What is multi level marketing? What is network marketing? How does direct sales fit in with these two marketing models? Which one is better to be part of? There is a need to clarify these terms or define them because of the negative connotations that has been given the industry of network marketing. During the mid seventies through the eighties all multi level marketers were met by resistance by their prospects, families, friends, co-workers, and employers. Literally anyone with a pulse had a reason to be on guard when a network marketer approached them.
Let’s start with multi level marketing. Gerald Nehra, a MLMIA Board Member and Direct Selling Specialist Attorney, defines multi level marketing this way, “where certain ranks of distributors buy direct from the company, and re-sell to lower ranks of distributors and to customers.” This form of distribution is not the norm any more. A sponsor or a sponsor further upline used to have an inventory of products they would direct sell to their product only customers with a markup and would re-sell to their distributors with a smaller markup in price so the prospect may earn money on the products they sell. This system required extremely strong willed people to make a profit and build a business from this model of marketing. This system relied heavily on direct sales to product only customers and down line distributors.
Network marketing uses a different tactic to marketing and is truly a network of marketers. Again, Gerald Nehra, a MLMIA Board Member and Direct Selling Specialist Attorney, explains the network marketing distribution model, “The more efficient distribution model is for the company to directly fulfill orders to the end user consumer. This method is now the norm, not the exception. So it may be accurate to say that companies structured that way do not have a multilevel form of distribution. But most of these companies still have a multilevel form of compensation.” Okay, Mr. Nehra gave the how product is distributed in each system. Multi level marketing is through direct sales from upper level distributors to lower level distributors. Network marketers use a more efficient distribution system from supplier to end user.
The distribution system still does not define a network marketer. Here is my definition. A network marketer offers a business model to another person where direct sales is taken out of the equation unless the distributor has product only clients. The business model incorporates a multi level form of compensation to all distributors in the network but each distributor is only responsible for the products they consume. The difference in multi level marketing and network marketing is the relationship between distributors. Multi level marketers sell to their sponsored distributors and network marketing distributors are only responsible for the products they consume. Again, multi level marketers rely heavily on direct sales and network marketers only rely on the products they consume.
So which system is best? Network marketing. Why? Well here is the question a network marketer may pose to you if you are interested in becoming a business owner. Do you like sales? Do you like selling products to family and friends? Ninety five percent of the population dislikes selling anything. Multi level marketing relies heavily on direct sales, so in multi level marketing you would have to sell to family and friends. Soon you would not have family and friends. In network marketing, you, the new distributor, buy products from your own store. With each distributor buying their own products the volume of sales grows among all the distributors.
The problem is that both systems need to sponsor new distributors in order to grow a business. The question arises, is this a pyramid? Gerald Nehra, the attorney explains, “By restating what is a single level income opportunity, and what is a multi-level income opportunity, we get to what is a pyramid: When the only way an independent contractor can make money with the company is by personally generating business volume, the company has offered a single level income opportunity. If however, the company offers two ways to make money – generate business volume – and optionally – find, (sponsor, recruit, refer) other independent contractors who generate business volume – the company is offering a multilevel income opportunity. The key is that the independent contractors are empowered to find, and are rewarded for finding, additional independent contractors. That is the very definition (legal definition) of “multilevel.” BUT - The “rewarded for” above, can only be an indirect reward based on the business volume of the second independent contractor. The reward can never be an immediate reward for just finding the additional participant. Such an immediate reward is pyramidal and illegal. In an illegal pyramid, the act of finding another participant is rewarded, based on the act of recruiting, instead of based on the business volume of the recruited person. Another shortcut definition of a pyramid – Rewarding a participant for bringing in another participant.” Alright George! But for you to explain a pyramid that way to your prospect when they ask, “is it a pyramid?” question, you would scare them away with that long winded explanation. Why network marketing is not a pyramid the answer is easy. Network marketing and for that matter, multi level marketing are not pyramids because the person you sponsor has the right and ability, if they so desire, to have their business become more profitable than the person whom sponsored them.
Ok then, we have answered what defines multi level marketing, network marketing and pyramids. What is the difference in attracting new distributors? Most multi marketing programs were built around direct sales and word of mouth. Attracting new distributors was the same. Invite people to your house or to the new prospects house to show the products and business model. Hope for sales and hope someone will share the same vision as you. Multi level marketers used promotional materials, cold calling, advertising, and whatever other method that was available to them.
Network marketers have a huge advantage over the multi level marketers of the past and that is da da! The Internet. The most powerful information moving platform the world has ever seen. FaceBook itself attracts 500,000 people a day with each person averaging twenty minutes on FaceBook. Huge! Larger than Google! Place ads on Face book and just have one thousandth of 500,000 people look at your ads and you have more people in one day attracted to your business than a multi level marketer in the eighties had in one year. So keep your family and friends your family and friends. Attract people that have the same vision as you and you will build a huge business.
Network marketing found his big brother, the internet, in the nineties. The two brothers will grow together and will become the number one form of marketing the world has ever known. Automobiles transformed the world, airplanes transformed travel, the internet is a real game changer, from marketing, employment, education, transportation, travel and just about anything else will be, if it has not already been, effected by the internet.
Don’t sit on the sidelines. The economy has changed. We are a serviced based economy. Most of our production has moved out of country. The cost of education will have our children in debt for years to come. Many jobs that we have counted on will never come back. The ability to earn big paychecks is dwindling. Time to do something is now. Find yourself a network marketing company. Build yourself an income where you will be able to pass it on to your children instead of passing on debt to your children.
Now you have knowledge of network marketing. Use it. Learn more about it. Do something now.
I am a network marketer with the Freedom Project. Find out more at www.miniofficeoutlets.com/gjr
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