Network Marketing FAQs
Q: What is a Network Marketing company?
A: A Network Marketing company recruits individuals to purchase and/or market their product. These individuals are called independent distributors of the company. They can choose to simply purchase personal product for themselves and their family at wholesale prices. Individuals that choose this option usually make up about 80% of the members in the company they enroll with.
The other 20% of independent distributors wish to generate a steady stream of income. They choose to not only purchase products at wholesale prices, but they encourage others to become members of their networking company. Whenever a member makes a purchase from the company, the independent distributor that referred that member to the company receives a commission from the company.
Network Marketing companies are often call Multi-level companies because these companies not only pay an independent distributor on the members they refer to the company, but they also pay on the purchases of members that their members refer; down to so many levels.
Q: Is that why the products are so expensive? Because all these people are getting paid…doesn’t that inflate the price of the product?
A: If that were the case, most networking companies would go out of business in no time at all. The fact is that many network companies produce excellent products because they focus on the quality of ingredients they use; cost is their second consideration. The cost of making quality products is what determines the retail price. Remember, almost 80% of networking members are strictly satisfied and loyal customers who find that the value of the product is worth the price.
Traditional companies depend on advertising to get the word out about their product. Advertising whether on TV or radio or billboard ads, etc., takes up a huge amount of a company’s revenue. Network marketing companies know what we all know: word-of-mouth is one of the most effective marketing strategies. In today’s world a person is more likely to trust a friend than some stranger on TV or the internet. So Network Marketing companies use their advertising budget to reward their distributors.
All network marketing distributors of a company are independent contractors. They are not employees of the company. Hiring a sales force requires investing massive amounts of money and time into training, insurance, health benefits, taxes, office space, office supplies, retirement benefits…This is a huge financial burden on a company. Worst of all, all this money must be invested in individuals before they make a single penny for the company. Conversely, a network company can bring in 100s, 1000s, even millions of independent contractors at very minimal cost to the company.
Q: But isn’t it a fact that in Network Marketing only the people at the top make all the money?
A: YES and NO.
It is very conceivable and it has happened over and over again…so many, many times… that a newly enrolled distributor goes on to make more money than a person who joined the company over a decade ago and even more money than the person who introduced him/her to the company. So, 'no,' people in any part of the organization can make money.
And, ‘yes’, it is also a fact that the people at the top of almost all companies, traditional or otherwise, do
make more of the money. That is true in corporate America, it is true in Hollywood, it is true is in sports, in the music business…
According to Pareto’s Principal, the 80/20 rule applies in all industries. 20% of all the people in the world, own all the wealth. In network marketing, as well in traditional businesses, that also seems to apply. 20% of its members will rise to the top. And while some person may have gotten there by luck, the vast majority have worked hard, smart, and diligently to get there. So if you want to get to the top, you have to be willing to do what the people at the top have done.
It is said that the network marketing industry creates more millionaires than any other industry, but not everyone in network marketing wants to become a millionaire. That’s the beauty of the industry. You get to determine how much time and effort you want to put into your business based on how much you want to make. In Network Marketing, you have a team of supporters that joins you in your efforts which makes it so much easier than going it alone.
Q: Aren’t the people that make it successfully, just using others?
A: I guess that may be true in all industries. But that seems to happen less in network marketing. Distributors who bring in new members to the company feel the responsibility of helping their recruits. If a member stops buying product because they’re not educated on the product, it hurts the person who brought them into the company. It is in the best interest of the recruiter to educate his members not only on product, but also on helping them reach their financial goals. The person on top does not win if the people in the bottom are not winning as well.
Q: What happens when there is no one else to recruit? Won’t the people at the bottom lose?
A: Remember, to be a member of a networking company, you must be 18 or over. Everyday new people are born and every day new 18 year olds are enrolling. So, ‘no,’ that scenario is not going to happen.
Q: But not everyone in Network Marketing gets rich, right. Don’t most fail?
A: No, not everyone gets rich in Network Marketing. Just like not all aspiring actors, or singers, band members, athletes…makes it big. After so many years in their profession, not all lawyers, doctors, architects, college graduates, etc., are satisfied with their financial accomplishments.
The thing is, not everyone who joins a Network Marketing company does so to become rich. Every independent distributor sets his own personal or financial goals. Some are happy just being able to use healthy products and change some lifestyle habits that make them healthier. These customers typically make about 80% of a networking company’s members.
Others take advantage of the business opportunity because they want to pay off a loan, or may wish to have extra cash at the end of the month. Most people do not quit their job when joining a network marketing company so whatever money they make is supplemental. In that respect, they do not see themselves as failures.
I must add, that because of the structure of a networking business, making it ‘big’ is more likely than in other industries. This is because you’re always working with a supportive team. When the team gets together to educate, train, and mastermind this can be very powerful for the person who has had to go it alone in other industries. There is power in numbers and everyone in the team benefits from each individual’s success.
Something else that makes it easier for people to make it ‘big’ is that the Network Marketing business model takes advantage of three important business principles: leverage, residual income, and geometric growth.