Have you heard of network marketing but never really dive deep into understanding what is network marketing, then you are at right place. For the last few years, I was having a clue about network marketing. But didn’t give a conscious thought on what is network marketing is, thinking that network marketing means its some scam pyramid scheme.
But I kept hearing from my friends who are six & seven figure earners, that one should focus on network marketing. I also saw a lot of people in the Facebook groups recommending network marketing.
And as a result, I thought of actually giving conscious thought and learning about what is network marketing. And after doing a detailed analysis, it literally blew my mind.
It is so easy and straightforward to understand and the best thing? We all doing it for all these years. Plus later in the article, I will also bust some myths about network marketing.
So let’s begin:
What is network marketing?
According to Investopedia, “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.”. In other words, you promote a product or company to your friends, family, or connection, and in return, you earn a commission for selling that product.
For example: If you own a product and if you sell it to your friend, then it is network marketing.
But you may be wondering if it’s so simple then why there are so much noise and distributed opinion regarding network marketing?
I agree in nutshell network marketing is simple, but as you will learn, there are few types of network marketing that make it complicated.
3 Type of network marketing
1. Single Level Network Marketing
Single level network marketing is simple, and here you promote one product to another person in return of the commission from the product owner. If you are a blogger or digital marketer like me, then you might have heard the word Affiliate marketing. Affiliate marketing comes under single-level network marketing, where you will get paid to promote other people’s product or services.
It’s important to note that mouth publicity is not a network marketing as you do not get paid by the company in return of promoting its services.
So If you recommend a restaurant to your friend, then it is mouth publicity because you didn’t get pay by a restaurant owner for recommending it.
However, if you recommend the restaurant to your friend and if that restaurant owner offers you a free meal or discount, then it is single level marketing. Got the difference? Great, let’s move on to the next part, if not then re-read the above example once again.
2. Two Level Network marketing
Two-level network marketing is two-tier deep. Unlike Single Level Marketing, in two-level network marketing, you will get paid for the people who you recruit to purchase the product well as for the sales made by them.
For example, if you recruit 10 people for one product and if out of them, if 5 people promoted that product in their connection, then you will also get paid for those five sales.
Now you might smell the things. But hold on, read this third type of network marketing to smell things completely.
3. Multi-Level Network Marketing (MLM)
As the word suggests, Multi-Level network Marketing is more than two-level deep. Typically these levels are 5 to 6 level deep. Amway successfully uses this marketing for more than 50 years.
For example: In MLM you get paid not only to recruit people under you but also for the commissions made by your recruiters and their recruiters etc.
So if you recruit 10 people and out of that 5 people recruit 3 more and those 3 again recruit 10 then you will get paid for all the 55 people joined under you. (10 (your recruitees) + 5 (level 2) *3 (15) + 10 (level 3) * 3 (30) = 55 people in total)
Basically, you recruited only 10 people, but you get paid for 55 people thanks to MLM. Looking at a bird’s eye view, this looks fantastic way to make money but is it?
Time to bust some myths.
But before that, let’s quickly understand what a pyramid scheme is?
According to Oxford, “Pyramid scheme is a form of investment (illegal in the US and elsewhere) in which each paying participant recruits two further participants, with returns being given to early participants using money contributed by later ones.”. That is, it is just like MLM but with no product involved. Here you get recruited by someone in exchange for joining fees, and after that, you start recruiting people to earn %% from those new recruitee’s joining fee.
As things grow the people who started early earns handsome money where people who are at the bottom loses out on money. And with no tangible product involved, this scheme gets scam as it has no real product involved and only looting other people for self-benefit. Thus the FTC has made a pyramid scheme illegal.
Now that you know about the pyramid scheme and what is network marketing let’s move on to bust some myths.
Network Marketing: Myths Busted Open
Myth #1: Network Marketing Is A Pyramid Scheme
Network Marketing Is A Pyramid Scheme is the most common conception which I personally had. But as you learned above, network marketing has various tiers, and only Multi-Level Marketing could become a pyramid scheme in the absence of a tangible product. If there is a real product involved in the MLM tiers, then it is perfectly okay to do as its a not a pyramid scheme and can be a profitable one. (Remember Amway is MLM and doing it successfully for 50+ years)
So Myth Busted, Not All Network Marketing Schemes are pyramid schemes.
Myth #2: You have to deceive people to make money with network marketing
Another myth people get is that you have to lie, make false promises, and deceive other people to get commission via network marketing. But that is not the case, and I know a few people who earn a seven-figure business based on network marketing. The product they recommend has real benefits and use cases other than making money by promoting it. One Funnel Away Challenge is one such product which is single level network marketing (Affiliate marketing).
Currently, FTC has started a new regulation where it asked bloggers and website owners to reveal upfront to the readers that they are promoting the product in exchange for a commission. For example, I have added a link above of OFA Challenge, and if you buy through me, then I will get a commission, but it won’t cost you anything extra.
So Myth Busted, You do not have to (and should not) deceive people to make money with network marketing.
Myth #3: Network Marketing Is Illegal
There is also another misconception that network marketing is illegal, but I would like to tell you that only Pyramid schemes are illegal. The rest of the network marketing is fine; it helps the economy get better.
Do you know? 81% of top brands rely upon affiliate marketing (single-tier network marketing) to get the majority of their sales?
Now, those were the top 3 myths that we all get one day or another but as you read they are not real or hold any group.
So Myth Busted, Network marketing is legal except of pyramid marketing.
But now you may be wondering how to know if a network marketing scheme is good or bad? And that is a good question. Let’s check it out.
5 Questions to ask yourself before doing any network marketing.
A. How many promotion layers are there?
As you know, there are three types of network marketing — single level, Two level, and multi-level. So if the product that you are promoting has only single or two tiers of promotions, then there is a high chance that its not a pyramid scheme. Mostly pyramid schemes come in multi tiers marketing. But hold on, check out the rest of the questions as well to be sure.
B. Is there any real tangible product involved?
If you come across a product that you liked and want to promote then do check out if its real tangible product or not. Because of FTC regulations, these MLM pyramid scheme guys try to succumb us into believing that their product is tangible and real. But before you promote it check if anyone is really using it or if you can use it ? If for anything else other than promotion. If yes, then it may not be a pyramid scheme.
C. Is there any upfront cost just to promote the product?
If you want to promote X product and if you can promote it for a small price without having to buy a complete product, then be aware of it. First I would suggest you to buy such products. Test it yourself to be confirmed with the above two questions before promoting yourself to earn the trust of your network. Make sure it does not involve any false claims or promises.
D. Are people using the product other than just promoting it?
For example, I promote OFA challenge, which is a 30-day challenge to build your business. But this challenge is real, and I personally go through it that is it’s a genuine product, and we are not promoting it to promote it. That is why I recommend that each product should have other tangible benefits of it other than just making money by promoting it.
E. Does the product owner has a good reputation and doing business for years?
Before you select a product to promote it, make sure that the product owner or company has a good reputation in the market. You don’t want to promote something completely new with no tangible product or company that has a bad reputation in the market. Promoting pyramid schemes can get you in trouble and may harm your reputation. Plus you do not want to deceive people, so make sure to go through all of the above 5 questions before promoting anything.
That it. You learned what is network marketing along with its types. Then I busted top 3 myths of network marketing. And in the end, I shared with you 5 questions that you can ask yourself to be sure that the network marketing you are going in is legit and trustworthy.
If you like this article, then it would be cool if you share it with your friends, family, or with connection (remember this will be mouth publicity and not a network marketing ;))