What Is Network Marketing?

If this is the first time you’ve heard about network marketing, you should know that it’s one of the oldest business models around and it’s something that anyone can do. How does it work?

First, you join a company and pay for the rights to sell its products. You build your business and grow your income by active marketing, however, you can also earn money by ‘sponsoring’ someone to join the company and earn override commissions on whatever he or she earns.

Does network marketing work?

Well, the truth is that there are many strong companies out there that have networking as its business model. Amway, Tupperware and Avon are just a few examples. However, side by side with the success stories, there have been many major flops in the industry, prompting people to cry ‘scam’. This is one major reason why you need to do your research on a company, its products and payout system before joining. You also need to do due diligence on the level of competition for its products and the traits of the end-buyers.

The network marketing companies that have come and gone quickly had payout systems that benefit only its up-line members and have no real products to sell. If someone approaches you for a network marketing opportunity, make sure the company has real products that already have a buying market. In this case, Amway, Tupperware and Avon are classics.

Also, analyze the payout system for any possibility that the company might fold because it’s over paying its members. There are many companies that started out with good intentions and high payouts, only to fold up because the members were earning through the membership fees of their down lines rather than selling real products to real people.

The most successful people in this business are the people with the most numbers, that is, the most number of down lines. That said, the first thing you need to do when you start is to look for people who work hard and have networking skills to go with it. Remember, you only need two people, at least in the beginning. (If you have eight, it’s better.)

The good thing about network marketing is that you own your business. There are people who compare it to franchising, only that the start-up costs are really low and it’s possible to earn passive income. Franchises like McDonald’s don’t have a system where you can earn override commissions if you ‘sponsor’ someone.

In all, joining a network marketing company can be one of the most profitable things you can do. However, you do need to pick your company well. Don’t join a company just because your friends are there. Instead, take the time to really analyze the potential longevity and profitability of a company. The last thing you want to do is to join a new company, only to see it fold up after a few years because it was over paying its members and not selling anything.