Networking marketing, or Multi-Level Marketing (MLM) or referral marketing, is a business distribution model that allows a parent multi-level marketing company to market their products directly to consumers using relationship, referral and direct selling. In the multi-level marketing, independent unsalaried salespeople referred to as distributors. These distributors are associates, independent business owners, franchise owners, and sales consultants.
Meaning of Networking Marketing
In networking marketing, each distributor can further engage sub-distributors and so on. Hence, it is also called multi-level marketing. The product reaches customers from the manufacturer via distributors at different stages. It is a mode of direct marketing the manufacturer completely bypasses the conventional retail route of selling to customers.
It represents the parent company and is rewarded a commission relative to the volume of products sold through each of its independent businesses. Independent distributors develop their organisation by either building an active customer base, who buy direct from the parent company or by recruiting a downline of independent distributors who also make a customer base—expanding the overall organisation.
Network marketing is a concept of marketing products pioneered by Amway Corporation (manufacturing household goods, personal care and nutritional products). A multi-level marketing approach consists of recruiting independent business persons by the manufacturer, who act as distributors of the company’s products.
Advantages of Networking Marketing
The strength of networking marketing lies in its tradition of independence, service to consumers, and commitment to entrepreneurial growth in the free market system:
1. Accessible Business Opportunities
Multi-level marketing provides accessible business opportunities to people looking for alternative sources of income and whose entry is generally not restricted by gender, age, education, or previous experience. It should be noted that a substantial majority of direct sellers are women worldwide, and most work in their network marketing businesses part-time. A tiny percentage of direct sellers are employees of the companies whose products they sell.
2. Owned and Accessible Business Opportunities
Independent direct sellers are those individuals engaged on their behalf or behalf of a network marketing company, selling products and services through personal sales contacts and are commonly referred to in some jurisdictions as independent contractors. Essentially, these independent salespersons are not employed by the company whose products they distribute but are separate business persons operating their businesses. These independent direct sellers have an opportunity to earn profits from their business and also accept the responsibility for the risks associated with running a business
3. Customised Selling Opportunity
The products sold by direct sellers are as diverse as the people themselves and include cosmetics and skin care products; laundry and personal care items: vacuum cleaners and home appliances; household specialities; household cleaning products; food and nutrition products; toys, books and educational products; and clothing, jewellery and fashion accessories; to mention a few.
4. Alternative Employment Opportunity
Multi-level marketing provides essential benefits to individuals who desire an opportunity to earn an income and build a business of their own, to consumers who enjoy an alternative to shopping centres, department stores or the like, and to the consumer products market. It offers an option to traditional employment for those who desire a flexible income-earning opportunity to supplement their household income or whose responsibilities or circumstances do not allow for regular part-time or full-time employment.
5. Low-Cost Investment
It requires a low capital investment, the set-up cost is also less, and it is risk-free. The cost for an individual to start an independent network marketing business is typically very low. Usually, a modestly priced sales kit is required for one to get started, and there needs to be more required inventory or other cash commitments to begin.
6. Easily Doable
No qualification and experience are necessary. A person should know to read and write English or any language of their region. It can be done part-time, and as such, it is reasonable for multiple sources of income. Multi-level marketing business has an excellent support system by the company and the upline organisation to assist. After building a successful network, the industry also continues without a physical presence. This business has unlimited income potential.
Disadvantages of Networking Marketing
The disadvantages of networking marketing are as follows:
- In theory, network marketing does not require advertising. However, in reality, it is only possible for some manufacturers to promote brand-building and brand loyalty in the presence of advertising. When, therefore, network marketing is coupled with advertising, the advantage of lower marketing overheads may be considerably reduced.
- Because of the multi-level marketing system, sales forecasting is problematic.
- A danger associated with multi-level marketing is that distributors (who often become the largest customers) may take over control of the company.
- The most important thing in network marketing is to interact with and make communication networks with new people, which requires excellent communication and interpersonal skills. Only some are blessed with these skills.