How to start network marketing?
There is a fundamental difference between using your network to market your product or service and Network Marketing also known as Pyramid Selling. Understanding the differences is very important.
Using your network to market your product
Most entrepreneurs find networking is the most cost-effective form of marketing available. Networking should be part of every start-up’s marketing plan, it helps you build alliances with other businesses that will promote your product or service to their customers.
Here are some ways to make networking more successful:
Spend a few minutes with a targeted number of people and then follow up. You might meet them through your existing business contacts, an industry group or forum.
Choose the right setting
Attend functions where these types of people will be. Make sure that the purpose of the function is to promote your business and not just to socialise. Select events that are designed to introduce people and promote business.
Have a goal
Decide what you are trying to achieve for your company before you start networking. It helps with new contacts to talk to them about their concerns before you talk about your company.
Always carry your business cards and know what you are going to talk about, how you will frame it and what your objectives are.
Don’t bombard people
Boring people you have just met with excessive details about your is not a way to make a good first impression. Save the specifics for a second meeting, unless your new acquaintance asks to know more. Always seem genuinely interested in contacts and try to determine their problems so you know how to help them.
Marketing through Affiliates
Affiliate marketing is the process by which an affiliate earns a commission for marketing another person’s or company’s products. Marketing your product through a network of affiliates can also be very effective and multiply your chances of selling more product. The affiliate is responsible for tracking transactions and attributing the correct affiliate to the sale.
Marketing through Agents and Distributors
The differences between agent and distributors are:
Ownership of Products
Agents do not take ownership of goods while distributors own the products. Distributors need to purchase the products and resell them to local wholesalers, retailers or end users.
Agents are paid by the supplier with a commission on sales value.
Distributors make their own profit by adding the price supplier providing to them.
Product Range & Responsibility
Agents generally have smaller product range , but agents don’t normally take care of after-sale services.
Distributors usually sell multiple products provide support and after-sale services.
Advantages and disadvantages of working with Agents
- Working with sales agents, you don’t have to mark up the quotes to customers which would increase the end price
- You quote the customers directly and control the pricing
- Sales agents are more willing to tell you customers’ information and market information than distributors.
- Agents are often smaller and have more limited sales reach, established network than distributors
- Agents specialise on specific products offerings
- Do they understand your products and your market?
- Do they represent any other products from any other company?
Advantages and disadvantages of working with Distributors
- Distributors have a lot of established contacts
- They have a local sales network and sales force
- They are usually market and product specialists
- They can have an established reputation and trust factor
- Distributors hold inventory, they shorten the product to market lead times and better serve the customers with finished goods, consumables, spare parts and or other commodity-based components
- A distributor, may have high mark-ups
- A distributor is unlikely to share customers information with you
- Distributors may just want to use your products to broaden their product portfolio
Using a Network Marketing approach (Pyramid Selling)
As mentioned earlier in this article Network Marketing is often a disguise for Pyramid Selling, a practice that is often illegal. Pyramid Selling is also known as Multi-level marketing (MLM), network marketing, and referral marketing, it is a marketing strategy for the sale of products or services where the revenue of the MLM company is derived from a non-salaried workforce selling the company’s products/services, while the earnings of the participants are derived from a pyramid-shaped compensation commission system.
The common feature that is found across all MLMs is that the compensation plans theoretically pay out to participants only from two potential revenue streams. The first is paid out from commissions of sales made by the participants directly to their own retail customers. The second is paid out from commissions based upon the wholesale purchases made by other distributors below the participant who have recruited those other participants into the MLM; in the organisational hierarchy of MLMs, these participants are referred to as one’s down line distributors.
MLM salespeople are expected to sell products directly to end-user retail consumers by means of relationship referrals and word of mouth marketing, but most importantly they are incentivised to recruit others to join the company’s distribution chain as fellow salespeople so that these can become down line distributors. According to a report that studied the business models of 350 MLMs, published on the Federal Trade Commission’s website, at least 99% of people who join MLM companies lose money. (“The Perils Of Multi-Level Marketing Programs”. Texas Public Radio. October 4, 2017. Retrieved February 16, 2018.) and (^ “Legging company, LuLaRoe accused of misleading consultants”. Valley News. Retrieved February 16, 2018)
Because down-line participants are encouraged to hold onto the belief that they can achieve large returns, while the statistical improbability of this is de-emphasised. MLMs have been made illegal or otherwise strictly regulated in some jurisdictions as merely variation of the traditional pyramid scheme.
In simple terms, using your network to market your products is a great idea, Pyramid Selling is NOT.