what-is-network-marketing-how-does-it-work-how-much-money-can-you-make

What Is Network Marketing: How Does It Work and Can You Make Money from It?

Network Marketing is one of the most wide-spread businesses among self-employed people. In this post I am going to be trying to explain what is Network Marketing, how does it work, and how much money can you make from it (if you can!).

I guess that we all, at least once in our lifetime, have purchased products from a network marketing business, be it cosmetics, cleaning products, pans, food supplements, essential oils, etc.

Have you ever heard of Avon, Oriflame, Amway o Tupperware? These are just a few among the biggest and most famous companies based on the Network Marketing model.

Unfortunately, Network Marketing has become one of the most controversial business activities, only because people mix up the term Network Marketing with the Ponzi schemes or HYIPs (high-yield investment programs) – fraudulent business models used by crooks to get together large amounts of money fast by deceiving other people.

The real Network Marketing isn’t anything about that.

It is true that, in this case as well, this business model may seem to be pyramidal, yet it has nothing to do with frauds like the Ponzi schemes.

Network Marketing is a business model like so many others. But unlike the Ponzi schemes or HYIPs, Network Marketing is a business model that works. So true is it that, some companies have been in the industry for decades, and have been utterly successful so far.

Just think of Avon, which was founded in 1886 and is the second highest among the most important network marketing businesses worldwide in 2019, with a turnover of 5,5 billion USD in 2018 only. Impressive, isn’t it?

Let’s see now what exactly is Network Marketing all about.

What Is Network Marketing?

Network Marketing is a direct sales business model.

It is a way of selling products. Since Network Marketing is based upon building a distribution network, which is developing on several levels, this type of business is also called Multi-Level Marketing. Its acronym is MLM.

Network Marketing and Multi-Level Marketing are the same thing.

Network Marketing definition:

Network marketing, also known as multi-level marketing, is a direct sales business model, which involves a network of people who sell a company’s products. The participants in this network are not employees of the company and usually get remunerated on a commission basis, both for selling the products and for recruiting other people to sell the product.

In simple words, people get paid whenever they or a person below them in the network makes a sale.

How Does Network Marketing Work?

how-does-network-marketing-work

When you purchase a product from a network marketing, you have the possibility to become a seller and be remunerated on a commission basis, if you sell products to other people. What is more, you get remunerated if you have other people subscribe to the network; these people in turn become sellers and/or recruiters. Thus, you have a distribution network, and that’s why it is called Network Marketing.

It is a very effective direct sales model, as it has several valuable advantages:

  1. It allows the company to cut down on distribution costs, that tremendously affect the final price of the product. It has been estimated that about 70% of the final price of a product are the distribution costs from producer to consumer. With network marketing these costs are dramatically reduced, thus allowing the company to invest more money in research and product quality, in training recruits, and in rewarding its distributors with discounts and bonuses.
  2. It allows to create a network of regular buyers and, thus, a recurrent income.
  3. It allows to create a direct relationship between the producer and the consumer.

Here’s a list of the most famous Network Marketing businesses worldwide:

  • Amway (USA)
  • Avon (USA)
  • Herbalife (USA)
  • Infinitus (China)
  • Vorwerk (Germany)
  • Mary Kay (USA)
  • Nu Skin (USA)
  • Forever Living (USA)
  • Tupperware (USA)
  • Young Living (USA)
  • doTERRA (USA)
  • Oriflame (Sweden)
  • Rodan&Fields (USA)
  • Jeunesse (USA)
  • Futurenet (UAE)
  • Ambit Energy (USA)
  • Dxn Global (USA)
  • Telecom Plus (GB)
  • Ir Works! Global (USA)
  • Faberlic (Russia)

The Network Marketing business is based upon meritocracy: the more you sell, the more money you make. Though, this kind of business offers you the possibility to make money from the work of other people too – the people you recruit.

Due to the fact it is a network, people mistakenly think Network Marketing is something about illegal activities and pyramidal schemes come up with to deceive consumers.

It is true you can find lots of scam businesses, that look like MLM and last shortly, but long enough to make the founders rich. Yet, it is wrong to think all forms of Network Marketing are fraudulent forms of Multi-Level Marketing.

Is Network Marketing a Legal Business?

is-network-marketing-a-legal-business

It is definitely legal.

In 1934 the founder of Nutrilite Carl F. Rehnborg came up with the concept of Network marketing and since then it has been regulated in the USA by the Federal Trade Commission (FTC).

When talking about pyramid schemes and unlawful structures, Section 5 of the FTC Act states that:

The most widely-cited description of an unlawful MLM structure appears in the FTC’s Koscot decision, which observed that such enterprises are “characterized by the payment by participants of money to the company in return for which they receive (1) the right to sell a product and (2) the right to receive in return for recruiting other participants into the program rewards which are unrelated to the sale of the product to ultimate users.” In re Koscot Interplanetary, Inc., 86 F.T.C. 1106, 1181 (1975).

It means that you should avoid like the plague businesses that will ask you to pay for the mere right to sell their products or for other “rights” or services unrelated to the products you should sell.

This is probably the main difference between legal and fraudulent MLM business models. When choosing to become a network marketer the choice of the company is of crucial importance for your success.  

As a whole, Network Marketing is a legal activity. But there could be more to it!  In the view of the unemployment crisis over the last years, Network Marketing may prove to be a valuable solution to the difficulties more and more people endure every day.

With due precautions, it may turn into a real chance to set up a business of one’s own, be it a full-time or a part-time business.

Listen to what the personal development legend Jim Rohn, who mentored Mark R. Hughes (the founder of Herbalife International) and life strategist Tony Robbins, says about starting a network marketing part-time business.

How Much Money Can You Make With Network Marketing?

how-much-money-can-you-make-with-network-marketing

There isn’t a definite answer to this question. Your revenue will depend on several factors:

  • the quality of the product;
  • the number of items of the product you manage to sell;
  • the number of people you manage to recruit;
  • possible business bonuses;
  • the amount of work and time, you devote to this business etc.

There are people who manage to earn hundreds of thousands of dollars per year with network marketing. Though, according to statistics, only a few people make that much money. The main reason why a lot of people fail is that they don’t take this business seriously and expect to easily and quickly make a lot of money with Network Marketing.

I would love to reiterate a concept I have already mentioned on this blog so many times: there is no such thing as easy and fast money. You really have to put in much effort in order to be successful, regardless of the kind of activity you are going to set up.

How to Become a Successful Network Marketer?

If you want to be successful in network marketing, it is essential to choose an accomplished and well-known company. What is more, it is absolutely necessary for you to:

  • know the product well and use it personally;
  • firmly believe in the quality of the product and promote it with sincere conviction, in order to help other people to get to know the product and appreciate it;
  • put in serious effort and set out goals to achieve.

In most Multi-Level Marketing companies, you will find a meritocratic hierarchy system. You will have the chance to grow and to rank up, thus considerably increasing your income.

Conclusion:

I hope I have been exhaustive enough in trying to explain what network marketing is and how it works.

It is a very effective sales model, which may turn into a real job and a career opportunity for all those people who want to set up a business of their own.

As far as I am concerned, I am part of doTERRA’s Network Marketing business – one of the most accomplished manufacturers of therapeutic essential oils worldwide. I got interested in doTERRA as I love their products and use them daily, which helps me to promote them more effectively than people who do that just to make money.

Nevertheless, I think the best way to build a solid business and to create steady passive income streams is affiliate marketing, which has some valuable advantages:

  • you don’t have to buy any products – IT’S FREE TO START;
  • you don’t have to sell anything;
  • you can run this business online;
  • you can become an affiliate marketer in almost any market niche.

If you are a beginner and you don’t know how and where to start from, I really suggest you subscribe to the Wealthy Affiliate training platform, where you are going to be walked through the whole process of setting up your own online business. It’s free to start and you don’t need a credit card to sign up. Click on the button below to read my detailed review of this platform.

Not only is this platform perfect for newbies, but also for more experienced users and marketers. It is an all-in-one platform, where you will get the chance to meet like-minded people, to get help whenever you get stuck, to improve your skills and earning potential.

I have also prepared a free guide for you on how to start making money online. You can access it by clicking on the button below and entering your email in the form.

I wish you good luck and much success in your online journey, and if you enjoyed reading this article, or if you have any questions for me, please leave me a comment below. I will be more than happy to help you.

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