MLM business, or network marketing, began to conquer the Russian market back in the 90s of the last century, and still remains in trend, attracting new entrepreneurs to its ranks. Thanks to this form of sales, we distribute all kinds of additives, cosmetics, detergents, dishes, etc. According to the Direct Selling Association, 43.5% of the market is occupied by personal care products, 29%- products that promote a healthy lifestyle. 11.2%- clothing and accessories, 9.5%- household chemicals, 5% - household goods and others. But, despite the rather high demand for goods, and the growing turnover of companies involved in the network business, our attitude towards MLM is very ambiguous.
- What is attractive MLM business
- Why people do not like MLM: 3 reasons for distrust of business
- How to start a business from scratch in MLM
- How to choose the right company to work and start earning
- 3 tips to make money with network marketing
- Internet network marketing: the second wind of business?
- MLM business trends 2018
- How to develop a business mindset with MLM
On the one hand, hundreds of thousands of people come to the MLM business who want to earn money and build a career: at the end of 2017, 3.8 million people were engaged in network marketing. With another- Network Marketing is often avoided and often not seen as an opportunity to earn money, preferring a stable job with a stable monthly pay. The thing is that often people have no idea about the true face of network marketing. Let's try to figure out what MLM business is today, what positions it occupies in Russia, whether it has prospects and what awaits it in the future.
What is attractive MLM business
The name MLM comes from the English multilevel marketing, that is, multi-level sales, sales. Network marketing is a certain type of marketing of goods and services by independent distributors. Each of them can not only engage in sales, but also attract new partners, and they, in turn,- their own. Thanks to this approach, a “network” is formed, each member of which can receive interest both from their own sales and from the sales of people attracted by them. The bigger the distributor network- the higher his income.
Let's say you have a store that sells cosmetics.. You will be able to make a profit only when buyers come to you. opened - earnings will also depend on its attendance by customers. Network marketing will provide completely different opportunities. People themselves will order the necessary goods, buy them and distribute them among friends. It is for this reason that it is so attractive to companies that produce certain products. "Dinosaurs" of the market, such as Avon, Mary Kay, Oriflame, Amway do not have worthy competitors for the simple reason that their goods are often sold out almost immediately, even at prices that are many times higher than the "store" ones. Sales through stores are fraught with competition and unnecessary problems that can be solved through network marketing. The manufacturer does not need to spend money on advertising, rent of retail space and incur other expenses. But for networkers, a big plus is that companies not only earn money themselves, but also give everyone the opportunity to earn- those who love their products.
In network marketing, you can:
- have a free work schedule;
- get by with minimal financial investment;
make a career;
- create passive income;
- transfer the contract by inheritance or sell.
But despite all the advantages, not everyone manages to achieve success in MLM.
Millions on MLM: how American multi-level marketing differs from Russian
American MLM marketing differs from Russian only in the attitude of representatives of two nationalities towards it. Americans most often think of network marketing as a side job or second job. They are ready to devote some time to it, but not all their lives. If things are going well, and there is not enough time to manage a multi-level company, a few leave their jobs and are engaged only in MLM business. Some people can actually become millionaires through MLM. But this is only the top of the pyramid, at the bottom of which are thousands of less successful entrepreneurs.
In Russia, newcomers often try to put all their efforts and resources into a new business and constantly run around familiar and unfamiliar people, offering goods and trying to sell it at any cost. To build their own network, many lack the skill or desire. Beginners basically see only a system of bonuses and bonuses in front of them, plus the opportunity to buy goods cheaply.
Network marketing today, like any other business, requires a reasonable approach and a clear plan of action. And one more thing: if abroad the times of lawsuits against network companies are a thing of the past, and business has become completely legal and profitable, then in Russia the opportunity to encounter fraud still exists.
What is network marketing, what are its pros and cons? Which MLM business companies are popular for 2018? How to make money in the network business the first money?
Hello, friends! This is Alexander Berezhnov, an entrepreneur and one of the authors of the HiterBober.ru website.
Today, the network marketing industry is gaining a new wave of popularity, and the development of the Internet plays a significant role in this.
However, this concept is still controversial in society. Someone calls network marketing almost the only opportunity to open your own business without investments, others are sure that this is all a pyramid scheme, a scam and a hoax.
Some time ago, I myself was involved in network marketing and I know firsthand what it is. In this article, I decided to dot the “and” and reveal this topic from all sides, including taking into account my experience in this industry.
After studying this article, you will firmly decide for yourself whether it is worth doing an MLM business, what are the pros and cons, and also find out which companies are better to start in and why.
So, let's begin!
1. What is network marketing (MLM) and what is its essence?
I'll start with a definition and then expand on it and give examples.
For example, the production cost of ORBIT chewing gum ranges from 20 to 50 kopecks per pack of 10 pads. However, while the gum is on the counter in the store, its value increases by several thousand percent! It's all the fault of intermediaries - large and small wholesalers who sell chewing gum to each other.
But everything does not end there, because, as you know: advertising is the engine of trade and intermediaries spend a lot of money on advertising.
Fact
In large companies, up to 50% of the final cost of the product is the cost of advertising and promotion of the product.
Thus, we buy Orbita packaging for 20-50 rubles. Yes, this cost, of course, includes the manufacturer's own margin, but intermediaries also want to eat. So it turns out that the end consumer suffers, who overpays at exorbitant prices.
About a hundred years ago, people thought about the problem of unreasonable markups of resellers and intermediaries.
Network marketing idea
Make the process of promoting goods (services) more convenient, cheaper and faster. Remove intermediaries and expensive media advertising from the promotion scheme.
This can be done if the people themselves tell each other about the product of the network company, and their motivation will be the percentage that they will receive from the sales of the products of the MLM company.
But you won't earn much just on interest. Therefore, multi-level marketing allows you to build your own business by creating a wide network of product consumers.
It is assumed that a person who has developed his network structure will receive a percentage of the entire turnover of his structure. That's how he can create himself tens of thousands of dollars a month.
Be sure to watch the video below to learn how you can create such an income in mlm. This is a cartoon about Pablo and Bruno - ordinary guys who chose different ways to gain financial freedom, and both wanted to become millionaires. Let's see what they got.
Network marketing was designed to solve the following tasks:
- Reduce the cost of goods for the end consumer. This can be achieved by moving away from expensive standard advertising on radio, TV and the Internet.
- Accelerate the process of delivering goods to the end consumer. It is achieved through well-thought-out logistics (network of own warehouses in different cities and countries).
- Avoid fake goods. In the process of resale of goods, it is possible to substitute it and falsify large quantities. The MLM company works directly with the end consumer, so the likelihood of product falsification tends to zero.
- Motivate company employees with money and business opportunities. In multi-level marketing, there is an opportunity to make good money and build your business from scratch.
2. How network marketing works
To begin with, I will tell you about the general principles of the work of this industry.
The manufacturing company has its own factories for the production of goods.
She sells these products without stores, products are distributed thanks to a built-in system of recommendations. In everyday language, this system is called "word of mouth".
A large number of people like this principle and they are happy to buy goods from the company.
Now all orders of an MLM company can be placed via the Internet, and paper catalogs that were popular some time ago with the development of information technology are fading into the background.
The customer uses the products and can start building a business with a direct selling company. To do this, he needs to find several people who will constantly buy products and attract new business partners to develop the network. That is why this type of marketing is called network marketing.
Having its own warehouses and delivery services, the network company delivers products to the warehouse, and then these products are delivered to the offices that the company's partners (distributors) have personally opened for themselves. Sometimes the company delivers the order to the client directly to the house, which is very convenient.
Now I will talk about the features and principles of multi-level marketing for the manufacturer of goods (company), for the end consumer (client) and for the person who decided to open his own business (entrepreneur) using the capabilities of mlm.
From the point of view of an MLM company
A distinctive feature of the promotion of goods in a network way is to reduce the cost of advertising their products. The company cares more about promotional materials for its distribution partners (sometimes called independent entrepreneurs) and building a system of professional training (mentoring).
It is from the qualitative transfer of the MLM idea from person to person that the business of the enterprise ultimately depends.
From the consumer's point of view
It is convenient for the client to receive goods with a quality guarantee, he likes affordable prices, samples, catalogs. Often, direct selling companies have exclusive products and accessories that cannot be found in regular stores.
From the perspective of a distributor (entrepreneur)
People who want to start their own business without investment can succeed here. After all, the whole system has already been built, the market has been formed, most of the large companies are already on the lips of the population. In addition, a powerful system of training and mentoring in network marketing companies makes the opportunity to build your own business more than real.
3. MLM business industry - history and development trend
Network marketing originated in the West in the USA.
In 1945, American entrepreneurs Lee S. Mytinger and William S. Casselberry started their own business, becoming the national distributors of Nutrilite Products. The basis of their activities was the principle of recommendation (network) marketing.
Further, in the late 1950s, two companies were created in the USA: Shaklee and Amway. In Russia and the CIS countries, people are widely familiar with Amway products and the peculiarities of its business. The company itself was founded in 1959 by Rich DeVos and Jay Van Endel and was originally called the American Way Corporation.
The industry developed especially rapidly in the 1980s and 1990s. The range of products grew and by the mid-1990s, mlm-manufacturers offered their customers literally everything: from cosmetics and detergents to automotive products, household appliances, long-distance communication services and computers.
Today, the network marketing industry has undergone great changes and almost all mlm companies have gone online in one way or another.
In 1996, Russia established Direct Selling Association(rdsa.ru), which contributes to the development of the industry, its self-regulation and maintaining the reputation of the network business at a high level.
According to the Association for 2015-2016 in Russia, one way or another, multi-level sales are involved 6% of the total population(distributors), and these are millions of people, not counting consumers.
The Internet space has allowed the industry to develop at a rapid pace. And this is quite logical.
Example
You can now build your business in a network marketing company not only through face-to-face meetings at home or in a rented office, but also via the Internet, using the capabilities of Skype, e-mail and social networks. Advanced entrepreneurs create their own websites.
This is exactly how “networkers”, as it is customary to call distributors of products of multi-level companies, are now actively processing the online space in order to expand the membership of their group (branch).
However, the development of digital technologies has also given rise to another side of this industry - the emergence of fraudulent companies and financial pyramids, which, under the guise of investment funds or just respectable mlm-firms, draw honest people into illegal and immoral schemes.
Later in the article, I will touch on the issue of fraud and tell you what not to do and how to distinguish a reliable network company from a scam.
4. Why do many people today associate network marketing with a pyramid?
In continuation of the previous paragraph, as promised, I will reveal the “pyramidal question”.
The association with pyramids, deceit and fraud in people arises rather out of inexperience.
I must say right away that there is the concept of "classic marketing" and "network marketing", although it is very conditional. For the sake of completeness, let me tell you how they differ.
1. Classic marketing
These are all the ways and means of promoting goods that we are used to seeing around - advertising on TV, radio, outdoor advertising, and so on.
Selling goods in stores is also a standard way of promotion. As a result, all this can be attributed to the concept of "classical marketing".
2. Network Marketing
This is just an unusual way for the bulk of people to distribute goods. It, as you know, is also called multi-level marketing.
In this concept of promotion, there are no retail stores familiar to many, there is no standard advertising in crowded places, and the goods themselves, as a rule, are of a higher quality in comparison with their familiar counterparts.
Unusual for many, the model of distribution of goods instills fear in those who have heard about various kinds of deceptions or have already fallen into financial pyramids.
Dear readers, remember!
Network marketing has nothing to do with pyramid schemes, fraud or illegal activities.
Associations with the pyramid arise because both in the pyramid and in mlm you need to attract people in order to earn.
Only in the first case, you get money for "heads", that is, your earnings depend from the number of people involved, who invested money in the pyramid, and in the second - the income depends on the turnover that the clients you attracted will make.
That is, if we are talking about normal multi-level marketing, you can sign at least 1000 people into your structure, but if they don’t buy anything, then your income will be zero.
In the pyramid, the opposite is true, where each attracted is obliged to make a contribution, usually quite significant (from 500 to 5000 dollars) and you are guaranteed to receive a percentage of his money, and your client will not receive a real product. He pays only for the opportunity to earn money by attracting new “victims”.
Below, in the answers to frequently asked questions, I have clearly outlined the criteria by which you can distinguish a good mlm company from a pyramid scheme.
5. Network marketing on the Internet without investment - myth or reality?
There is no myth here and cannot be. Building your network business via the Internet is a new trend that is gaining momentum every day.
How to find a client in your mlm structure via the Internet - 5 proven ways to attract:
- Social media. One of the most popular ways. You can create here a group (community) on the topic of earnings and self-development. The people who enter will be your potential customers. You can also “spam”, that is, send messages to everyone in a row, but then you risk getting your account blocked by the administration of the social network.
- Thematic forums. In the forums about earnings and personal growth, you can also find future partners in your multi-level structure.
- Contextual advertising. You can create a website and set up contextual advertising on it, thereby attracting targeted visitors. There is already an article on our site,. However, this method can be quite expensive for such a purpose.
- SEO - promotion. By analogy with the previous method. You can make your own Internet resource and write articles on it containing keywords related to success, earnings and network marketing. Gradually, these articles will be promoted through the subscription form located on the site, and you will receive people loyal to your activities.
- Lead generation. This method consists in creating a flow of contacts (applications) of potential customers whom you will attract with various advertising tools. You can learn more about what advertising is and what types of advertising exist from. You can process applications of potential customers (leads) and attract them to your multi-level marketing company.
You can use these and other ways to attract potential participants from the Internet to your network structure.
6. Pros and cons of network marketing - an overview of the main advantages and disadvantages
Network marketing, like any phenomenon, has a number of advantages and disadvantages.
That is why there are people who fiercely campaign for mlm, and there are those who are afraid of "network". For clarity, I have compiled a corresponding table that reflects almost all aspects of the SM:
Pros and cons of network marketing:
| № | Comparison criterion | pros (+) criteria | Minuses (-) criteria |
| 1 | Opportunity to start your own business | You can open an MLM business with little or no investment and create passive income over time | Many novice distributors leave the business in SM, as it grows slowly and you often hear rejections |
| 2 | Doing Business Online | The unlimited possibilities of the World Wide Web provide practically limitless opportunities for the growth of your business. | Not all people will agree to cooperate with you and cost business with your company, since getting into an interested audience through cold contacts is small |
| 3 | Buying quality goods at an affordable price | In network companies, you can buy really high-quality goods, often their counterparts on the open market are either not available or are much more expensive. | Sometimes the products of multi-level marketing companies are unreasonably expensive, even if they are of high quality. |
| 4 | party, team | For many people in this industry, the very atmosphere of running an mlm business is a way of life and they feel “like a fish in water” here. | For most people, spending time at various seminars, trainings and events of such companies is tiring and does not correspond to their nature and psychological type. |
| 5 | Skill development, personal growth | In the process of work, you can acquire good skills in interpersonal communication, planning, leadership and management | There are not many people who are constantly striving for development, most prefer much more understandable ways of earning money, for example, regular work for hire |
| 6 | Reputation | It is believed that people with leadership and well-developed communication skills will certainly succeed here. | In society, the reputation of network marketing is significantly damaged, so finding like-minded people, and even more so turning them into your clients or business partners, is not easy. |
If you have not yet decided whether it is worth doing SM, then the criteria described in this table will help you once again understand whether it is for you or not.
7. Rating of grid companies in Russia - list of TOP-5 market leaders in 2017-2018
The most interesting thing is that the first two companies Avon and Oriflame occupy 31% and 30% respectively in this rating. This means that these companies are far ahead of our citizens in the MLM industry.
As you can see, Mary Kay and Faberlic have almost the same market share, while Amway is somewhere in between.
In any case, I am sure that you have heard if not about all of these companies, then most of them for sure.
I consider them reliable and I advise you to work with these companies if you decide to go into network business.
8. FAQ - answers to frequently asked questions
These questions are often asked to me, and here I cite them with answers as the most popular.
Question 1: Should a newbie start a network marketing business?
Yes, it is worth it, but only if you are ready to wait a long time for the result (from 6 months to 3 years) and have a cash reserve that will “feed” you in a cashless period. I also advise you to analyze your strengths and weaknesses, objectively assessing your capabilities.
But if you get tired of communicating with people and have a hard time enduring rejection, then you better not rush into this pool with your head.
Question 2. How to earn the first money in network marketing?
To do this, find 2-3 customers and simply sell them your company's products, after registering as a partner in it.
Then you will feel the "taste" of the first money. Perhaps it will be a very small amount: from 100 to 1000 rubles, but it will already be your money earned in direct sales.
If you want to get a more serious amount, then find 3-5 people who plan to build a business with you. Help them find 3-5 more people for each and in a few weeks your income will grow to several thousand rubles a month and will increase as your "branch" grows.
Question 3. What and how can you attract people to network marketing today?
Today, you can attract people to network marketing, as always, with the idea of earning prospects, creating passive income and a free (flexible) work schedule.
The quality of products and the range of direct sales companies is constantly growing, so to say that we have high quality products is no longer so appropriate.
But if you show the convenience of working with the company's website and the possibility of doing business via the Internet, this will definitely impress your potential partners.
Question 4. How to distinguish network marketing from a pyramid scheme?
It's no secret that some scam companies tarnish the honor of decent MLM businesses and masquerade as them.
How to distinguish scammers? There are some characteristic signs of dishonest firms:
Here they are:
- Unreasonably high entry fee. As a rule, it is from 100 to 5000 dollars. It is from this money that the remuneration to the “distributor” is paid.
- The product, as such, either does not exist at all, or has no market value outside of this organization.
- There is no documentary confirmation of the fact of receiving money and other relevant documents (invoice, contract, checks, etc.);
- You are told that you will receive money from number of attracted participants rather than from the turnover structure.
- The focus of the organization is on quick money , and the product (if it exists) is needed only as a cover for the activity of the pyramid.
If you notice at least one of them in the company where you are invited, you should thoroughly study it for fraud and the legality of doing business.
A detailed article about what network marketing is, what the three letters “MLM” mean, what advantages and disadvantages such a business has, how they make money on it, recruit distributors, why this type of activity is dangerous and why you should not become part of the “pyramid”.
The beginning of the path of network marketing falls on 1945. Its foundations and principles were laid in America by two entrepreneurs William Casselbury and Lee Mitenger. A similar field of activity came to Russia and the CIS in 1990. Since then, millions of people have been involved in it and new network companies have been opened.
Despite the fact that this type of business is widespread, many do not fully understand what network marketing is, what advantages and disadvantages it has, and why it is dangerous. All this will be discussed below.
What is network marketing and how does the abbreviation MLM stand for
Network marketing is a type of business that is based on selling various products and attracting sellers. From each attracted seller, the seller of the goods receives income. The seller, in turn, attracts new sellers and already has his own percentage of profit from them.
If you look at the whole structure of such a business, it will have the shape of a pyramid. And the one who is at its top earns the most.
The abbreviation MLM stands for Multi Level Marketing, which means multi-level marketing. In the common people, this is called a "pyramid".
In network marketing, most often they use products that cannot be found in regular stores. These can be bioadditives, kitchen utensils, cosmetics, etc. A vivid example of this is the well-known Oriflame or Faberlic - the products of these brands cannot be found on store shelves. Moreover, 90% of goods are produced outside the CIS.
At first glance, network marketing may seem like a pretty simple way to make money. Yes, some millionaires and billionaires claim that it is on MLM that they made their fortunes. However, most people, not only in Russia, the CIS, but also in the world, avoid this dubious activity. And there are reasons for that. But they will be discussed below. To begin with, it is better to consider all the positive and negative aspects of network marketing.
The light and dark side of network marketing
First, it's worth demonstrating the benefits of network marketing to understand why it still exists.
Advantages of MLM
- Anyone can get into network marketing. This does not require experience, special education, business registration and other points necessary for a traditional business.
- Network marketing can become an additional source of income - a small one, but still. This is a good option for students or moms on maternity leave.
- The unlimited earnings that people sitting at the top of the “pyramid” talk about really exist. But few can make good money with network marketing - even a few. To get decent money, you need to be a purposeful person who knows how to find an approach to people, and have a lot of free time in your pocket.
- Financial freedom is also present here. It lies in the fact that the seller has no bosses, and the profit depends only on him. Freedom also means the absence of a work schedule - you can work when you want. However, financial freedom should not be taken literally. Rather, it consists here in not depending on the wallet of parents, relatives or husband. And this does not guarantee the complete absence of problems with money.
- Network marketing gives you the opportunity to try yourself as an entrepreneur and open your own business, which you need to independently promote. Here you can learn several useful skills, such as, for example, the ability to communicate with different people and establish business relationships with them. In the future, if you manage to create a really profitable business in another area, then all the skills gained in MLM will come in handy.
- Team cohesion is the only virtue of network marketing. Indeed, the network companies team is friendly and responsive. Each new member of this team is assigned a teacher who willingly helps the newcomer (naturally for his own benefit). Network companies regularly hold various master classes, seminars and trainings, which again unites people who are passionate about one thing.
All of these benefits are present in network marketing, but some of them should not be taken literally, such as financial freedom. Yachts, villas, expensive cars and living abroad in a penthouse are definitely not to be expected.
Now about the dark side of the "pyramid".
Pitfalls of network marketing
- Lack of stability is one of the main disadvantages of MLM. It is expressed in the volatility of income. Such an occupation can become an income, but not a permanent field of activity. Although, again, purposeful people are still able to achieve good results. But this will require a lot of time, money and effort that can be invested in the implementation of more.
- There is a very big psychological load in MLM. Most people contacted by sellers react negatively to frankly selling something. Clients are especially negative about obsession. Therefore, sellers of network companies often encounter inadequate people. Moral difficulties also arise due to the fact that after some time the seller himself will teach someone to sell, and iron restraint is needed here, since there are people who quickly grasp everything, and there are those who are not inclined to quickly absorb all the information and apply it correctly in practice.
- Whatever the mentors say, network marketing requires a cash investment from the beginner. He must buy goods with his own money, and then sell them at other prices, having a percentage of this. Accordingly, there is a risk of losing money. That is, a person bought a product, but no one bought it from him, and he also does not need it. Financial losses can be from 1,000 rubles. up to more than 50,000 rubles.
- In network marketing, there is responsibility for others. If the seller attracted a person to the team, then he is responsible for him, is obliged to help him and solve any working issues. And not everyone is able to be a mentor and bear responsibility for someone.
These are not all the pitfalls of MLM. After all, there are a number of risks, because of which most people do not want to join the ranks of network companies. But more on that later.
Now it is worth considering in detail how to earn money. That is, how and what people earn in network marketing.
How to make money on network marketing: the principle of building a business
The whole point of building a business in network marketing is to create a network of distributors (sellers) of goods. And the more of them in the pyramid, the better.
For example, a person started working in a network company. He was attracted to it by a specific person who is assigned to him as a mentor. A person is taught everything that needs to be known, he buys a product and proceeds to sell it. At the same time, he is in parallel looking for new distributors, whom he will train, and receive from them his percentage and additional bonuses (incentives).
New sellers are attracted quite simply. A person is properly “treated”, told about the prospects, about how much you can earn, and about the fact that he will have huge discounts on all goods and he will be entitled to free gifts. That is, they begin to flavor a person with a bright future, their own dignity, and additionally play on a simple human feeling of greed.
Future sellers are sold not only the product itself, but also images of a bright and rich future. With the help of such techniques, gullible and impressive people are drawn into the “network”. That is, the share of psychology in this business is also present.
From the above methods of attracting new members of the "pyramid", it becomes clear why the common people call network marketing a sect. There are some significant similarities here.
In principle, it is extremely difficult to call MLM a business, in its usual sense. Since everything here is built on deception and illusions. Only those who sit at the very top of the main pyramid make money in network marketing, while the lower classes work hard and do not receive the promised wealth.
The main task of network companies is to sell their products or goods quickly and in large quantities. And how this will happen, they are not at all interested. Only distributors are interested here - the more you sell and attract, the more you earn.
Everyone can judge the honesty of such a “business” or earnings independently. But a number of facts, not in favor of network marketing, remain undeniable.
Now the time has come to consider all the existing risks and dangers that are fraught with "pyramids".
What is the danger of network marketing
Scientists have long conducted a number of studies that prove that network marketing is no different from a totalitarian sect. They recruit in MLM in the same way as in a sect. The potential salesperson is cleverly brainwashed. Moreover, according to a specific technique, which provides for a certain fetish of one's own chosenness, missionary work (just like in a sect), elitism and significance.
After a person has been “caressed”, they begin to tell him about a carefree future and complete financial independence. Do not forget to mention the "freebie" that a person regularly relies on. All this is fed into the brain of a potential distributor in the right portions, and in the end it is simply squeezed that it is no longer possible to refuse the “tempting” offer.
Seminars of network companies are a completely different story. They are visited by eternally smiling people who are happy with everything around and dream of the immense wealth that MLM will bring to them. And the speakers at the seminars only stir up these feelings in people.
The newcomer was recruited, now he needs to sell the goods. Naturally, the newcomer agrees and pays for his first bulk purchase in the hope of a quick sale and easy money. But as a result, everything is not so simple. Not as promised "teacher".
Naturally, surrounded by the newly minted "networker" are sane people - relatives and friends. They begin to explain to him that this is not a business at all, but only a scam and he will not earn anything on this. And here quarrels and loss of friends begin. A person is left practically alone with his "correct" opinion.
Regardless of the success of sales, a person begins to invest money in his business - to buy a new product. At the same time, he drags himself into debt.
The danger of such earnings lies in the fact that beginners with a clouded brain are unable to think clearly. For example, they do not understand that before entering any market, it is necessary to analyze it and understand whether consumers need the offered product at all. And if the market does not need this product, then it is extremely difficult to sell it.
As a result, it turns out that the money is spent, the goods lie and no one needs them, there are already debts, but there is nothing to pay them back, since no one will return the money for the goods purchased in bulk.
Moreover, even if the goods are more or less sold, then such an occupation is an illegal entrepreneurial activity. And at one fine moment, a person comes to the attention of the tax inspectorate. As a result - punishment with serious fines. And for tax evasion now you can get a real term.
And, of course, the main danger of network marketing is that it drags people into a swamp. Then it is extremely difficult to get out of it.
It can be seen from the above information that MLM is indeed dangerous. Making money is hard, but losing money is easy. Network marketing is really a sect, but not in its traditional form.
In conclusion, it is worth drawing some conclusions.
You can really make money with network marketing. But how big is this income? It is impossible to call MLM a business - rather, extra money. The fact that such a field of activity is dangerous is a fact. Whether it is worth trying yourself in such a “pyramid” is undesirable, but this is a personal matter for everyone.
Consider the answer to the popular question: "network marketing - what is it?". There are many companies on the Russian market that work according to this principle, and many people who have tried themselves in them. The reviews are mixed: someone considers MLM an ideal job, and someone considers it almost a financial pyramid. Finding out if network marketing is a real way to make money or is it nothing more than a scam?
Network Marketing aka MLM
The concept of "network marketing" came to Russia in the late 1990s. Sometimes this type of sales is called "multilevel", from the English multilevel marketing or simply MLM. The principle of this sales technique is to sell goods through a network of distributors, which are individuals. They are engaged in direct sales of products, and also receive a commission for each attracted participant. This is a rather complicated definition.
What is "network marketing" in simple words? This is the principle of selling goods through a network of agents. The agent's profit directly depends on his entrepreneurial spirit and ability to sell. With MLM, goods are primarily sold among acquaintances, as well as through social networks. You can increase earnings by attracting new members to the network - a commission is charged for this. Thus, a multi-level network of sellers and buyers is created, who sell goods to each other.
In fact, such companies are well known in Russia. For example, Avon and Oriflame. There is nothing illegal in their activities. With due diligence in MLM, you can really build a career, earn good money and fulfill yourself. This is a job with a flexible schedule and is actually on itself. Social networks can significantly increase the number of potential customers.
Network marketing is one of the modern methods of sales
Network Marketing Tasks
Network marketing solves several problems. They can be divided into 3 categories: manufacturer's tasks, distributors' tasks and buyers' tasks. The manufacturer, using MLM, creates an effective way to market products through a network of agents interested in sales. He does not need to maintain stores, hire staff and pay him a salary, and also spend money on advertising.
For agents, network marketing solves the problem of building a career or even their own business with a minimum investment. A team in the network business is an analogue of the staff of your company, with the difference that it does not require documentation, the maintenance of the wage fund. Another task is personal development and motivation.
Network marketing helps buyers to buy goods at better prices: the cost of goods is reduced, because it does not include advertising, rental of premises, utilities and other related costs.
Differences from the financial pyramid
Network marketing is not a financial pyramid, despite the fact that there are still certain external similarities. You should start with what MLM is legal, and for the organization of the financial pyramid relies on criminal punishment. In network companies, agents are engaged in sales of real goods and their earnings are made up of this. Pyramids do not conduct any entrepreneurial activity, and their income is limited only by the money of new participants.
Recruiting in the network business - that is, attracting new participants - is not mandatory. You can only deal with sales and not invite other agents, however, earnings will be somewhat lower. Participants in the financial pyramid are required to find new investors, because without this there will be no income.
The similarity of MLM and pyramids is limited by the presence of an entrance fee. Only in the network business, the participant buys products for the entrance fee, which he can then resell. In the pyramid, the money goes to other higher-level investors and is not returned to the participant in any way.
Scheme of work
Why network business is profitable? Because the scheme of work of MLM is cleared of everything superfluous. The structure of the work of such companies has been built for decades, so it has been cleared of everything superfluous. This business involves flexible hours, work outside the office and directly with clients. Refusal to rent premises and expensive advertising helps to reduce the cost of products, that is, to make them more attractive to the buyer.
There is no linear leadership and subordination, which allows agents to feel more independent and free. Let's take a step-by-step look at how network companies work.
Manufacturer - distributor
A manufacturer who has decided to sell his products on the principle of network marketing is looking for partners who buy or receive consignments of goods on special conditions. Individuals (in rare cases, individual entrepreneurs) act as partners. The manufacturer and the partner conclude a cooperation agreement.
By mutual agreement of the parties, the following conditions may be established in the agreement:
- attraction of new partners;
- the minimum amount of monthly sales;
- compliance with the principles of the company;
- use of the manufacturer's products by the partner.
With the help of network marketing, cosmetics and perfumes are most often sold. doom products and nutritional supplements
Second level partners
The first partners invite the next participants who will perform the same functions. The difference is that the first partner receives dividends for their work. From this moment - with the first partners attracting new agents - the construction of the network begins.
Partners of different levels are not each other's bosses and subordinates. They are equal, but those who came to the company earlier receive a commission for the work and achievements of each involved. This system is absolutely open, the conditions are initially known to all parties. Thus, each partner is interested in attracting new participants to MLM.
Entry Level Partners
Agents who joined the company in the third, fourth and all subsequent queues are called entry-level agents. Their only difference is that they receive less income because they joined the business later. Otherwise, their rights and duties are no different from agents of a higher order.
recruiting
Each entry-level partner can invite new members and raise their income. The purpose of recruiting is to increase your income with dividends for new partners. In MLM, this is not a duty, but a right. If the agent does not want to engage in attracting people, no one will force him. He can only engage in sales and receive income from them.
Social networks open up new opportunities for recruiting. A few years ago, agents were limited to the circle of their acquaintances, pasting ads and handing out business cards on the street. Now such tricks are not needed. You can search for buyers and new partners on VKontakte, Facebook, Instagram.
Types of network marketing
MLM companies are actively developing, so there are different formats for doing such a business. Between themselves, they differ in the principles of networking. Types of network marketing:
- Multistage. The most ordered version of work, where the participants are in a strict hierarchy, but do not report to each other. Development is envisaged: from the lowest levels to the highest. For example, from the representative to the director, from the director to the general director, and so on.
- Puff. A more intricate scheme, which involves the simultaneous work of several levels of employees. Gradual development is not envisaged.
- Binary. What is a binary? This is the principle of MLM operation, in which each participant builds only 2 branches, and receives dividends from the entire subsequent structure. That is, he invites only 2 participants, who will then invite the next. The network will deepen, and the first participant will receive a commission not only for 2 invitees, but also for everyone they refer.
Types of marketing plans are diverse, but do not differ fundamentally from each other. Their differences are limited to the internal structure. The principles remain the same: selling products through a network of agents, recruiting new members, no subordination.
Network marketing is not a financial pyramid, despite certain external similarities
Key to online sales success
Is it possible to build a career in network sales and earn a lot? Reviews are mixed: some really manage to carve out a niche and earn a steady income, but most fail to generate income. Then people tend to accuse network companies of fraud, when in reality there is no fraud.
MLM is sales. The key skill for success in it is the ability to present and sell products, attract and build customer loyalty. How the agent will do this - by ads, personal charisma or through social networks - does not matter.
For people who want to earn income in the network business, books and sales training are useful. It is important to realize the fact that income depends solely on personal activity and enterprise. The key to success is constant and stable work, the search for new distribution channels, loyal customers and the recruitment of new network members.
Advantages and disadvantages of network business
MLM companies are already sufficiently developed in Russia, so it is possible to objectively assess their advantages and disadvantages. Reviews about the network business of NL International and other popular companies are mixed. Among the advantages are:
- the opportunity to receive unlimited income;
- lack of leadership, superiors and coercion;
- prospects for a successful career and even your own business;
- flexible work schedule;
- self-realization and personal growth.
The disadvantages are not so obvious. Firstly, unlimited income in words is in fact limited to sales in the circle of acquaintances, a few subscribers on social networks. Secondly, attracting new members is also not as easy as it seems. The market is oversaturated, many are afraid of scammers and are in no hurry to become "agents" and "partners". Thirdly, to earn money, you need to be very active. Some hope that they will create a "network of partners" and get rich on dividends. This is impossible, in MLM you will have to work hard, study and attract new and new customers.
In network marketing, you can earn on the sale of any product, if you are active and work hard
Examples of network companies
Many network companies are actively operating in Russia, the names of which are widely known to the public. Most often, such companies distribute cosmetics, perfumes, and health products. For example:
Network business NL International sells several categories of goods at once: weight loss products, vitamins, supplements, coffee, cosmetics, hair products and household goods.
- Essence is network marketing. Perfumery, cosmetics.
- "Siberian Health". Food, sports supplements, household goods.
- Avon. Cosmetics and perfumery.
- Oriflame. Cosmetics and perfumery.
- Faberlic. Cosmetics and perfumery.
- Mary Kay. Cosmetics and perfumery.
- Amway. Household chemicals and household goods.
- Herbalife. Health food products, dietary supplements and cosmetics.
- Vorwerk. Equipment for kitchens and floor care.
- Agel. Edible gels from fruits and berries.
Conclusion
Network marketing is a popular business development model. The sale of products in this case occurs through a network of agents. The activity of such organizations is completely legal, although outwardly it looks like a financial pyramid. With the help of MLM, you can earn money and build a career, although it is quite difficult.
The number of distribution companies specializing in MLM is increasing every year. This is due to the fact that this business is profitable and quickly generates income. They are easy to do without even leaving the house. If you study in detail the basics and concept of MLM marketing, you can achieve excellent results in 2-3 months.
What is network marketing
MLM business is a multifaceted concept that opens up many perspectives. It implies the concept of the sale of services and goods, based on the formation of a network of independent sales agents who are not only involved in the sale of products, but also have the right to attract new partners who will be endowed with similar rights. The income of each networker is formed from commissions from the sale of products and additional remuneration (bonuses), which directly depends on the volume of personal sales of the involved sales managers.
History of network marketing
Carl Rehnborg is considered the founder of the MLM business. He developed ideas that later turned into an entire industry with huge multi-million dollar turnovers. In 1927 in the USA, Rehnborg began to work hard on the creation of nutritional supplements. For testing purposes, he distributed the developed drugs for free to his friends, who subsequently refused to take them.
After Carl realized that the free is not appreciated, he began to sell supplements: the results were not long in coming. Information about drugs quickly spread, and the number of people interested in them increased. Karl Rehnborg could not satisfy the needs of all customers on his own, so he had to come up with a new scheme. He invited his acquaintances to provide information about bioadditives, and, subject to successful sales, promised to pay commissions. From these events began the history of network marketing.
California Vitamins was founded in 1934 by Carl Rehnborg. It operated a sales system, according to which the consumer of the product became its distributor. In 1939, the marketing company was renamed Nature's Sunshine Products, the principle of drug distribution remained the same. Network agents independently attracted new clients to cooperation, advised them, made sales plans, came up with individual sales schemes, and offered to create their own network.
The MLM-firm fully provided networkers with goods, paid commissions in a timely manner. So in MLM a new definition appeared - single-level marketing. The story of the business did not end there: a new round was set by the American Way Corporation (abbreviation Amway), created in 1959 by former Nature's employees Jay Van Andel and Rich de Vos.
What is the merit of these people in the development of the MLM business? They began to sell not one product, but several. The list of goods offered to consumers has been replenished with food additives, household chemicals and household goods. Soon network marketing companies appeared on the world market. They began to function successfully in Russia, China, England. Their importance has become enormous both for people and for the economy of many countries.
Types of network marketing
MLM business is developing at a fast pace, its varieties are increasing every year. The main types of network marketing are as follows:
- Puff (the most popular, adapted to the Russian market, its vivid example is the companies selling cosmetics - Avon Products, Faberlic, Mary Kay, Oriflame. The essence of this type of marketing is that the concept of the company is based on the work of certain layers of employees at several levels.
- Pyramid. This type of marketing involves the following scheme of work: there are founders who find a few people who sell services and goods, they subsequently find a few more people and control their activities, and so on ad infinitum.
How Network Marketing Works
The principle of operation of Russian MLM companies is the same:
- First, a person is interviewed, where he is introduced to further prospects and opportunities.
- Then the person is told that he should, using the network, attract new people, the greater their number, the greater his monthly income.
- How does network marketing work? New employees, becoming distributors of the company, independently promote it, for which they receive commissions, contributing to their own development and business development.
The essence of network marketing
What is MLM (multilevel marketing), what is its essence? This is one of the most popular and effective ways to legally promote services and products. MLM companies offer unique products that are in demand both in individual cities, regions, countries, and around the world. MLM business is not only direct sales. You don't have to sell anything to be successful in this field.
The main components of multilevel marketing are well-organized intellectual distribution, the effective use of all its capabilities and advantages. In other words, the main essence of network marketing is that consumers, being at the same time partners of the company, develop its network and make a profit from the turnover.
Network Marketing Principles
MLM business is based on the following rules:
- equality for all;
- helping others;
- minimum entry costs;
- having a residual income;
- pyramid structure (this principle of network marketing ensures the constant development of the business and its stability).
Network Marketing Structure
Running through the MLM business and not noticing the main thing, many do not achieve the desired results. Why? Because they do not know how to properly build the structure of network marketing. What is a structure? These are people who take part in the organization of trade, and the final income directly depends on their number. It can include acquaintances, friends, complete strangers. The main task is to skillfully unite them and constantly motivate them for successful promotion.
Network companies
There are many companies that specialize in MLM business. They sell cosmetics, chemicals, household appliances, household goods, and other products. A detailed list of network companies successfully operating in Russia is given on the Mlmbaza website, the most popular are:
- Life;
- Oriflame,
- "Siberian Health";
- Faberlik;
- Avon;
- Primerica;
- Shaklee;
- Talk Fusion;
- Neways;
- Vitamax;
- Zepter International;
- Kirby;
- Atistek;
- Lurk;
- True.
Work in network marketing
Anyone can try their hand at multi-level marketing business. Companies provide training in network marketing, but not everyone can master this profession. An MLM distributor must be able to organize the sale of products, draw up schemes for the effective distribution of services and goods. The profession obliges to attract new partners, expand the client base (network), apply intellectual resources, use the network, establish a system that will generate income directly for the company and the network manager.
Network business on the Internet
The global web opens up incredible opportunities for networkers. Using her gifts, you can make a fortune without leaving your home. On the Internet, products are promoted through their own websites, information groups, blogs, and communities. The main task of the distributor is to find the target audience, create an effective sales information network, constantly improve and develop it. Network business on the Internet has the following advantages:
- the ability to conduct business from anywhere in the world;
- the possibility of attracting potential partners from any regions, cities and countries;
- a lot of information programs that provide prompt assistance in solving organizational issues, conducting education and training;
- the possibility of selling through online stores with an integrated order basket;
- possibility of learning online.
How to make money in network marketing
To be successful in this business, you need to follow a few simple rules:
- be a sociable person who is not afraid to approach strangers with a proposal;
- be able to interest, present products brightly and unusually;
- actively involve their relatives, acquaintances, colleagues;
- constantly improve oneself, raise the intellectual level;
- skillfully build a pyramid by attracting new people, in order not only to earn commissions from sales in network marketing, but also to provide residual income.
Cons of network marketing
Before you start a distributor career, you need to familiarize yourself with the main disadvantages of the MLM business. This is the only way to understand how correctly the direction of activity is chosen. List of cons of network marketing:
- unstable income;
- great moral burden, constant pressure from customers;
- the need for material investments;
- a high level of responsibility for the people involved.
Network Marketing Benefits
MLM marketing has both its pros and cons. He teaches to receive unlimited income, which depends on the aspirations and character of the person. Another benefit of network marketing is financial independence. Network agents have a free work schedule, independently plan their day, make decisions, gain new skills, the opportunity to develop socially, improve their status. These advantages cover all the disadvantages of this type of activity.
Video: how network business works
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