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What is network marketing

All about Netwotk Marketing

Defination Netwotk Marketing:

A business model in which a distributor network is needed to build the business. Usually such businesses are also multilevel marketing in nature in that payouts occur at more than one level.
Network marketing is a type of business opportunity that is very popular with people looking for part-time, flexible businesses. Some of the best-known companies in India, including Amway, Modi-care and Forever, fall under the network marketing umbrella.
Network marketing programs feature a low upfront investment--usually only a few hundred dollars for the purchase of a product sample kit--and the opportunity to sell a product line directly to friend, family and other personal contacts. Most network marketing programs also ask participants to recruit other sales representatives. The recruits constitute a rep's "downline," and their sales generate income for those above them in the program.
Things can get sticky when a network marketing network compensates participants primarily for recruiting others rather than for selling the company's products or services. A network marketing system in which most of the revenue comes from recruitment may be considered an illegal pyramid scheme.

Structure of Network Marketing:

Firstly, manufacturers require several distributors, sub-distributors and dealers in order to create a network marketing structure. Secondly, These distributors procure goods from manufacturers themselves at wholesale prices.
They may either use them personally or they may sell them to other distributors for a profit. This chain continues further. The distributors, thus, will end up marketing goods until they reach customers or else they may become final customers themselves.
Furthermore, these distributors get an opportunity to make some profits from this marketing network. They can receive some commission from manufacturers on the basis of the total volume of goods they buy and sell. Hence, the functioning of these distributors is similar to that of insurance agents.

Use of Network Marketing:

Manufacturers generally use network marketing in business structures that require multi-level marketing. This is because such business models involve a large network of distributors and sub-distributors.
It is also of great use for distributors themselves because they can make an earning from it. Most companies like Amway and Tupperware tie-up with people who put in part-time work for this. Many women in India also become distributors and actively work with manufacturers directly.

Advantages of Network Marketing:

  • There are absolutely no limits on the size of the network marketing structure. This happens because companies can tie-up with innumerable people to become distributors. Further, distributors can further c0-ordinate with other sub-distributors to expand the company’s sales.
  • Due to a reliable and robust distribution network that engages customers directly, companies do not need to rely on advertising to market their goods.
  • The structure of distributors also reduces the profit margins of retailers that companies consider as an expense. These margins get passed on to distributors and the companies do not have to bear their burden.
  • Another advantage is that companies do not need to spend a lot of money on storage and distribution. This is because distributors end up bearing these expenses themselves.
  • Finally, this structure allows distributors to earn an unlimited income from their dealings with the company. They can earn an income from their own profits as well as commissions.

Disadvantages of Network Marketing:

  • Since manufacturers depend on distributors to determine consumer demand, it can be difficult to predict production targets. They may end up under or over-stocking their products.
  • In this form of business, it is basically the distributors who facilitate delivery of goods to final customers. Manufacturers have a limited role in this regard. As a result, they may find it difficult to control distribution and sales.

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