How does network marketing work, anyway?

Jan 16
09:58

2009

Jaz Lai

Jaz Lai

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How does network marketing work? Many people think that it is the best business model out there. Other people are so afraid of the concept that they j...

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How does network marketing work? Many people think that it is the best business model out there. Other people are so afraid of the concept that they just assume network marketing is a pyramid scheme or a scam.

The official definition of network marketing is a distribution channel that is defined by government regulations. It’s nothing more complicated than that. But exactly what kind of distribution program is it? The ideal way to understand network marketing is to understand what a traditional distribution model is first.

There are several key components to a traditional distribution model: the manufacturer,How does network marketing work, anyway? Articles the agents, the wholesaler, the retailer, and finally, the customer.

Manufacturers create products in large quantities and they work directly with wholesalers and agents.

Agents are the middlemen who negotiate between suppliers and distributor to make contracts between different distribution channels. Now, some manufacturers don’t work with agents at all, and just connect with the wholesalers. However, agents still play a part in the transactions, because agents make sure all negotiations are legal under the rules and regulations of importing and exporting product.

Wholesalers keep large quantities of product and stock on hand. Wholesalers work with retailers directly. They are who negotiate with manufacturers and with agents about storage of backlogs of products, and they also distribute product in a way that makes sure that retailers have the right amount of product on hand.

Retailers are the only people who actually sell directly with customers. They carry product and stock on hand, after getting it from wholesalers.

The customer is at the end of this chain. Product moves through all of these channels and once the customer gets it, the price is raised considerably! The customer is not able to figure out the true cost of a product from what they pay for it.

Network marketing is a different way of getting product into the hands of the customer.

First off, there are no middlemen in network marketing. Instead, network marketers make connections directly between the manufacturer (which is actually the network marketing company) and the consumer. Basically, instead of having to go through the agent and the wholesaler, network marketing sales representatives put the product right into the hands of the customer, without all the complication.

An excellent perk of working in network marketing is the ability for the customer buying the product to actually become the distributer. It works the opposite way, too. If a customer likes their products so much that they would like to get a discount, he or she can actually become a distributor of the network marketing company, and get their favorites at a discounted “wholesale” price. Current distributors can actually use their products themselves, becoming their own customer!

Now you can understand why network marketing distribution is considered one of the most cost effective ways to get a product to customers. This system adds a personal touch to an impersonal transaction through person to person contact, customers save money by not using middlemen, and distributers are empowered so they can sponsor their own team of resellers (down lines).

Summary: How network marketing works. Why network marketing as a distribution channel is different from traditional distribution channels.