Introduction to Network Marketing
Network marketing is a type of marketing where people use their own networks to expand their businesses or sell products. These networks are utilized to find new clients and partners, and they frequently have a mentoring and training program for new recruits. It’s a business model that relies on a network of distributors to help a firm develop. Three basic forms of systematic tactics which assists to generate revenue: lead generation, hiring, and building & management.
Network marketing is an industry that is growing rapidly. It has a lot of potential for growth and development in the future. Amway and Tupperware popularized Network Marketing in 1980s.
Network Marketing Industry
|Nutrition, Beauty, Home and Health
|$ 8.8 Billion
|Beauty and Home
|$ 5.7 Billion
|$ 4.5 Billion
|Beauty and Home
|$ 4.2 Billion
|$ 3.5 Billion
|Nutrition, Beauty and Health
|$ 3.41 Billion
|Nutrition, Beauty, Home and Health
|$ 3.06 Billion
|Nutrition and Health
|$ 2.89 Billion
How does Network Marketing work ?
Amway “American Way” is a leading business using multilevel network marketing. Here, there is a staple hierarchy of traders. Here, an individual :
- Will gets recruited by a distributor
- After recruitment, will acts as a distributors (Independent Business Operator (IBO))
- Will sell the company’s product and recruit more IBOs under his/himself to sell the product in order to earn profit.
In this, each IBOs will earn money only after the sale of the product. An operator will earn money from each sales made by him and will earn commission on each sales made by IBOs recruited by the operator. When a product is sold, revenue is generated and part of earning runs down the hierarchy. The earning of operators/distributors is directly proportional to the sales volume. The operators/distributors will not get anything for recruitment, the recruitments must generate sales for commission.
Types/Tiers of Network
Businesses that use the network marketing model frequently organize salespeople into tiers, which means they are encouraged to build their own networks of salespeople. These systems can be divided into three categories based on how many layers they have: single tier, two tier, and multi-level.
A single tier network is a business that hires people to work as direct affiliates, earning commissions on sales and receiving discounts.
In a two-tier system, members who were brought in by the first affiliate could start a new tier below them. According to this concept, each person is entitled to a portion of the benefits that result from the network’s extra level’s sales.
Last but not the least, there are multi-level networking strategies that employ many tiers below the initial affiliation and give them access to rewards from each stage below them.
Network marketing is also known as multi level marketing (MLM), cellular marketing, affiliate marketing, consumer-direct marketing, referral marketing, or home-based business franchising.
Advantages of Network Marketing
The networking marketing industry has a bad reputation, especially those with multi layers that might be compared to pyramid schemes because the top-tier salespeople can earn enormous amounts of money via commissions from the tiers below them. The lower categories’ residents will make significantly less money. The business generates revenue by offering expensive starter kits to new recruits. Despite these accusations, there are a number of advantages of network marketing, which are as follows;
- A network marketing firm can be as big as it wants to be. This happens because companies might join together with lots of people by becoming distributors. To boost the company’s sales, distributors might also collaborate with other sub-distributors.
- Companies don’t really need to rely on advertisements as they already have a strong distribution network that interacts with customers directly.
- Retailer profit margins, which are viewed as an expense by businesses, are also impacted by the distribution structure. As distributors receive these profit margins, firms are relieved of their financial burden.
- Another advantage is that businesses do not have to spend as much money on storage and delivery as they used to. This is because distributors are in charge of bearing these expenses.
- Because of this framework, distributors can profit indefinitely from their dealings with the company. They can profit from commissions along with their own earnings.
- Network marketing provides opportunities for people to make money without quitting their jobs. Network marketing has a flexible operation.
In conclusion, network marketing is a unique form of marketing. People who are working in it think it is unique and that the market is growing astonishingly fast. We might be able to see some significant expansions of the network marketing industry in the near future. However, there should be proper regulations to control these kinds of marketing schemes because despite earning numerous profits through commissions and sales, accountability is low among the top tiers.
Network Marketing in Nepal
In Nepal, it is apparently illegal to operate a network marketing business. However, there are a notable number of companies that brand themselves as a direct selling market company. Some of such companies are :
- Iboss Global International
- Healthy Living Nepal
- Care Matters International
- Nature Herbs International
- New Bibek Enterprises
An associate of Iboss Global Life has stated, “as per regulation, foreign enterprises need to create 50% of their goods from Nepalese raw resources.” Some foreign businesses operate MLM in Nepal by registering their businesses under the names of Nepalese people. They are selling rebranded Indian products. Such is the condition of network marketing in Nepal.