Network Marketing (also know as relationship marketing, word of mouth marketing and multilevel marketing) is a distribution model used by Direct sales organisations for the promotion and distribution of their goods and services. Usually, the company will be responsible for producing, packaging and distributing the product and the Independent Associate is responsible for marketing and advertising. The role of the Independent Associate is to identify new customers for the company, in exchange for commissions. The reason it is called Network Marketing is because the Independent Associate will traditionally promote the goods and services through social networks including family, friends, church, clubs, work colleagues, etc.
As well as promoting the products, an Associate may be interested in promoting the business opportunity, finding new partners for the company. When an existing Associate personally introduces someone new to the business, they become the new Associates Sponsor or business coach. That new person will also be an Independent Distributor for the company and will be placed in their Sponsors team. Both of them will receive a commission based on the customers that the new Associate introduces to the products. For some people the number of potential customers that are personally known to them may be limited, hence there are huge benefits to building a group of Distributors to promote the products alongside them, reaching more potential customers and opening new distribution channels.
This process can then continue for any business partner. Associates are able to build a customer base of thier own and receive commissions on the orders placed by any new and repeat personal customers, as well as the customers of the Associates in their team. The original Sponsor will receive commissions from any sales generated within their team. The structure and commissions will differ from company to company and pay plan to pay plan, but the principle is the same.
The Network Marketing business model offers Individuals the opportunity to create wealth like an Entrepreneur. What I mean by this is that income is not defined by the number of days personally invsted. Payment is made based on the volume of goods sold by the person's organisation. The money they earn is based on the productivity of everyone in their organisation. Therefore, if you are able to mentor your downline to be more effective then you will make more income! You have true leverage in your business when your team members are fully trained and are capable of finding new customers and Distributors without your own involvement. This requires a sound understanding of your products and strong leadership ability, but the benefits are significant.
In retail distribution, the product is produced and is purchased by the wholesaler. The wholesaler distributes the products to various retailers, who sell the product to the customer.
As a customer / consumer, you will typically pay around 2 to 3 times more for a product than the wholesaler paid the manufacturer for them. Say for example an item cost 10 to manufacture, the wholesaler may then pay 15 for each unit and the retailer then purchases them for 20 from the wholesaler. The retailer will then sell the product to you for 45 to account for their expenses for staffing, utilities, advertising, etc. and still make a profit. Therefore you are paying 45 for a product that the manufacturer sells for 15, because everyone in the distribution chain must make a profit on your purchase.
In the Network Marketing model you order directly from the manufacturer. Therefore, less of the money you pay goes to the middleman. The products you actually get are generally a higher quality than retail products, due to the companys emphasis on research and development of the product. Network Marketers may be paid up to 30% on the sale of a product, but the customer will still pay proportionally less for a higher quality product.
Network Marketing businesses are typically managed from home, often on a part time basis and promotion is generally done via word of mouth marketing. Hence, overhead costs are lower. Also, people are generally more likely to trust the recommendations of a friend, family member or work colleague than any other form of advertising. In addition, customers have much closer contact with the company through the Associate who introduced them to the company.
The purpose of both distribution methods is to find new product consumers, whilst serving existing customers. However, incentives and commissions are awarded differently in the two models. In retail, the owners and managers of the wholesale and retail companies are rewarded on the productivity of their staff and in Network Marketing, the Distributors earn commission based on sales generated by their organisation. Learn more at
http://www.usanainhealth.com/business
