Some people love it. Some people hate it. Most don’t understand it.
Like it or not, this wildly popular business model is here to stay. And when combined with quality products and/or services, it’s really hard to beat.
So what is network marketing exactly?
Network marketing is a method of selling and promoting products that utilizes independent distributors who are paid a commission on all of their sales.
The incredible thing about this model is that independent distributors are not required to stock products. That is if you’re with a quality company.
Ask any marketing pro, or any financial company who acquires other companies, and they’ll tell you that subscription based services are dynamite. Most network marketing companies target this model by offering steep discounts to customers who agree to order on a monthly basis. This means distributors continue to make money.
“But I’ve heard that network marketing companies bloat the cost of their products in order to pay their distributors.”
Sorry to break it to you, but there’s price bloat in all products in all industries. Let’s look at a real world example…
IBM Business Partner
An IBM Business Partner is a company who markets IBM equipment, software and services. It goes like this:
- IBM provides hardware, software products & services.
- These products are sold to a distributor for around 40% off list price.
- An IBM Business Partner purchases from the distributor at 30% off list.
- The customer then pays full price (unless offered a discount).
- A sales rep at the IBM Business Partner is paid commission for sales.
As you can see, there is a large margin built into products to allow for distributors and resellers to be paid. Apple has their products manufactured in China. You don’t even want to know what those shiny new iPhones actually cost to make. But somebody has to foot the bill for all the cool, hands-on Apple stores around the globe!
Removing the Middle Man
How is the network marketing model different than the examples above?
Points 2 and 3 are removed.
The markup typically used to pay distributors, resellers and build retail outlets is now absorbed by the company and their independent distributors.
Abolishment of Marketing Costs
Another cost factor eradicated by this model is marketing.
Did you know a Hollywood studio such as Paramount or Warner Brothers typically spends 50% or more of the film’s budget on advertising? Read about it here. If the latest Marvel hit costs $300 million to make, the studio then has to shell out an additional $150 million in advertising costs!
According to this report, Proctor and Gamble spends 4.6 billion in advertising each year. This would pay 92,000 people a $50,000 a year salary.
In the world of network marketing, independent distributors not only handle the selling of products, but the majority of marketing too. The millions spent in advertising by other companies is paid directly to the independent distributors themselves. Genius.
Doesn’t It Make People Abuse Friendships?
A common gripe about network marketing is that people abuse their friendships. Things feel “slimy.”
But just like you can find uncouth sales reps in every business, it’s not the business model to blame. Anyone who abuses friends to sell, probably treats the same friendships selfishly in other ways.
As Perry Marshall has wisely stated, the only time sales is slimy is when pushing products on people they don’t need. When someone is selling a product that could make someone’s life better, this is more of a moral obligation.
Network Marketing Management
Ask any successful network marketer, and they’re going to tell you how important customer followup is. If you don’t stay in touch with people, they end up going inactive. That means a lower monthly check. Fortunately, Follow Hook can help you manage your downline while cutting down on your to-do list at the same time!
Following up with Prospects
Are you wondering how to follow up with prospects as a network marketer? The key is to define your USP, niche down and connect with people. Show them how you ended up in the same place they are. Don’t just sell. Deliver valuable information, but not too much info. Save killer training for your customers. Show prospects that you have what they want, and that signing up with you is the way to go. Manage your MLM business with a new level of personal attention!
Find the Right Fit
There’s no arguing it: If you want to work from home, find a network marketing company who offers quality products with a solid track record, and then dive in!
And when you do, remember to use Follow Hook for your customer followup needs! Get our free CRM tips below and receive a coupon for 25% off your first year!