Is it possible to make money on network marketing and why is it dangerous?

2024 Author: Malcolm Clapton | [email protected]. Last modified: 2023-12-17 03:44

The main thing that you should know about this type of business.

What is network marketing

Network, also known as multilevel marketing (from the English multilevel marketing, MLM) is a sales system organized in a special way. Each person who joins it can receive money not only for the sale of goods, but also for attracting new members of the organization.

All of this is presented as "an opportunity to start your own business", so each member of the network will be called a partner or something similar. An illusion is created that all participants are equal, but this is not so. How exactly, let's figure it out a little below. And for this we will consider each component of earnings in MLM.

How sales are organized in network marketing

The principle of direct, or personal, sales works here. The MLM agent himself offers products to potential buyers. Much depends on his assertiveness, sociability and the breadth of his circle of acquaintances. For example, salespeople may bring catalogs and product samples to the office where they work, to a university study group, or to a friend meeting. However, now network marketing has moved to the Internet, so it has become easier to expand your social circle.

The seller receives income due to the fact that he sells the product at the price of the catalog, but he gets it cheaper. Also, somewhere they may pay extra bonuses for achieving target indicators - a certain amount of purchases or sales volume.

In some cases, the agent must buy a certain set of products upon entering the structure. Sometimes it happens that he is obliged to purchase goods for a certain amount on a monthly basis. But even if this is not required, it is still profitable to be a client yourself: you buy at a discount and increase your total bill.

How levels work in network marketing

As the name implies, business is organized according to the principle of a network, or rather a pyramid. The agent has the right to attract new sellers and become their manager. They pay for that too.

Building your team can be more profitable than selling goods.

Let's say you become a member of a network business selling wooden darning eggs for socks. You have attracted two more people to the company - you have already formed your own team. You will receive a reward for this. In addition, now monthly you will be transferred a percentage of the sales of your "subordinates". When they attract two people each, your team will become three-tier. In addition to the reward for expanding the structure, you will begin to receive a percentage of the sales of six people already.

Accordingly, the more people you and your team involve, the more earnings. When the structure grows, it is not necessary to engage in direct sales and attracting people yourself, you can supervise it and live off the efforts of others. True, not everyone will succeed.

Why network marketing has a bad reputation

Usually those who are already in such a structure speak about the network business with burning eyes. People have such a job, they get money for it. Others most often rate network marketing in terms of the victims of overly active salespeople.

The fact is that direct sales sometimes require an aggressive offer of goods and pushing a potential buyer.

You will not leave such a seller with the polite "I will contact you if I decide to purchase the product." They will call you back a million times and ask if you have changed your mind.

The situation is similar with the proposal to open your own business. Now networkers are attacking with similar messages on social networks, especially those who have posted an advertisement for a job search in some group with vacancies. People are even forced to write something like: “Do not offer network business”. The way job offers are presented adds suspicion. The messages “I left the office and a month later I started earning 100 thousand rubles” is a bait far from reality.

Often, the negative is transferred to the goods, although this has nothing to do with their quality. The products that networkers sell can be different - both good and bad. However, like any manufacturer.

What are the advantages of network marketing

Free schedule

In a network business, you don't need to sit in the office for 8 hours. You choose when and what to do. True, this does not mean that you will have a lot of time free - most likely, you will have to work much more than 40 hours a week, at least at the very beginning.

No upper limit on earnings

Formally, income depends only on your efforts. The more you achieve, the more you get.

Bonuses for own purchases

If there are no restrictions, you can buy goods for yourself at least for the entire due amount and receive a reward for this.

The prospect of entering passive income

This is perhaps a very important advantage that excites the hearts of neophytes and with which they are lured into the structure. The idea of one day doing nothing and getting paid for it looks attractive. True, it does not quite correspond to the truth. A team can fall apart without a leader, so you still have to stay active.

What are the disadvantages of network marketing

Low starting earnings

Selling alone won't get you far, especially if you're just getting started. By the time you assemble your team, it may be a long time. Moreover, there is a chance of not getting anywhere from the start.

The need to look for clients

It happens that a potential buyer wants to buy some advertised item and goes to the distributor himself. But this does not happen very often. Usually an agent has to offer a product, advertise, periodically remind of himself if the buyer cannot decide. This is a lot of work.

Obligation to buy products

If a company insists that you must periodically buy a certain set of products, there is a risk that you will not have time to sell or use them. As a result, you can spend a lot of money and never compensate for the costs.

Can network marketing be beneficial

Looking for someone. This is definitely beneficial for the founders of the company. Under the standard scheme of selling a product, it must be advertised in such a way that the buyer is interested and comes himself. In the network business, the seller goes to the buyer, and there are many such sellers in the company.

There are benefits for the members of the structure as well. Joining the network early on and being at one of the higher levels will certainly make money. Moreover, all the main work for you will be done by those who are on the lower levels. For newcomers, the situation is not so straightforward.

Research shows that 73% of people do not make money from network marketing or exit at a loss. These are American data, but you can draw conclusions from them.

Many people in network marketing will remain a source of income for those at the higher levels.

Why network marketing can be dangerous

With the fact that you can waste time and not earn anything, we figured it out. But that is not all.

A financial pyramid can be disguised as a network business

A pyramid scheme is a multi-level organization in which members are rewarded through the contributions of those who joined later. If there are no more people willing to invest, the pyramid collapses. At the same time, the participants of the upper levels leave the scheme in positive territory (sometimes a lot), the lower ones lose everything.

Pyramid schemes are often disguised as something else. One of the screens is network marketing. Indeed, the schemes are quite similar. But not all network marketing is a pyramid scheme. Here's what should alert you:

• Entrance fees are collected from the participants without giving out the goods and they promise a reward for this.
• Members are sold cheap goods at a high price. Let's say it can be a "high-tech" tea strainer, which costs 50 rubles in a hypermarket. But here it will cost 1, 5 thousand. These are all the same contributions, just disguised.
• The main task of the participants is not to sell products, but to bring as many people as possible. And the reward for the second is much higher. At the same time, no one monitors the volume of sales.
• The history of the creation of the company, statutory documents, licenses, the place of production of the goods are secrets covered in darkness. When you try to get information from higher-level managers, you get a direct or veiled refusal.

In network marketing, the main thing is the sale of goods, and at an adequate cost. This is the main source of income for the company, not deposits. Even if we are talking about the sale of goods to their own "partners". Expansion of the network is intended to increase sales, and therefore remuneration is paid for attracting new members.

Networked business uses the same methods as sects

Sales is a business, in whatever form it is organized. You need to approach him with a cool head, see all the pros and cons, risks and pitfalls. But sometimes the organizers of the network business themselves prevent this, and for this they use the same tricks as in the sects. They help turn off critical thinking and make you stay in business, even if it’s not profitable at all.

Attention bombardment

Perhaps you have ever read screenshots of chats from network marketing teams, which they happily publish on their pages. They are filled with molasses, syrup and smiles - it seems that something can stick together only from contemplation.

The team is glad that you have joined, they rejoice at your successes, experience your failures, support and are always in touch. For many, this is an unusual experience. People feel that someone is needed, and therefore they are afraid to go across the opinion of the majority, because they are almost a family or even closer to it.

When it comes to large gatherings, this feeling only intensifies: you've finally met like-minded people who understand you. As a result, a person can stay in the structure only for the sake of these emotions.

Information manipulation

It is no coincidence that the network business loves to organize mass meetings and reward their best partners by participating in some kind of conferences. It is then that people come on the scene who tell how they started from scratch, and now they make millions. And of course you can do it too.

The bitter truth is that most MLM members are likely not to stand on this stage. But universal delight can warm up interest for some time to come and make you believe that everyone can come to success.

Imposing guilt

If the rosy promises of a million dollar income do not come true and the person begins to doubt, his team will move from support to imposing guilt. For the fact that you are not able to earn a lot, only you are responsible. Trying poorly, working little. As a result, instead of giving up everything, you start to work harder - albeit with the same result.

Who is network marketing for?

As we have already found out, not everyone can make money in MLM. There are categories of people who will fit into network marketing more successfully than others. This is for you if you:

• Love the products of this company with all your heart. Then it will not be difficult for you to buy goods for yourself and sincerely recommend them to your friends.
• Immune to someone else's anger. And you have to deal with it, because the reputation of network marketing is poor.
• We are ready to work hard, and not always with a result. Tales that money will flow into your hands are created to attract new adherents. Success is built precisely on personal activity.
• You have a wide range of acquaintances, and better pumped accounts in social networks. You may have seen success stories when a popular blogger becomes a member of MLM and in a month gets super bonuses and goes to the main conference of the brand. He, of course, writes that everyone can do this (for this you just have to come to his team). But he already had a huge loyal audience. A person with 40 followers on Instagram cannot do this, no matter how good he is.

Things to remember if you are interested in network marketing

• MLM is a business and must be treated accordingly.
• Getting rich quickly and easily, as they promise, will not work, you will have to work hard.
• Before starting, you need to check the company with which you intend to cooperate, make sure that it is legal and does not look like a financial pyramid.
• It is important to maintain a sobriety of mind and critical thinking at all stages of work. And jump off in time if something goes wrong.