellness, home care and nutrition products. With revenue of about $8.6 billion has proven to be one of the biggest MLM examples.
Differentiating Between Pyramid Structures & Network Marketing
A Pyramid Structure is a business model where one gets paid to recruit someone new and there is no product involved. This business model has been regarded as an ill-practice, as it suggests taking advantage of friends and family to earn money. Companies that use this model tend to lure people into believing that they will earn in the future. Such a trick-like strategy is where the participant of the company is at loss.
A completely different yet similar-looking approach is network marketing, where there is an involvement of multifold effort that is based on the selling of products. This business model of network marketing results in a win-win outcome for all, where the company gets profits and sales and the participants get a commission.
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All in All
This was the complete article on what is network marketing business.