Network Marketing

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Network Marketing

Introduction:-
Network marketing, also known as Multi level marketing, Pyramid marketing & direct selling, is the marketing style & technique, adopted by many companies in India as well as worldwide. In this concept, companies emphasise not only on sales generation, but also on workforce maximization. Companies adopt a workforce pyramid of different levels.
In multi level marketing, companies sell their products directly through the distributers. They take the distributers from the society. Here, each member of the pyramid is supposed to generate sales & also attach more members or distributers with the company. All these members further generate sales & join more people as distributers. Thus, the sales as well as the workforce increase. These distributers are paid the commission on the base of sales they generate & also by the sale generated by the next level of the distributers, they attach to the company.
Thus, we see that it acts like a chain reaction. Here each member brings sales & work force. Each member uses the product and makes other using it. Thus he earns & also earns for the company.

Need of Network Marketing:-
            In the traditional marketing model, a product goes through many processes before in reach to the customer like Importer (in case of imported products), Whole Selling, Retailing, Distributing, Advertisement etc. All this made a delay in delivery of the product, as well as these all increase the cost to the customer. Also all this made a product less profitable to the company.
            In Network Marketing, the companies just eliminate all these middle processes & hand out the product directly to the customers. It cost less to the company. Same way, it cost less to the customer also. Secondly, it creates lot of Employment Opportunities. Third, if customer finds the products good & the company also, he may be the part of this. He may also earn money by just using the products only.

Different Models:-
                    Network marketing has five different models. We can explain it as further:-

Unilevel  Model:- This model is often considered the simplest of compensation plans. As the name suggests, the plan allows a person to sponsor one line of distributors, called a "frontline." Every distributor the person sponsors is considered to be on that sponsor's frontline and there are no widths limitations, meaning there is no limit to the amount of people one can sponsor in the frontline. The common goal of this plan is to recruit a large number of frontline distributors and then encourage them to do the same. This is due to the fact that commissions are normally paid out on a limited depth, which typically means sponsor can earn commissions on sales between 5 and 7 levels deep.

Stair step Model:- This model is characterized as having representatives who are responsible for both personal and group sales volumes. Volume is created by recruiting and by retailing product. Various discounts or rebates may be paid to group leaders and a group leader can be any representative with one or more down line recruits. Once predefined personal and/or group volumes are achieved, a representative moves up a commission level. This continues until the representative's sales volume reaches the top commission level and "breaks away" from their up line. From that point on, the new group is no longer considered part of his up line’s group and the multi-level compensation aspect ceases. The original up line usually continues to be compensated through override commissions and other incentives.

Matrix Model:-This model is similar to a Uni-Level plan, except there are also a limited number of representatives who can be placed on the first level. Recruits beyond the maximum number of first level positions allowed are automatically placed in other down line (lower level) positions. Matrix plans often have a maximum width and depth. When all positions in a representative's down line matrix are filled (maximum width and depth is reached for all participants in a matrix), a new matrix may be started. Like Uni-Level plans, representatives in a matrix earn unlimited commissions on limited levels of volume with minimal sales quotas.

Binary Model:-A binary plan is a multilevel marketing compensation plan which allows distributors to have only two front-line distributors. If a distributor sponsors more than two distributors, the excess are placed at levels below the sponsoring distributors front-line. This "spill over" is one of the most attractive features to new distributors since they need only sponsor two distributors to participate in the compensation plan. The primary limitation is that distributors must "balance" their two down line legs to receive commissions. Balancing legs typically requires that the number of sales from one down line leg constitute no more than a specified percentage of the distributor's total sales.

Hybrid:-Are compensation plans that are constructed using elements of more than one type of compensation Model.

Advantages of Network Marketing Model:-

  • Network marketing model comes with a large workforce. Also, the workforce grows very fast. Thus, it helps company to establish soon.
  • In Network Marketing system, a company need to pay a nominal advertisement cost. Most of the promotion is done by the workforce only.
  • Company always stay connected with its customers as well as distributers. It provides a 3D picture of the market as well as the distribution system of the company. Thus, any internal problem in the sale or the organizational structure can be solved very quickly.
  • Network Marketing develops its market by the social network of the Distributers. Thus it penetrates very quickly in the market.
  • Network marketing gives employment to many people. It helps people to earn money. One can join it as a part time job also.

 

Disadvantages of Network Marketing:-

  • Companies cannot provide a range of the products. Customer is left with no choice, but a single product to use. Thus, after some time, the companies start losing their customers.
  • In Network Marketing model, a company need to pay commission at every level of the Pyramid. This process makes it an expensive one
  • The workforce of the Network cannot be relied upon. All the distributers do not perform well expect few. Thus, the Pyramid does not perform properly.
  • Scope of Network Marketing is limited in India, due to the conservative behaviour of the people. Behaviour about the distributers, about the quality of the products and the reliability of the Chain system.
  • The performance of the companies, who had tried the multi level marketing, is also de-motivating. None of them had performed well. Most of them has adopted the retail chain system or left the multi level marketing.

 

Required Steps:-

  • Companies should recruit only the able distributers. A person, who is not smart enough to convince a person, is not a right person for the network marketing. Evaluated & educated people can do a lot in multi level marketing.
  • The companies need to make the customer aware of the products. The product, which has never been heard about, will not be accepted by the customer.
  • Workforce needs a lot of motivation from the company side. Training is also required to make enough sales & to join more distributers.

 

Conclusion:-
          Network marketing is one of the best innovative techniques. It has done well worldwide. Many big names like Amway, IQ International, ANC Inc. Telecom + have grown from multi level marketing. However it is not a successful one in India, it has also not a flop one. It may do well with some more innovative & technical steps. We just need to improve the model a little in the Indian contact. It may be a successful marketing model in the future.

 

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