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Pros and cons mlm. MLM business and network marketing: what is it, what are the pros and cons of this direction Pros and cons of marketing

Irina Davydova

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The term "network marketing" involves the distribution of goods or services through a well-developed and extensive network of distributors (note - independent representative of a particular company).

Is CM (Network Marketing) a "Pyramid" , what are its pros / cons, and how does this system work?

How network marketing works - its pros and cons

What is the essence and what is the scheme of network marketing?

The bottom line is simple: a person sells goods and invites other people to a similar position, from whose sales he receives interest. The more sellers he brings, the higher his earnings. Thus, a large network of sellers working for one organization is built.

The scheme of work of most network companies, as a rule, is the same (with minor differences in individual companies).

At the interview you are told about job prospects and "huge" opportunities (usually the possibilities are overestimated or greatly exaggerated). For example, about a solid income already in the first six months of work.
After registering, you may be asked to make a membership fee . It is worth noting that reputable network companies use exclusively legal schemes and do not require any fees.
Next, you look for and recruit new sellers who are already registered through you. This is the main feature of the SM.
Profit (the difference between purchases and sales) comes to you after sale of goods, which, as a rule, you have to redeem with your own money. Also, the profit comes as a percentage of the sales of the people you attracted to work.

Network Marketing - Benefits

Saving money on advertising. The network company's products are advertised mostly through "word of mouth" - direct contact between sellers and buyers. By saving on advertising, the market price of products is reduced and the income of the distributor is increased.
Acquisition of effective and high-quality products not available in conventional stores.
Possibility of part-time or full-time work with good income.
Free work schedule.
The amount of earnings depends directly on the time invested , human abilities and the desire for high incomes.
Opportunity for own business. True, not immediately, but after you recruit people, train them and promote your own recruitment system. And without investment, of course, will not do. The only question is their size.
Help from professionals. As a rule, in each network company, along with the products, a person also receives a personal “guru” who helps, teaches, and instructs him.
No age restrictions. It doesn’t matter if you just turned 18 or you are retired - everyone can earn.
No high school diploma required . Instead, you will need such qualities as sociability, ingenuity, etc.
The presence of a system of "increase" (career growth).
No need

Network Marketing - Disadvantages:

Income instability. Especially, at first, when the work will resemble a part-time job.
material investments. It's unavoidable. Even if they tell you otherwise, accepting SM into the ranks. The amount of investment will depend on the situation, company, product. Pros: The investment always pays off.
Selling goods is not as easy as you might think. Until you find your way to effectively sell, you will draw a lot of negative emotions.
Not everyone will be successful. This point follows from the previous one. Much depends on your capabilities, abilities, experience, learning ability. Someone will become successful, someone will leave this opportunity for a part-time job, and someone will leave altogether, straining through his teeth - "you won't earn anything here."
You will work in the business, but you will not own it. Why? Because the products you are selling do not belong to you. You will not be able to sell it as your own - for this you will have to develop your own product and open production.

Interesting job or financial pyramid?

Should I be afraid of working in a network company? What is the difference between SM and financial pyramids?

It is worth noting that the SM has nothing to do with the notorious "pyramids". The reputation of SM was badly damaged, "thanks" to swindlers who successfully disguised their companies as network ones.

How to distinguish a network company from a financial pyramid?

Signs of a "pyramid":

The idea is to attract a large number of people in order to collect as much money as possible in the piggy bank of the pyramid and disappear.
You get a profit for each person you invite who brought money to the pyramid.
The company's product (service) cannot be sold on the open market.
Consumers of products (services) - only distributors.
It won't work without investing your money. The size depends on the scale of the pyramid. Moreover, for your own money, you are buying not a real and high-quality product, but dummies, at best, simply not causing harm. And in most cases, you give your hard-earned money for “membership fees” or some “papers” that have value only inside the pyramid.
No printed materials.
By investing in a pyramid scheme, you only receive promises that “very soon” you will become rich, rich.
The pyramid teaches you to cheat.

Signs of a legally operating network company:

The idea is to attract a large number of people to grow the company and increase the income of distributors.
You get a percentage of the sales of the people you hire.
The company's product can be freely sold on the open market.
Consumers of products are ordinary buyers and distributors themselves.
Investing funds - only for the goods that you buy and then sell.
Printed materials are usually present. At least product catalogs.
By investing in SM, you get a quality product and a percentage of the sale.
SM teaches you how to sell.

The Most Popular Examples of a Business Built with Network Marketing

The first of the first in the SM were companies that appeared back in the 30s in the last century. They were engaged in nutritional supplements and sold only one product.

most successful company in the SM was launched in 1959 AMWAY. She was one of the first to go beyond the sale of the "1st product", expanding the range of nutritional supplements with household goods.

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 financial pyramid, a scam and deceit.

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 cost of production chewing gum"ORBIT" is from 20 to 50 kopecks for a 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 have chosen different ways gaining 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

First, let me tell you about general principles work in 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 information technologies recede 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 vocational 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 its reputation 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, email 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 simply respectable mlm-firms are drawn into illegal and immoral schemes of honest people.

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 etc.

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, there are no promotions, familiar to many, Retail Stores, there is no standard advertising in crowded places, and the goods themselves, as a rule, have more high quality compared to our 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 everyone 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 over the Internet is new trend which 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. On the earnings forums personal growth you can also find future companions in your layered structure.
Contextual advertising. You can create a website and customize it contextual advertising 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	Unlimited Possibilities 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 to earn 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 weak sides, objectively assessing their 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 characteristics dishonest companies:

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.

What is its essence and basic principles, and now I want to consider all the pros and cons of network marketing as the main or additional way of earning, a source of replenishment of a personal or family budget. I'll try to be as objective as possible.

Advantages of network marketing.

First, let's look at all the advantages of network marketing.

1. Opportunity to use quality products. As a rule, serious network companies produce sufficiently high-quality products, a level higher than that sold in a traditional retail network.

2. Opportunity to purchase company products at a good discount. Becoming a distributor of a network company, a person gets the opportunity to purchase all the company's products for personal needs at a good discount (most often - a discount of about 20-30%).

3. To start earning almost no start-up capital is required. To enter network marketing, most often you just need to purchase a product for a certain amount, and in some companies even this condition may not be necessary.

4. Opportunity to use network marketing as an additional income. In order to become a distributor of a network company, it is not necessary to quit your job or make any cardinal changes in your life. On the contrary, it is best to initially consider this type of business as, and then look at the results: perhaps it can become the main source of income in the future.

5. Free education. All network companies provide an opportunity for free training in network business, and it is in the interests of the person who brought you into this business to make your participation as effective as possible, because his passive income will directly depend on this. And in general, training in network marketing always plays a very important role: the network company will provide you with a lot of training materials, videos, and will invite you to numerous lectures and seminars. Therefore, even if you cannot build this business, you will understand that it is not yours, you will still have very important and useful knowledge that you will find application in other areas of earnings and everyday life.

6. Ability to work on the Internet. IN Lately network marketing, like many business areas, is gradually moving into the Internet space. Therefore, today network marketing on the Internet is far from uncommon, but one of the most popular ways to make money online. Moreover, it is often much easier to communicate virtually than live, and the whole essence of this business is built on communication.

7. Ability to independently choose the pace of work, development strategy. In network marketing, you are your own boss: when and how you want, you work, however, this, of course, will depend on the effectiveness of your work and income level.

8. Constant communication with people and self-development. In the process of working in a network company, a person is in constant development, improving his communication skills with other people, the art of persuasion, the art of sales, and these qualities are extremely valuable: a specialist with such qualities is always valued much more.

9. Network marketing is not only an active income, but also a passive income. It is extremely important that with the help of network marketing you can create a reliable source for yourself, which can greatly strengthen your personal or family budget. To do this, you first need to actively work to create and develop your own distribution network, and then you can gradually retire, while your network will work for you.

10. Opportunity to participate in company events. Many probably know that network companies often organize comfortable, expensive holidays for their distributors, a “place” in which you can secure yourself for free, having reached certain performance indicators. Agree that it will not be superfluous.

11. You will not be left alone with the work. If you encounter difficulties in the process of work, you can always discuss them with your mentor, who is directly interested in your efficiency, which means that he will do everything possible to ensure that you work effectively.

12. Unlimited earning opportunities. Any traditional salary, no matter what position you grow up to, is always limited, and income in network marketing can be anything, it all depends on you. Moreover, in some network companies, the passive income of the distributor is even inherited.

13. No risk of dismissal. Again, compared to a traditional job, network marketing wins in that no one will fire you here, because. everyone is interested in you earning yourself and bringing profit to the company.

14. Lack of pressure from the authorities, frequent stress, nervous strain. All these factors inherent in traditional work “for an uncle” are absent in network marketing, or they are not so pronounced.

15. If you fail, you have nothing to lose. Network marketing is one of those few ways to earn money in which a person actually does not risk anything, except perhaps only their time. If you fail, you can leave this business at any time without losing anything and gaining some experience that will never be superfluous.

Those were the pros of network marketing, now let's move on to the cons.

Cons of network marketing.

1. Opportunity to run into scammers. Often, under the guise of network companies, fraudulent structures operate or are focused not on selling their products, but on maximizing the pumping of money and quickly curtailing the project. Sometimes it is quite difficult to distinguish a scam company from a real MLM company, so here you need to pay attention to the rating, age, reviews and other factors that characterize the network company.

2. Too expensive products. The products of network companies, as a rule, are significantly more expensive than their counterparts in a retail sales network. This is due to the advantages in quality, however, most people live by the principle “it is better to buy cheap than high-quality”, so it is always difficult to convince a person of the need to switch to expensive and high-quality goods.

3. The need to periodically buy company products. Very often, network companies operate on the principle that each distributor is obliged to regularly buy the company's products for a certain amount. And these investments, especially at first, can “eat up” and even cover all the income received.

4. Negative attitude towards network marketing of most people. A lot of people believe that network marketing is a scam, a scam and a scam, and as soon as they see any signs of this form of business, they try to run away from it as far as possible and don’t even want to listen to anything. Therefore, working with such people, convincing them of the opposite, will not only be difficult, but extremely difficult.

5. The first results of the work may not come soon. If you're starting network marketing from scratch, it can be days and even months before you've attracted just the first member to your network. Not everyone is able to endure such a long wait, so many quickly become disillusioned and leave this business.

6. The need to register a business and pay taxes. Many prefer only illegal additional earnings, our mentality is to blame. And the main, serious network companies work only officially, transferring remuneration to their distributors as an entrepreneur's income. That is, it requires registration in tax office and regular payment of taxes, and only this factor immediately scares off many.

7. High competition. In the most effective areas of network marketing (cosmetics, household chemicals, personal care, etc.) there are already many successful distributors with their own regular customers and good experience, so it will not be easy to compete with them.

8. Income in network marketing is not guaranteed. If with traditional employment you will receive at least some salary even if you work inefficiently (here, however, you can simply be fired), then in an MLM company, earnings depend only on the results of labor. Even if you work 20 hours a day, but do not attract a single distributor and do not sell a single unit of goods, no one will pay you anything.

Perhaps these are all the main disadvantages of network marketing that I know.

I will end with this. I described the most significant pros and cons of network marketing and, as you can see, there were more pluses, about twice. With this publication, I am not trying to “draw” someone into network marketing, I am only giving information that you yourself must analyze, comprehend and draw conclusions. After all, the main task of the site is to increase your level of financial literacy and help you establish effective management personal finance.

See you in new posts!

Network marketing. Almost everyone has heard this term today, but not everyone knows what it is in practice. For reference: according to the glossary (http://www.glossary.ru), multi-level (or network) marketing is a form of out-of-store retail, at which sales agents () of the manufacturer establish contacts with potential buyers. Simply put, network or multi-level marketing (Multilevel marketing), means the delivery of goods, information products or services from the producer to the consumer using a multi-level structure consisting of distributors.

Today you can often hear a tempting offer: " without investment! Unlimited earning opportunity! Or: "With our company you will become a millionaire!" Anyone who hears this will think: "Well, then, not all people are rich, since it's so easy to become a millionaire? They just pump it out ..."

On the one hand, the author of these words will be right: there are enough companies that profit from the trust of people and fake under the SM system, but today we will not talk about how to distinguish a "scam" from real network sales companies, but about how to understand whether you should try to make money in this way and how profitable it is in general. We will analyze all the pros and cons of this system.

Network Marketing - History

But first, a little history of SM. It is inextricably linked with the name of the American (1897-1973), whose realized ideas turned into a multi-billion dollar network marketing industry.

In the United States of America, where Rehnborg ended up in 1927, he came to grips with the creation of various nutritional supplements, the basis for which he chose alfalfa, which contains many vitamins, minerals, protein and other useful components. Rehnborg offered the drugs created on its basis for testing to his friends, distributing the products for free. There were no results - no one began to try the resulting nutritional supplements. Then Karl began to take money for them, realizing that nothing free is not appreciated. The results appeared immediately, and the most positive.

Information on healthy supplements became widespread (each of Rehnborg's acquaintances found many of his acquaintances), people asked Rehnborg for meetings to get more information about the new product. Carl, of course, could not satisfy all requests.

And then a brilliant idea came to him. Rehnborg invited his friends to give information about nutritional supplements to their acquaintances, and in case of a successful sale, he promised to pay a commission. He decided to pay also to those acquaintances of his friends, who, in turn, will promote his product further, using their connections. This is how network marketing was born.

In 1934, Carl Rehnborg founded California Vitamins and, thanks to new system sales, when consumers of the product also became its distributors (distributors), the company quickly reached a turnover of $ 7 million without investing a single dollar in advertising.

In 1939, Carl Rehnborg renamed his company Nutrilite Products, retaining the principle of distributing dietary supplements. Its employees themselves invited newcomers to work, gave them the necessary information about the product and suggested that everyone build their own network, inviting their acquaintances to the business. The company provided all distributors with its products and paid each a commission not only for the goods sold by him, but also for each sale made by the personally involved distributor. Thus, Rehnborg introduced "one-level marketing" into the practice of classical business.

The further history of SM is connected with the names of Nutrilite employees Rich De Vos and Jay Van Andel, who, after ten years successful business in the structures of Rehnborg in 1959 created their own company called American Way Corporation, abbreviated as AMWAY. The merit of these people lies in the fact that, firstly, they went beyond the sale of only one product, including in their assortment, in addition to food additives, household goods for home use.

Pros of Network Marketing

Like any other, this type of business has its advantages.

Of course, any distributor of any network company can successfully tell you about this. But, firstly, I'm afraid that his story will be embellished with facts that are beneficial to him, and secondly, he will never tell you about the disadvantages of working with his company. I want to give you proven facts about why it is profitable to work with such companies - which will immediately answer the question of why network marketing still exists.

1. The possibility of unlimited earnings. Purely theoretically, this phrase is true, but in practice it all depends on the nature of the person and his desire to earn money. And, as a rule, more successful are those people who do not look for easy ways to earn money. Yes, yes, and this despite the fact that most people are attracted to network marketing precisely by the ease of achieving the desired wealth! If a person is ready to achieve the goal, earnings are really not limited to anything: the more products you sell, and, most importantly, the more other people you can attract to your team, the more you earn. And no restrictions! The most important thing in this business is to build a large, cohesive team, which in itself is not difficult if a person has at least some organizational skills. And if not, then there are usually a lot of trainings in companies that are designed to help such people.

Network companies exist in 125 countries of the world.Currently, there are more than 4000 only large network companies, whose total turnover in the world exceeds 300 billion dollars.

Currently operating in the US more than 2500 large network companies, 65% of products are promoted through them, and approximately 15% of the population is employed in this area, i.e. about one in nine people.

In Japan, the volume of sales of goods through SM reaches 90%.

Works in Europe more than 700 network companies, in Asia Minor - more than 800.

Network marketing began to be used and largest companies, such as Ford, Colgate, Canon, Lipton, Coca-Cola and many other business flagships.

2. Financial independence. This factor is called one of the main arguments for SM. Sounds very attractive to many. But not everyone fully understands what this phrase hides behind it. Under it, distributors understand independence from the employer or from parents and relatives, if it is a young boy or girl. But this phrase does NOT mean that you will be completely protected from financial adversity and will not depend on life circumstances.

It all sounds like this: "Yes, you will be given the opportunity of unlimited earnings, which thereby does not put you within the framework of your official salary and gives you financial independence in front of your parents and society." In fact, the meaning is somewhat different: "Yes, you will be given the opportunity to earn as much as you can, which thereby does not put you within the framework of your official salary and gives you financial independence in front of your parents and society." And, as you know, each person has different opportunities. And here the advertising slogan will be really truthful: "Find out the power of your abilities!"

3. Own business."Don't you want to take advantage of this unique opportunity to start your own?" - the distributor will ask you in surprise and, again, temptingly. Here he is really right: there is such a possibility, only the distributor does not finish something. Firstly, a business will become a business no earlier than in a year, when you draw up and promote your system for recruiting and training people in your team - which, in principle, is similar to writing a business plan in a classic business. Secondly, the phrase "without investments" is not entirely accurate. It would be better to say "no significant investment." But more on that later.

4. Close-knit team. You can't argue with this advantage. In network companies, a lot of attention is paid to education and training, which is not always found in companies that do not use SM. Simply put, by joining the company, along with the products, you also acquire a personal teacher who will help you in everything and set you on the right path =))) ... The main motto in network companies is: "I learned it myself - teach it to someone else!" Moreover, as a teacher you get those managers who have already achieved some success themselves. And in general, as a rule, all the people in the team are quite friendly and ready to help the newcomer.

Cons of Network Marketing

And now for the cons. Namely, about those dirty tricks in SM that most often frighten a beginner and leave negative, and sometimes even categorically hostile, impressions about the network business.

1. Instability of earnings. No matter how high income distributors promise you, they will still not be high at least for the first 2-3 months in the company. For this period, such earnings are suitable only as a part-time job. After all, it will take some time for you to train and recruit the right people in your own team (as well as your product customer base). And for each person this interval is different. Someone is extremely sociable and has good organizational skills, which gives him the opportunity to acquire his regular customers in the first month, and to train several people in the same skill in the second and get a good income. And someone, on the contrary, is very shy and prefers submission, and his training can stretch for a long time. Unless, of course, this person is patient. If not, then he will become one of the opponents of SM, claiming that this cannot be earned. But, on the other hand, in nature there is no business that makes a profit in the first month.

This item is the main reason for leaving the network business. Not everyone can withstand the constant pressure from clients (and they are often not quite adequate, because many have already formed the opinion that they are always trying to “sell” something to them, and it will take some effort to destroy it), as well as the distributors you train and even your teachers.

Since it has already been said about clients, I will tell you what is difficult in teaching people. Usually people of almost all ages are accepted into the team, and each age needs its own approach. Young people, for example, listen to your instructions inattentively, and it takes a lot of work to explain to the student why it is necessary to do it this way, and not the other way (“simpler”), and why all these subtleties in communicating with clients. But the older generation, on the contrary, will carefully listen to everything that you tell them, but ... they won’t believe it. After all, in their opinion, they have a rich life experience, and they have already learned everything that is possible ...

Also, the burden will be on the part of your teachers, because for a start you will be taught yourself, and something may be contrary to your habits and principles.

3. Inevitable material investments. Yes, investments, despite the phrases "Own business without investments", will really be required. The only difference is that it will take several thousand dollars to establish a business according to the classical scheme, and in network marketing - from 100 to several thousand rubles.

4. Responsibility for others. Some people prefer not to answer even for themselves, to say nothing of others. But the whole system consists in the team, in the recruitment of its own assistants, their training; and then they will recruit their own, and so on. By teaching people, you will be to some extent morally responsible for those whom you have attracted and whom you undertook to help. And if you are not ready to be a mentor to the end, despite the nature of the student and the difficulties of his training, you should not take on this matter. You can earn only on the sale of products, which, however, will bring less income.

Network marketing has ✔its pros and ✔its cons. It is up to each individual to determine what is more important to him ➨

Network marketing

Pros and Cons of Network Marketing

In conclusion, I want to say that the main qualities of a successful SM leader are communication skills, organizational qualities, purposefulness and patience. Having these qualities can affect your success in this business. And the more developed they are, the higher your chance of succeeding.

What is network marketing for you? Fraud or Greatest Opportunity?

Very often in the expanses of a rapidly developing market industry you can hear the term "network marketing". What is it, what are the features of the concept, how does it affect the performance of companies - questions that are of interest not only to business sharks, but also to those who are trying to start their own business or are simply looking for sources of income.

You can find out the answers, as well as read the reviews of the owners and employees of companies who were able to successfully use the principle of network marketing in their work, from the article below.

What is network marketing

Multi-level or network marketing (MLM) is an inherently specific process of product realization, which uses direct contact between the manufacturer and the buyer. This process can be done either directly or through a trained distributor. His distinctive feature is the fact that through such communication it is possible not only to sell the necessary products, but also to attract other interested people to work.

At the same time, the payment scheme is absolutely open - not only the seller receives money and benefits, but also everyone through whom the goods pass in this chain. At the same time, earnings are official, real and depend only on the number of goods sold. While, for example, in the case with which network marketing is often compared, the pros and cons are not so obvious, because in this case the receipt of money is carried out at the expense of the investments of other participants, and their timely issuance is not at all guaranteed.

Advantages and disadvantages

Like every concept, the MLM structure is not without its positive and negative sides. You can highlight all the pros and cons of network marketing by examining the impact this business scheme has for each of its individual structures - companies, employees and consumers.

Benefits for the company:

the possibility of unlimited earnings;
no advertising costs;
no costs for renting premises for shops;
no shipping costs;
minimal intervention from public services, lack of documentation.

The last point may also include the introduction of minimum tax duties. Due to the fact that the products fall directly into the hands of the consumer, and not through stores, it is extremely difficult to control the volume of sales.

What are the benefits for employees of MLM companies

Trained and satisfied with the conditions of earnings, distributors are the key to successful business building for MLM companies, therefore, when working with their team, management offers them the following prerogatives:

the possibility of unlimited earnings (as you can see, both for the company and for employees, this item is common and fundamental);
financial independence, i.e. the possibility of carrying out activities without constant pressure from the employer;
the possibility of raising your own business with minimal investment, regardless of age, education;
flexible work schedule;
continuous improvement of personal qualities.

Improper organization of the workflow - a disadvantage?

The disadvantages of network marketing are observed if people with lacking experience are at the head of corporations or among the team. In the process of activity, they can stop work processes, negatively affecting the level of sales. There are several reasons for this:

high morale of the staff on the part of customers, other distributors;
instability of earnings (sales levels in different months of work can bring different profits);
due to a sense of responsibility for the rest and the lack of organizational skills, as a result of a large turnover of staff, dissatisfied with the quality of the work process.

What is the benefit of MLM principles for buyers

For the consumer, the pros and cons of network marketing are completely different features. For example, the disadvantage may be excessive obsession on the part of the distributor in an effort to arouse the interest of the buyer and, in case of refusal, wasted time for both. The advantages are in the following factors:

saving time on trips to the store;
full awareness of the quality of the offered product;
control of financial spending;
the purchase of goods is cheaper due to bonuses, discounts, sales;
You can order and receive goods at any convenient time of the day.

Also, thanks to the concept of MLM, it became possible to visually compare, check the compositions, share your opinion, earn money, receive recommendations for the types of goods purchased. Ratings also allow you to establish how the pros and cons of network marketing affect the efficiency of doing business and purchasing activity.

what does it mean for network marketing

By itself, the rating is a kind of evaluation of the effectiveness of a particular type of activity. To compile it, you need data that can be obtained through social surveys. This is done by special firms that process the information received and transfer it to customers for further use.

In the process of data processing, all the pros and cons of network marketing used to develop a certain company in a certain region to promote certain products become clear. Also, the results obtained allow us to trace and fix financial results corporate activities, as well as apply new strategic tactics for business development in the further planning of the company's economy.

Rating of network companies

A separate subject for ratings that allow you to track how effective network marketing is - companies, a list of which can be compiled both for the international arena and for each individual country or region individually. The data included in the structure of these top ratings characterize how attractive the product being sold is to the consumer, how changes in the internal structure of the company or the introduction of a new product affect sales figures, etc.

In this case, the rating is an identification of competitiveness on modern market and how much the company has grown financially over a given period of time. Also, the data obtained based on the lists of companies allows us to give a complete detailed analysis of financial opportunities in the future, to understand what to do in order to double / triple indicators in the future.

List of MLM companies in Russia

Below is a list that includes large domestic companies using effective network marketing. Russia compiles the list on the basis of their annual activities and includes various economic, technical, cultural and social factors. The top 5 network companies with a high percentage and profit growth for 2015 include:

Avon Prod. Inc.
Amway Corp.
Oriflame Cosmetics SA
Mary Kay Inc.
Faberlic JSC.

If we compare the same top list with indicators, for example, in 2012, Oriflame's sales volume will decline to grow (in 2012, it took 2nd place). To summarize, the economic crisis has affected the decline in sales for all companies without exception. However, the Avon corporation was able to maintain its leading position: as before, it accounts for a third of the perfect turnover of all listed companies. And this means that as a result of the rating research, Avon is one of the most competitive and promising network companies in the Russian market.

How to influence the increase in sales and rating

Naturally, in difficult economic situations, the way out of the difficult financial situations of companies is to stimulate employees to increase the level of sales. This is called "motivational network marketing". What is the essence of this program? It allows you to move the company up the top list due to additional financial support for the employee and building his own profit scheme by attracting third parties.

In other words, in such cases, a reward is introduced:

for the sale of a large volume of products;
for attracting additional staff who will sell a large volume of products and search for a new

It has been verified that this construction of a network marketing scheme can significantly increase the growth of the company's profit and recoup the costs. And all you need for this is the desire to get easy additional income and effectively present your product to the buyer. That is why the number of people involved in this business structure is already more than 6% of the Russian population, and these figures are growing from year to year.

How to Avoid and Succeed in Network Marketing Scams

Naturally, not everyone can succeed in the MLM business, but there are 3 rules that can be followed to avoid fraud and financial failures and comprehend the principle of network marketing:

the company must be registered (you can check whether the company belongs to the declared association using the rdsa.ru resource), this significantly increases the factor of trust in the company and is an indicator of its official activity;
for employment, it is necessary to choose a company with a high sales rating, which occupies a leading position in the modern market - this is a guarantee of its success, effective self-improvement, and hence prospects;
the maximum manifestation of active personal qualities (capacity for work, desire to learn, improve their communication skills and persuasion), the position of a leader is the key to success in running a network business.

The main thing to remember is that the buyer must have the right impression about the type of activity of the company. It should not resemble an inexplicable confusion, scam or financial pyramid. Everything should be as transparent as possible, accurately, meet the stated requirements.