December 8th, 2007
MLM: AN OVERVIEW OF AN EXCITING INDUSTRY An Introduction to Network Marketing By Jeffrey A. Babener
Network marketing - also called multilevel marketing (MLM), person-to-person marketing, and one-on-one marketing - is a form of direct selling. You already know what direct selling is. Avon, Tupperware, Mary Kay, Fuller Brush ... these are just some of the direct selling companies that have been household names for decades.
Direct selling companies market goods and services through networks of thousands of independent distributors. These distributors either buy products from their companies and then resell them to consumers, or they sell products on behalf of their companies for a commission.
Network marketing gives direct selling a new spin. In both types of companies, distributors make money by selling products directly to consumers. But in network marketing companies, distributors can also make money by building their own sales organizations and receiving commissions or bonuses on the sales generated by the distributors in the organizations. They build these sales organizations (often called "downlines") by recruiting new distributors, and helping those new distributors recruit other distributors, and so on.
Let's say Distributor A recruits Distributor B, Distributor B recruits Distributor C, and Distributor C recruits Distributor D. In a network marketing company, Distributor A receives a commission on sales made by Distributors B, C, and D. The term "multilevel marketing" springs from the fact that distributors receive commissions on multiple levels of their organizations. Most direct selling companies today are structured this way.
Much of the power of network marketing springs from the fact that most people tend to seek advice about products, services, and even business opportunities from their friends and relatives. Moreover, they generally trust that advice. In fact, a poll by the Roper Organization revealed that the advice of friends and relatives carries even more weight than the advice that comes from strangers with impressive credentials. The poll showed that for every person who seeks financial counsel from a financial planner or stockbroker, three go to friends and relatives for advice.
Network marketing allows people to put that trust to work in a positive way that can improve the lives of those who give the advice, as well as those who take it.
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