With the changing scenario of business around the globe, organizations have quickly and effectively synergized with the dynamics of the modern business. Their orientation, their focus, their processes, and aboveall, their ways of marketing
& sales management- everything has evolved.
Gone are the days when people had to depend upon a handful of sources to get access to branded offerings, products and services. Internet, E Commerce, Direct Selling, Mail Order System? and there's an inexhaustive list of innovative ways and media through which organizations sell to their customers.
One cannot ignore the abovementioned modes of marketing and selling, particularly in an environment, which is today driven by anything but the motto of "Customer Service, Satisfaction and Ease". To add to this, Internet & Information Technology
has given marketers tools like never before- the tools of accessibility and wider reach. In fact marketers around the world have started emphasizing upon the significance of these new modern age tools that could be the very beginning of a new evolution in the field of marketing. And yes, to mention in the same context, I'd like to share the following lines of a famous leader-"Today's illiterate won't be the persons who aren't educated, but instead they'll be the ones who aren't adopting themselves to changes".
Getting back to the topic, I must talk of Network Marketing (also known as Direct Selling/ Multi Level Marketing (MLM)). Being a part of the most modern methods of making sales, it has already made its presence felt in India backed with established credentials of itself as an industry spread far and wide across most parts of the world and having annual global business volumes exceeding US $ 100 billion and enormous potentials to grow. A non-conventional way of sales & distribution, direct selling or network marketing is all about going directly to the consumer, and most importantly- through a customer.
Definition & Explanation
Network or Multi Level Marketing may be defined as a distribution channel/ sales method wherein the manufacturer directly sells to the customer at a preferred rate and also gives the customer rights of selling the same product(s) for certain compensation/ incentive.
Thus, firms involved in selling through network marketing have a well developed system of functioning based on the concept of Network Marketing. According to the concept, the company does not employ full time salaried employees to sell and market its product offerings. Instead it goes the direct way to consumers by approaching them first to become customers of the company by purchasing products of the company at preferred rates, and then offering the same customers to re-purchase those products at special preferred rates for future purchases. This way the company ensures that it has a system strong enough to attract people towards its products and offerings coupled with the advantages of lifetime re-purchase discounts. Now, besides the discount facility, the company also offers the customers to help the company market its offerings. The customers acting as independent agents/ distributors/ network marketers/ independent consultants on behalf of the company do this (very similarly like the life insurance companies have independent marketing agents to sell their insurance policies). It is worthwhile to note that the formalities for registration of the customers as agents of the company incurs no agency or distributorship charges except a nominal fee being charged by the company towards one time registration of the customer and his enrolment as a network marketer/ network customer.
How Does the Model Work?
As per the model, the firm motivates the customers of the company to sell its products by way of Network Marketing (direct selling). This happens when the customer introduces other people to the system of MLM and sells to them his firm's products. Now, after purchasing, theses new customers will automatically have agency rights for marketing (as explained earlier) the same products to other people, thereby increasing sales and recruiting more marketers (consultants). Hence this system of network marketing boosts sales and also brings in new and more marketers by way of existing customers working on behalf of the company and marketing its offerings + the great business opportunity available with the customership.
Advantages of Network Marketing
The 45 per cent or more of the margin or markup, which was charged by the middlemen, is now given to the consultants.
The consultant gets the product direct from the firm, hence the material is always genuine.
The products will be of superior quality at affordable pries and in appropriate packings. These products will not be available at retail outlets, hence there is exclusivity of selling rights.
A detailed computerized monthly statement of accounts, along with the payment is sent to the consultant. This statement also gives the names, addresses and phone nos. of all the consultants in your group.
The consultant gets a chance to do business without any investment or liability.
The Business opportunity aspect of MLM- earnings potential
Multilevel marketing allows sellers to build a business through their own sales efforts and by inviting others to become sellers. Remuneration is based on a seller's personal sales AND on the combined sales of those people they have sponsored, trained and motivated.
Every human being on this earth has limitations, the biggest being time limitation. Nobody can afford more than twenty four hours of work a day (assuming that a person works for full of a day), since god has given us only twenty four. Thus it clearly implies that there are limitations for people to work, and hence for them to earn. This is called Linear Income or limited income.
Keeping the above factor in mind, it is but obvious that nobody can have unlimited earning or better and more practically, say exponential earning.
It must be kept in mind that it is through only exponential earning that industrialists have been able to build wealth and make big industrial empires. This can be understood from the simple explanation ? An industrialist has a factory, an office, etc where he employs people in large numbers to work for him and in turn pays them salaries and he himself earns huge profits and turnovers from their work. This becomes possible by the multiplication of time and work, i.e. the time put in by thousands and hundreds of employees is multiplied by virtue of so many employees working for say eight hours each, thus time worked totaling to eights of thousands of hours a day, and that too in the industrialist's favour. The best part of the whole story is that the people working as such are individually working only for eight hours a day, but collectively for thousands of hours. This is called time duplication and it forms the basis of what is called Leverage Income or Exponential Income.