~ Network Marketing is a method of marketing products, services, and/or ‘opportunities’ to other people you know, you know of, your relatives know, your friends know, or your cousin’s boyfriend’s mother’s sister’s co-worker’s mailman’s aunt’s father-in-law, etc., etc. knows. “Word-of-mouth” has been proven to be the most effective form of marketing. There are all sorts of names and terminology associated with “network marketing”, such as “relationship marketing” or “referral marketing”, but most of them are redundant. The two main ‘types’, or subsets, of network marketing are “MLM” or “Multi-Level Marketing”, and single-tier marketing.
~ MLM, or “Multi-Level Marketing” – This is a type of network marketing that uses a multi-tiered compensation plan. Unless you were one of the people who formed the company, you will have an ‘upline’. Normally, the person who signed you up for the MLM ‘opportunity’ is the next person above you in your ‘upline’. This is not always the case as you will find some people higher up in the company, perhaps even one of the original founders, will be out giving seminars (usually sales presentations with the fervor of an evangelist) and aggressively recruiting interested parties like yourself, and possibly anybody who came with you, to become new participants / distributors / representatives or other similar titles, now that you have heard the hype about becoming an ‘instant success’; a ‘millionaire’ who gets that way by making ‘money 24 hours a day’ while only actually working a ‘couple of hours a week’. Exciting, isn’t it? “Take your time. Promoters of fraudulent business opportunities are likely to use high-pressure sales tactics to get you to buy in.
If the business opportunity is legitimate, it’ll still be around when you’re ready to decide.” -(from the FTC)- “Consult an attorney, accountant or other business advisor before you put any money down or sign any papers. Entering into a business opportunity can be costly, so it’s best to have an expert check out the contract first. If the promoter requires a deposit, ask your attorney to establish an escrow account where the deposit can be maintained by a third party until you make the deal.” Once you have signed on, you will be expected to build a ‘downline’ of equally passionate ‘followers’ (participants / distributors / representatives / etc.) underneath you who will purchase DVD’s, magazines, flip charts, order forms, websites and other training / selling aids, just like you did when you signed up, and of course, inventory. Your ‘downline’ in an MLM will usually consist of one, two, three, or even sometimes more, people directly under you.
Each of those people will be expected to build a similar ‘downline’, for which you will usually receive some form of compensation or company ‘credit’ whenever they make a sale or recruit a new participant / distributor / representative / etc. This first tier (under you) may provide a source of ‘residual income’ for you as long as they are actively selling &/or recruiting in the organization. Historically, that is not long. ‘Downlines’ are typically the factor most critical to your success in most MLMs. Depending on the compensation plan of the MLM, you may receive compensation, or ‘bonuses’, as far down as seven levels. In the meantime, your efforts will most likely be providing compensation to the members of an equal number of levels above you – your ‘upline’. In the U.S., there is little actual regulation of MLMs, other than on a state level, and that is usually complaint driven after-the-fact. In California, there are some legal requirements spelled out in its Seller Assisted Marketing Plan requirements, but they are only applicable when the initial investment to participate in a company’s MLM ‘opportunity’ exceeds $500, an obstacle that most MLMs easily navigate around with a ‘did you want fries with that?’ strategy.
~ Single-tier marketing (a term not widely used) is also network marketing to other people, similar to MLM, but without the complicated compensation plans. It is a more traditional approach to marketing and selling and is more prone to be successful with total strangers (like the old ‘door-to-door’ business model and the current in-home-party / presentation model) than MLM as it usually does not involve aggressively recruiting or selling an ‘opportunity’ – just a product. If the product is a good product, usually so is your compensation. That compensation is based primarily on the success of your own efforts and sometimes those of a sales force under your direct control, but not the thousands of participants that MLMs can potentially involve. You are almost never more than three levels down from the main office or supplier (Ownership / Regional Manager / General Distributor or such structure). Your commissions on products are usually many multiple times that of those in MLMs.
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