Network Marketing – Definition

Cite this article as:"Network Marketing – Definition," in The Business Professor, updated January 10, 2020, last accessed September 23, 2020, https://thebusinessprofessor.com/lesson/network-marketing-definition/.

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Network Marketing Definition

Network marketing is a form of marketing where the distributors of goods and services are independent agents. It is a business model that uses independent agents for sales, these agents often work from home and are required to build their sales force by recruiting other sales agents. The agents recruited are called down lines on which the independent agents earn commission alongside the commission earned on his sales.

Network marketing is also called multi-level marketing (MLM), pyramid selling, and referral marketing. This form of marketing is perceived as less reputable than the single-tier team.

A Little More on What is Network Marketing

Network marketing has no salary-earning workforce, rather, independent agents market the companies products in exchange for a commission. These agents also derive their earnings from a compensation system in which they paid from the number of downlines they recruit into the system.

Network marketing is a pyramid structured and it can easily be confused for pyramid schemes. In a network marketing program, independent agents, often called uplines earn income from their sales and sales made by their downlines.

Other names network marketing is called include affiliate marketing, cellular marketing, consumer-direct marketing, or home-based business franchising.

The Advantages and Disadvantages of Network Marketing

Multiple-tier marketing often favors individuals at the top of the pyramid. As a pyramid-shaped firm of marketing, independent agents that are at the top of the pyramid enjoy juicy benefits and make huge profits. Sales representatives on tiers below them do most of the work but earn less.

Network marketing is a good business model for energetic and passionate sales representatives. These individuals can make huge money from the program.

One major drawback of network marketing is that is can end up being a pyramid scheme. This happens when the company focuses less on focus less on making sales to consumers but rather targets how salespeople are registered into the system with payment.

Special Considerations

Despite that network marketing may look attractive to sales representatives, conducting in-depth research about a company before joining is crucial. Generally, single-tier network marketing are more reliable and reputable than the multi-tier network marketing, but a salesperson that is interested in joining the latter can research about the kinds of products the company offers, history of the company and its founders, are the products well advertised and acceptable, is making profit in the company tenable?

Here are the major points about network marketing;

  • Network marketing is a business model in which independent agents make sales to consumers on exchange for a commission.
  • These agents are required to hire other sales representatives who become their downlines.
  • Network marketing favors uplines more and sales representatives with good sales tactics and energy.
  • There is a thin difference between network marketing operations and pyramid schemes, sales representatives need to do deep research about a company before they join.

References for “Network Marketing

https://www.investopedia.com/terms/n/network-marketing.asp

https://www.entrepreneur.com/encyclopedia/network-marketing

www.businessdictionary.com/definition/network-marketing.html

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