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.
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:-
Disadvantages of Network Marketing:-
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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