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What is Network Marketing?

We are huge fans of network marketing, which surprises a lot of people. In the future, we’re going to go into detail about why we are such fans, but before that, we wanted to introduce the concept, explore the history, give you a baseline understanding of what network marketing is, and how it might be a good fit for you as a source of residual income.

History

Network marketing has been around for over 50 years. In 1934, the California Vitamin Company came up with a concept of Multi-Level Marketing. They found that their sales reps were having great success with their families and friends, who would then act as an army of true fans. But this was before the internet could propel those rave reviews and that positive word of mouth. Instead, they decided to put this army of fans to work. Why not provide the product wholesale to these fans and send them out to represent the company directly?

In 1943, California Vitamins changed their name to Nutralite Corporation and proceeded to implement the first true Multi Level Marketing compensation plan. Everyone involved in the company got paid on multiple levels of each sale made.

This one company is responsible for a number of the major players you think of in today’s network marketing landscape. For instance, Jay Van Andle and Richard DeVoss joined Nutralite Corporation as members in the late 1940s. A decade later, Jay and Richard decided to go in a different direction and start their own network marketing company – Amway.

A few other legacy brands that come to mind when you think of network marketing are Shaklee (also born out of Nutralite,) Avon, Mary Kay, and Tupperware. But it is not just these mid-20th-century players at the table. More recent examples include Pampered Chef, Discovery Toys, and doTerra.

What Network Marketing Is

Network marketing is a way for a company to sell directly to consumers, with a compensation structure based on selling products as well as recruiting new distributors.

You join a distributorship, sell a product, and recruit new distributors who become your “downline.”

The power of network marketing comes from your personal network. In talking with friends and family through your daily interactions and your social media presence, the products you are selling – whether they are science-based toys for toddlers or vitamin supplements for older adults – might strike a chord with people in your networks. The freedom of creating your own schedule around another job or just your day-to-day life is also an attraction of network marketing.

Your downline is created when people join your distribution network under you and create revenue for themselves, and provide you with a percentage of those sales. You become part of their “upline.”

With each new distributor you recruit to your network, you start to build your downline. Each of your recruits, in turn, are taught the benefits of recruiting new distributors to their network, and in doing so, your downline structure continues to grow.

Questions to Ask Before You Jump In

  • What is the upside for your upline? Your “upline” consists of people in the levels above you: your recruiter, regional VP, etc. They should be able to tell you what they earned on an annual and monthly basis. If the numbers check out, these people can become a great resource for you as you get into the business. What have been the best practices that propelled them to where they are?
  • How are your marketing skills? The brand will likely provide you with materials for promotion on and offline, but it will be up to you to develop a marketing strategy and deploy those materials to sell product and grow your distribution network.
  • Is this a product you believe in? To me, this is a key question. If you love and use this product regularly, you can be a strong brand ambassador. This creates a direct correlation with your ability to earn, instead of having a trunk full of wholesale product you can’t get rid of.

Ok, that gives you a basic understanding of network marketing. Network marketing can get a bad rap, in our opinion but finding the right fit with the right company can be a great source of supplemental income. We’re looking forward to sharing in more detail what we see as the benefits and why we are such proponents. So stay tuned!