subject: What is Network Marketing? [print this page] What is Network Marketing? What is Network Marketing?
What is Network Marketing?
Network Marketing is a marketing strategy in which the sales forceis compensated not only for sales they personally generate, but also for the sales of others they recruit, creating a downline of distributors and a hierarchy of multiple levels of compensation.Other terms for Network Marketing include multi-level marketing,direct selling, and referral marketing.Network Marketing started in the forties of this century and became extremely known after Bill Clinton's famous speech about it on 1991. To understand Network marketing, it's important to compare it with regular marketing. The image below illustrates thedifference:
The images above explain simply how Marketing works:With regular,marketing, 80% of the company's profit from a given product is spent in two categories: Advertising (60%)and Affiliates/Retailers (20%), so the net profit for that kind of companies is only 20%.
When it comes to Network Marketing, the company does not count on media advertising, it counts on what we call "word of mouth advertising", that kind of company does not pay those 60% to advertising companies but instead pays them to CUSTOMERS to SAY that they like the product to their entourage or in other words THEIR NETWORK! Network Marketing based companies are smart because they know that millions of dollars spent in advertising arenot worth the WORDS of someone you trust! Just ask yourself one thing, do you choose to go to the movie thathas a nice trailer or the one that your friends recommended? 90% of people would go for the movie that their friends recommended! So, these companies pay you the millions they spend on advertising, and with that kind of marketing, they will not need retailers or affiliates, they will just need you and your network! This way they keep the 20% paid for affiliates/retailers and make 40% profit instead of 20%! This way network marketing is more effective for buyers and sellers!The next image shows how a Network Marketing Network looks like:
Let's show an example of a Network Marketing Network:Suppose, Someone referred person "A", let's call him Joe, tobuy a certain product from a Network Marketing Website,let's call it ABC.com. To buy this product, Joe registered to this website and had his own referral ID which was 123456.To start his network, Joe told all his friends to buy the product from ABC.com, six of them liked the idea and did the following:
1. Went to ABC.com.
2. Specified that user 123456 (Joe) Referred them.
3. Registered and had their unique referral ID's.
4. Purchased the product.
From his 6 referrals who did the previous actions, Joe earned a commission of 300$ (for example). Few days later,Joe's six friends chose to tell all their friends to buy a product from ABC.com using their ID's. Six of each of Joe's six friends, agreed to buy the product and did the same 4steps mentioned above. For this, each of Joe's six friends will be credited 300$ and GUESS WHAT! Joe will be credited for the friends of his friends, he will earn 300$ for each 6 persons in his network so now having 36 persons in his network he will make 36X3006 which is equal to 2400$.
So, as the friends of Joe's friends will keep referring theirown friends, Joe and his friends will keep making more&more money without doing any additional work.Therefore, with each generation Joe adds to his network (in the image above, each generation is represented with a different color), his earnings will double.Let's see how much he will make after he has 10 generations of referrals containing each 36 persons, here is the count: 10 generations with each having 36 persons would be total 360 referrals, and as we know, he makes 300$ from every 6 referrals so he will end up making 360X3006= 18,000$. WOW, JOE!
If you wish to know what exactly you need to do to start making money from Network Marketing, feel free to visit: http://networkmarketing123.info
