Very often in the vast rapidly developing market industry you can hear the term "network marketing". What is it, what are the features of the concept, how does it affect the performance of companies - questions that are of interest not only to business sharks, but also to those who are trying to start their own business or are simply looking for sources of income.
You can find out the answers, as well as read the reviews of the owners and employees of companies that were able to successfully use the principle of network marketing in their work, see the article below.
What is Network Marketing
Multi-level, or network, marketing (MLM) is inherently a specific process of product implementation, which uses direct contact between the manufacturer and the buyer. This process can be carried out either directly or through a trained distributor. Its distinctive feature is the fact that through such communication it is possible not only to sell the necessary products, but also to attract other interested people to work.
The payment scheme is absolutely open - money and benefits are received not only by the seller, but also by everyone through whom the goods pass in this chain. At the same time, earnings are official, real and depend only on the number of goods sold. While, for example, in the case of a financial pyramid, with which network marketing is often compared, the pros and cons are not so obvious, because in this case the money is received through the investments of other participants, and their timely issuance is not guaranteed at all.
Advantages and disadvantages
Like every concept, the MLM structure is not without its positive and negative sides. You can highlight all the pros and cons of network marketing by examining the impact this business scheme has on each of its individual structures - companies, employees and consumers.
Pros for the company:
- possibility of unlimited earnings;
- no advertising costs;
- no cost to rent space for shops;
- no shipping costs;
- minimum intervention from public services, lack of documentation reporting.
The last item may also include the introduction of minimum tax duties. Due to the fact that products go directly to the consumer, and not through stores, it is extremely difficult to control sales.
What benefits can be identified foremployees of MLM companies
Trained and satisfied distributors are the key to successful business building for MLM companies, therefore, when working with their team, management offers them the following prerogatives:
- the possibility of unlimited earnings (as you can see, both for the company and for employees, this item is common and fundamental);
- financial independence, i.e. the ability to carry out activities without constant pressure from the employer;
- opportunity to raise your own business with minimal investment, regardless of age, education;
- availability of flexible convenient work schedule;
- continuous improvement of personal qualities.
Improper organization of the workflow - a disadvantage?
The disadvantages of network marketing are observed if at the head of corporations or among the team there are people with lacking experience. In the course of their activities, they can stop work processes, negatively affecting the level of sales. There are several reasons for this:
- high staff morale from customers, other distributors;
- instability of earnings (sales levels in different months of work can bring different profits);
- psychological pressure due to a sense of responsibility for others and lack of organizational skills, as a result of a high turnover of staff, dissatisfied with the quality of the work process.
What is the benefit of MLM-principles for buyers
For the consumer, the pros and cons of network marketing are completely different features. For example, the disadvantage may be excessive obsession on the part of the distributor in an effort to arouse the interest of the buyer and, in case of refusal, wasted time for both. The benefits are in the following factors:
- save time shopping;
- full awareness of the quality of the product being offered;
- control of financial spending;
- buying goods is cheaper thanks to bonuses, discounts, sales;
- you can order and receive goods at any convenient time of the day.
Also, thanks to the MLM concept, it became possible to visually compare, check the compositions, share your opinion, earn money, receive recommendations for the types of goods purchased. Also, ratings allow you to establish how the pros and cons of network marketing affect business performance and purchasing activity.
What is ranking, what does it mean for network marketing
Rating itself is a kind of evaluation of the effectiveness of a particular kind of activity. To compile it, you need data that can be obtained through social surveys. This is done by special firms that process the information received and transfer it to customers for further use.
In the process of data processing, all the pros and cons of the networkmarketing used to develop a certain company in a certain region to promote certain products. Also, the results obtained allow us to track and record the financial results of corporate activities, as well as apply new strategic tactics for business development in the further planning of the company's economy.
Rating of network companies
A separate subject for ratings that track how effective network marketing is - companies, the list of which can be compiled both for the international arena and for each individual country or region individually. The data included in the structure of these top ratings characterize how attractive the product being sold is to the consumer, how changes in the internal structure of the company or the introduction of a new product affect sales figures, etc.
In this case, the rating is an identification of competitiveness in the modern market and how much the company has grown financially over a certain period of time. Also, the data obtained based on the lists of companies allows us to give a full detailed analysis of financial opportunities in the future, to understand what to do in order to double/triple the figures in the future.
List of MLM companies in Russia
The following is a list of large domestic effective network marketing companies. Russia compiles the list on the basis of their annual activities and includes various economic, technical, cultural andsocial factors. The top 5 chain companies with the highest percentage of sales and profit growth in 2015 are:
- Avon Prod. Inc.
- Amway Corp.
- Oriflame Cosmetics SA
- Mary Kay Inc.
- Faberlic OAO.
If we compare the same top list with indicators, for example, in 2012, Oriflame's sales growth will become noticeable (in 2012 it took 2nd place). To summarize, the economic crisis has affected the decline in sales for all companies without exception. However, Avon Corporation was able to maintain its leading position: its sales volumes, as before, account for a third of the perfect turnover of all listed companies. And this means that as a result of the rating research, Avon is one of the most competitive and promising network companies in the Russian market.
How to influence the increase in sales and ratings
Naturally, in difficult economic situations, the way out of the difficult financial situations of companies is to stimulate employees to increase sales. This is called "motivational network marketing". What is the essence of this program? It allows you to move the company up the top list due to additional financial support for the employee and building his own profit scheme by attracting third parties.
In other words, in such cases, a reward is introduced:
- forselling a large volume of products;
- for attracting additional employees who will sell a large volume of products and look for a new customer base.
Verified that this network marketing scheme building can significantly increase the company's profit growth and recoup costs. And all you need for this is the desire to get easy additional income and effectively present your product to the buyer. That is why the number of people involved in this business structure is already more than 6% of the Russian population, and these figures are growing from year to year.
How to avoid and succeed in network marketing scams
Of course, not everyone can succeed in the MLM business, but there are 3 rules that can be followed to avoid fraud and financial failure and comprehend the principle of network marketing:
- the company must be registered (you can check the company's belonging to the declared association using the rdsa.ru resource), this significantly increases the trust factor in the company and is an indicator of its official activity;
- for employment, you must choose a company with a high sales rating, which occupies a leading position in the modern market - this is the key to its success, effective self-improvement, and hence prospects;
- maximum manifestation of active personal qualities (capacity for work, desire to learn, improve your communication skills and persuasion), the position of a leader is the key to success innetwork business.
The main thing to remember: the buyer must get the right impression about the type of company's activities. It should not resemble an inexplicable confusion, scam or financial pyramid. Everything should be as transparent as possible, exactly, meet the stated requirements.
Reviews of active users of the MLM concept
They will allow you to better understand how network marketing works, what it is, feedback from those who have encountered the principles of its work. Many employees of such companies noted the presence of difficulties in the initial stages of familiarization with this method of doing business. This was due not only to the process of assimilation of a large amount of information, but also to the emerging feeling of wariness.
To cope with all prejudices, and it is also easier to delve into all processes, seminars, lectures, trainings, ready-made catalogs, which describe in detail the features of the products offered, the company's policies and financial plans, make it easier. Such periodic consultations help develop the skills necessary for work, become more confident.
By the way, thanks to the feedback from employees of such network companies, the MLM concept has ceased to be perceived as a means of deception since the beginning of 2014, but is considered solely as a proven source of income, the effectiveness of which depends on personal qualities.
Tips for beginners
Based on all the feedback, successfully buildyour career, guided by the principles of network marketing, you can if you have:
- experienced mentor;
- desire to develop;
- good product with quality certificate;
- decent salary;
- a close-knit team.
There are countless positive and negative opinions about how network marketing works. There are pros and cons to every business method. The main thing is to draw the right conclusions from all of the above, rely on the already existing experience of predecessors, skillfully use the knowledge gained and successfully implement it in life.
