Network Marketing Revealed

Network Marketing Opportunities

Network marketing opportunities (also called multi-level marketing (MLM)), direct sales, referral marketing, and pyramid selling is a term that describes a marketing structure used by some companies as part of their overall marketing strategy. The structure is designed to created a marketing and sales force by compensating promoters of company products, not only for sales they personally generate, but also for the sales of other promoters they introduce to the company, thereby, creating a downline of distributors and a hierarchy of multiple levels of compensation in the form of a pyramid.

The products and company are usually marketed directly to consumers and potential business partners by means of relationship referrals and word of mouth marketing.

Criticism Of Network Marketing

The Federal Trade Commission (FTC) issued a decision, in regards to Amway Corp. in 1979 in which it indicated that network marketing was not illegal per se in the United States. However, Amway was found guilty of fixing (by requiring "independent" distributors to sell at the low price) and making exaggerated income claims.

The FTC advises that network marketing opportunities with greater incentives for recruitment than product sales are to be viewed sceptically. The FTC also warns that the practice of getting commission from recruiting new members is outlawed in most states as "pyramiding". In April 2006., it proposed a Business Opportunity Rule intended to require all sellers of business opportunities, including MLMs, to provide enough information to enable prospective buyers to make an informed decision about their probability of earning money. In March, 2008, the FTC removed network marketing (MLM) companies from the proposed Business Opportunity Rule:

"The revised proposal, however would not reach multi-level marketing companies or certain companies that may have been swept inadvertently into scope of the April 2006 proposal."

Another criticism of Network marketing opportunities is that "Network Marketing organizations have been described by some as cults, pyramid schemes, or organizations rife with misleading, deceptive, and unethical behaviour; such as, the questionable use of evangelist discourse to promote the business and the exploitation of personal relationships for financial gain.

Another charge is "By its very nature, MLM is completely devoid of any scientific foundations.

Network marketing opportunities are also criticized by being unable to fulfil their promises for the majority of participants due to basic conflicts with Western cultural norms. There are even claims that the success rate for breaking or even making money are far worse than other types of business. The vast majority of Network marketers are recruiting MLM's, in which participants must recruit aggressively to profit. Based on available data from the companies themselves, the loss rate for recruiting network marketing is approximately 99%, meaning 99% of the participants lose money after subtracting all expenses, including purchases from the company. In part, this is because encouraging recruits to further "recruit people to compete with them leads to market saturation.

Setup:

Independent, unsalaried salespeople of network marketing, referred to as distributors, associates, independent business owners, dealers, franchise owners, sales consultants, consultants, independent agents, etc, represent the company that produces the products or provides the services they sell. They are rewarded a commission based upon the volume of product sold through their own sales efforts as well as that of their downliine organization.

Independent distributors develop their organizations by either building an active customer base, who buy direct from the company, or by recruiting a downline of independent distributors who also build a customer base, thereby expanding the overall organization. Additionally, distributors can also earn a profit by retailing products they purchased from the company at wholesale price.

This arrangement of distributors earning a commission based on the sales of their independent efforts as well as the leveraged sale efforts of their downline is similar to franchise arrangements where royalties are paid from the sales of individual franchise operations to the franchiser as well as to an area regional manager. Commissions are paid to network marketing distributors according to the company's compensation plan. There can be individuals at multiple levels of the structure receiving royalties from a single person's sales.

Available Network Marketing Opportunity