Very often in the vastness of a rapidly developing market industry you can hear the term "network marketing". What it is, what are the features of the concept, how it affects the performance indicators of companies - issues that are of interest not only to business sharks, but also to those who are trying to start their own business or just looking for sources of income.
You can find out the answers, as well as get reviews of owners and employees of companies who were able to successfully use the principle of network marketing in their work from the article below.
What is network marketing?
Multilevel or network marketing (MLM) is essentially a specific product sales process, for which the manufacturer’s direct contact with the buyer is used. 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 realize the necessary products, but also to attract other interested people to the work.
The payment scheme is absolutely open - not only the distributor receives money and benefits, but also everyone through whom the goods pass in this chain. Moreover, earnings are official, real and depend only on the number of goods sold. While, for example, in the case of the financial pyramid, with which network marketing is often associated, the pros and cons are not so obvious, because in this case, money is received from investments of other participants, and their timely issuance is not guaranteed at all.
Advantages and disadvantages
Like every concept, an MLM structure is not without its positive and negative sides. All the pros and cons of network marketing can be identified by examining the impact of this business scheme for each of its individual structures - companies, employees and consumers.
Pluses for the company:
- the possibility of unlimited earnings;
- lack of advertising costs;
- There are no costs for renting premises for shops;
- lack of expenses for the delivery of goods;
- minimal interference from public services, lack of documentation.
The last item may also include the introduction of minimum tax duties. Due to the fact that the products fall directly into the hands of the consumer, and not through stores, it is extremely difficult to control the volume of sales.
What benefits can be highlighted for employees of MLM companies
Trained and satisfied with the conditions of earnings, distributors are the key to successful business building for MLM companies, therefore, when working with their team, management offers him the following prerogatives:
- the possibility of unlimited earnings (as can be seen, both for the company and for employees this item is general and fundamental);
- financial independence, i.e. the possibility of carrying out activities without constant pressure from the employer;
- the possibility of raising your own business with minimal investment, regardless of age, education;
- flexible flexible work schedule;
- continuous improvement of personal qualities.
Improper organization of the workflow - a flaw?
The disadvantages of network marketing are observed if people with a lack of experience are present at the head of corporations or among the team. In the process, they can stop work processes, negatively affecting the level of sales. There are several reasons for this:
- high morale on the part of customers and 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 the rest and the lack of organizational abilities, as a result of a large turnover of staff dissatisfied with the quality of the work process.
What are the benefits of MLM principles for customers?
For the consumer, the pros and cons of network marketing are completely different features. For example, a lack of comprehension on the part of the distributor in the desire to arouse the interest of the buyer and, in case of refusal, is an invaluable time for both. The advantages are in the following factors:
- saving time on shopping trips;
- full awareness of the quality of the goods offered;
- control of financial expenses;
- purchase of goods is cheaper due 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 compositions, share your opinion, earn money, receive recommendations on the types of goods purchased. It is also possible to determine how the pros and cons of network marketing affect the efficiency of business and purchasing activity, allow ratings.
What is a rating, what does it mean for network marketing
The rating itself is a kind of assessment of the effectiveness of a particular type of activity. To compile it requires data that can be obtained through social surveys. This is done by special companies that process the information received and transmit it to customers for further use.
In the process of data processing, all the pros and cons of network marketing, which is used to develop a certain company in a certain region to promote a certain product, become clear. Also, the results obtained allow us to track and record the financial results of corporate activities, as well as apply new strategic tactics for the development of the business in the future planning of the company's economy.
Network companies rating
A separate subject for ratings, allowing you to track how effective network marketing is, is a company whose list 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 characterizes how attractive the sold product is for the consumer, how changes in the internal structure of the company or the introduction of a new product affect sales volume indicators, etc.
In this case, the rating is an identification of competitiveness in the modern market and how financially the company has grown over a certain period of time. Also, the data obtained on the basis of the lists of companies allow us to give a full detailed analysis of financial opportunities in the future, to understand what to do in order to double / triple the indicators in the future.
List of MLM Companies in Russia
Below is a list that includes large domestic companies that use effective network marketing companies. The list of Russia is based on their activities for the annual period and includes various economic, technical, cultural and social factors. The 5 leading network companies with a high percentage of sales and profit growth for 2015 include:
- Avon Prod. Inc.
- Amway Corp.
- Oriflame Cosmetics SA
- Mary Kay Inc.
- Faberlic OAO.
If you compare the same top list with indicators, for example, in 2012, there will be a noticeable tendency towards a decrease in sales growth for Oriflame (in 2012 it occupied the 2nd place). To summarize, the economic crisis has affected the decline in sales for all companies without exception. However, Avon was able to maintain its leading position: its sales volumes, as before, account for one third of the total turnover of all listed companies. 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 increase sales and ranking
Naturally, in difficult economic situations, the way out of the difficult financial situation of companies is to encourage employees to increase sales. This is called "motivational network marketing." What is the essence of this program? It allows you to promote the company up the top list due to additional financial support for the employee and the construction of his own profit scheme by attracting third parties.
In other words, in such cases, a reward is introduced:
- for the sale of a large volume of products;
- for attracting additional employees who will sell a large volume of products and search for a new customer base.
It is verified that this construction of a network marketing scheme can significantly increase the company's profit growth and recoup costs. And all you need for this is the desire to get easy extra 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 population of Russia, and these figures are growing from year to year.
How not to fall victim to and succeed in network marketing fraud
Naturally, not everyone can achieve success in MLM business, however, there are 3 rules that can be used to avoid fraud and financial setbacks and understand the principle of network marketing:
- the company must be registered (it is possible to verify the company’s affiliation with the declared association using the rdsa.ru resource), this significantly increases the confidence factor in the company and is an indicator of its official activity;
- for employment, it is necessary to choose a company with a high sales rating that occupies a leading position in the modern market - this is the key to its success, effective self-improvement, and hence prospects;
- the maximum manifestation of active personal qualities (ability to work, desire to learn, improve your communication skills and beliefs), a leader’s position is the key to success in conducting a network business.
The main thing is to remember: the buyer should have the right impression about the nature of the company. It should not resemble an inexplicable turmoil, scam or financial pyramid. Everything should be as transparent as possible, accurately, meet the stated requirements.
Reviews of active users of the MLM concept
They will help you better understand how network marketing works, what it is, the feedback of those who are faced with 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 associated not only with the process of assimilating a large amount of information, but also with the emerging sense of alertness.
To cope with all prejudices, and also easier to delve into all processes, the presence of seminars, lectures, trainings, ready-made catalogs, which details the features of the products offered, about the company's policies and financial plans, makes it possible. Such periodic consultations help to develop the skills necessary for work, and become more confident.
By the way, thanks to the reviews of employees of such network companies, the MLM concept has already ceased to be perceived as a means of deception since the beginning of 2014, and is considered solely as a proven source of income, the effectiveness of which depends on personal qualities.
Tips for Beginners
Based on all the reviews, you can successfully build your career, guided by the principles of network marketing, if you have:
- experienced mentor;
- desire to develop;
- a good product confirmed by a certificate of quality;
- decent salary;
- close-knit team.
You can find countless positive and negative opinions about how network marketing works. There are pros and cons to each of the business methods. The main thing is to draw the right conclusions from all of the above, draw on the existing experience of the predecessors, skillfully use the knowledge gained and successfully implement it.