What is Network Marketing?

We do it every day and we don’t even realize it. We click “like” on Facebook, we insert a link to something we like, we tell someone about a movie or restaurant that we like. The power of a referral is huge and it is the NUMBER ONE source for new customers. Even when we owned our franchise, we spent thousands of dollars on advertising, corporate spent millions on television advertising, yet our strongest source of new members were “Buddy Referrals”… a friend told them about our gym.

Well, network marketing is the distribution method that companies are now using to pay for advertising on the back end of a sale, rather than on the front end. Well recognized institutions are turning to network marketing to reward those who make “referrals” or “recommendations”.

Network marketing is also known as Multi-Level Marketing (MLM), Direct Sales, or Independent Distributorship. Many well known forms of compensation, such as Real Estate/Broker agents, and Insurance Agence model the compensation plans of network marketing. Yet, as soon as someone starts drawing circles on a board, everyone thinks “Pyramid”.

Although illegal pyramids exist (see posts related to telling the difference), a legitimate network marketing opportunity is nothing more than a methodology to track who has earned the “referral credit” or commission. All compensation is based on volume of sales that one can be directly tracked to generating. Contrary to popular belief, the person at the top does not always make more than the person below them. If someone below generates more sales to the company, they will make more money.

I love this methodology of rewarding those who do the work. In corporate America, as a financial analyst, I could NEVER make more than the CFO, yet in this, there is no limit to what I can make and I can even surpass someone above me (and I have before). In my opinion, this is a true enterprise system.