I figured, if I’m going to write a blog on network marketing, it might help if everyone was on the same page and had a basic understanding of what I’m talking about when I use the various terms used in the network marketing profession. So, today, it’s just the facts. I try to keep lingo to a minimum because that and acronyms that aren’t commonly known are confusing and, frankly, totally annoying. There are definitely words and terms in network marketing that you won’t see anywhere else, so I set up a glossary tab with the most commonly used words and terms in our profession, if you come across something that isn’t a common business term, you’ll find it in the glossary.
Some people use the terms direct selling or multi-level marketing in place of network marketing. According to the WFDSA (World Federation of Direct Selling Associations) the distinction is simple… network marketing and direct selling are the same thing. Multi-level marketing describes the way some network marketing professionals are compensated. The definitions on the glossary page will give you more detail.
Back to the original question: Network Marketing is, very simply, a distribution system, or form of marketing, which channels goods or services from the manufacturer to the consumer through a “network” of independent distributors or consultants away from permanent retail locations. It’s a wonderfully effective system that cuts out the “middle man” found in most industries.
Traditional marketing moves products from the manufacturer to wholesalers, warehousers, shippers, advertisers and retailers before ever reaching the consumer. In network marketing, all of these “middle men,” including the advertisers, are replaced with independent distributors/consultants who distribute the same products throughout their own network of consumers. This way, the large profit that would normally go to the wholesalers, warehousers, shippers, advertisers and retailers goes to the independent consultants and those who help train them.
Leading traditional retailers are known to spend 25–30% of every sales dollar on advertising, media and other promotions, while network marketing uses those same dollars to reward individuals for “word-of-mouth” promotion. Because network marketing relies on developing and keeping trusted relationships, the product quality and service is often much higher than standard retail brands.
As I mentioned above, network marketing companies market their products or services through independent sales representatives; these representatives are sometimes referred to as consultants, distributors or other titles. I personally use the term consultant, so I’ll use it at Professional Network Marketing, too. Consultants are not employees of the company, they’re independent contractors who market and sell the products or services of a company in return for a commission on those sales.
How does a network marketing professional advertise and market the product or service he/she represents? The vast majority of network marketing sales (about 70%) occur using a one-to-one approach where one consultant presents the products or the business opportunity (or both) to a single consumer. Home shopping parties or some other form of group presentation are another method, where a group of people get together to learn about or sample a range of products. Orders can be placed in person or through a web page sometimes offered through the company and used by the consultant. Sometimes the phone is used to place orders or reorders, but a small percentage of sales take place this way.
I’m going to save what network marketing is NOT for the next post. Cheers!