Updated: Mar 26, 2020
Network marketing has become exponentially huge in the past few years with the MLM industry generating millions of dollars through independent business owners.
At some point of time, you may have been approached by a friend or someone in the family about an amazing new business opportunity that they have recently started and are doing fabulously well. They invite you to join but joining often comes with a price, an amount that you need to pay to sign-up for a membership fee or for a starter kit that may contain some products. You are then paid commissions for signing up other members and selling the products.
Network marketing, also known as multilevel marketing, is a business model based on a pyramid structured network of people who sell a company's products. The people involved in this network often refer to themselves as independent business owners (IBO) and treat it as their own business. These IBO's are not salaried employees and get paid on a commission basis only. They make commissions when they sell the products to new recruits and also when the new recruits recruit others by making a sale. It forms a chain and essentially a pyramid structure where the IBO's at the top make the most money.
However, network marketing is a legitimate business and is not just a pyramid/ponzi scheme where people invest money and recruit others to invest money on which they get returns and make money. What makes network marketing legal is the presence of a product. A real, legitimate product is provided through network marketing, These network marketing companies sell their products only through their IBO's and do not make use of any well defined channel of trade. They encourage their IBO's to sell the products to their friends and families before adopting the method of cold selling.
On the other hand, MLM scams do exist and it is always advisable to know the warning signs before you sign-up to be a part of any MLM company. The most common sign of any MLM scam is where they have no product or the products are of very low quality. They may also make wild and unproven claims about their product. These companies often push recruiting other members over the sale of their product. They may adopt high pressure sales tactics to sign you up as quickly as possible. They try to prevent you from studying the company, avoid questions and do not give you time to sleep on your decision to sign-up by saying that you may be missing out on the opportunity.
A good opportunity should be a good opportunity regardless of when you join it. Also, a sign of a good MLM company is when it focuses more on their products and delivering value to the consumer rather than simply recruiting members to make money.
Network marketing can be a great opportunity for you or it could be your biggest regret. The truth is that it is not meant for everyone and it is definitely not a get rich quick opportunity. Although there are some advantages of network marketing. For companies, network marketing saves a lot of costs as they do not go through any wholesaler or retailer. Their advertising expenses are also quite low as most of the marketing is done through the IBO's. As far as IBO's are concerned, they can work from home and on their own terms. Those with a good network and strong selling skills will be able to succeed over time. It requires minimum investments upfront and does not require you to hold an educational degree. On the downside, reports also state that majority of the people lose money rather than make money through network marketing. This is often due to the fact that most people are unable to treat it as their own business and are not willing to put in the time and effort required. They do not believe in the products of the company. Also, there are a good number of MLM scams. If you do wish to work for a network marketing company, brush up on your selling skills and find a company whose products you love as that would incline you towards being more positive about it. Place more emphasis on the product and the value that it would bring to the customer rather than just focusing on the sale or recruiting. People are more inclined to buy products when they see the value in it.
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