Network Marketing Guide
Updated: May 17, 2020
What is Network Marketing
Network marketing is a business model that depends on person-to-person sales by independent representatives, often working from home. A network marketing business may require you to build a network of business partners or salespeople to assist with lead generation and closing sales.
Network marketing is a type of business opportunity that is very popular with people looking for part-time, flexible businesses. Some of the best-known companies in America, including Avon, Mary Kay Cosmetics and Tupperware, fall under the network marketing umbrella.
Network marketing appeals to people with high energy and strong sales skills, who can build a profitable business with a modest investment.
A network marketing business can be a single-tier program, whereby you sell the products or multi-tier where you recruit salespeople.
Beware of network marketing companies that create many tiers of salespeople and thoroughly research the company before you join.
How Network Marketing Works
Network marketing programs feature a low upfront investment--usually only a few hundred dollars for the purchase of a product sample kit--and the opportunity to sell a product line directly to friend, family and other personal contacts. Most network marketing programs also ask participants to recruit other sales representatives. The recruits constitute a rep's "downline," and their sales generate income for those above them in the program.
Companies that follow the network marketing model often create tiers of salespeople—that is, salespeople are encouraged to recruit their own networks of salespeople. The creators of a new tier (or "upline") earn commission on their own sales and on sales made by the people in the tier they created (the "downline"). In time, a new tier can sprout yet another tier, which contributes more commission to the person in the top tier as well as the middle tier.
Anyone considering joining a network marketing operation should do their research before making a decision. Consider these questions:
Was it pitched as a chance to make money by selling products or by recruiting others?
What is the track record of the company's founders?
Are you personally enthusiastic about the products?
Are people you know enthusiastic about the products?
Is the product being promoted effectively?
Do you foresee a relatively fast pathway to profits or a long time treading water?
Since network marketing programs are usually exempt from business opportunity regulation and aren't defined as franchises under state and federal franchise laws, you'll need to do your own investigation before investing any money.