Network Marketing: Is it a good or bad investment?

Joy Gabriel

8 months ago

Network marketing has been around for many years and has proven to be a sustainable source of making passive money over time for some but bad for others. So, if you’re among those wondering if network marketing is a good or bad investment, this article explains it all.

What is network marketing?

Network marketing also called Multi-Level Marketing (MLM) is a sales and marketing model that requires people to sell products by connecting to other people and selling to them. In other words, the business operates a multi-level customer structure in which people build connections with other people and sell their products to them over time.

Network marketing is usually considered a work-from-home business and mostly operated within social media communities. However, the business model of person-to-person lead generation and conversion can work both offline and online.

Network marketing has often been likened to pyramid schemes but it is different from the latter.

How does network marketing work?

Network marketing companies use a strategy that pays people to bring in more members while marketing their products. The marketers have two main sources of earning from the business: commission on product sales and commission from recruiting people under them known as ‘downlines’.

Therefore, as a network marketer, your goal is simply to get as many downlines as possible and sell as many product units as you can.

Pros of network marketing

There are some benefits attached to being a network marketer, especially with a reputable company. If you’re interested in joining the business then you might be making the right choice depending on your personal interests.

Flexible working hours and regulations: Network marketing is flexible in terms of time spent in the business. For instance, some salespersons may decide to fix their working time during the morning hours.

Doing that will give them ample time to finish up their daily job and do other things with their time. In addition, there are fewer rules from the company on how products should be sold, time spent in the business, and how you choose to communicate with target customers.
Good work from home opportunity: Network marketing is one business that allows people to choose their own working space.

You can choose to set up your office at home and connect with people online instead of carrying physical products around. Whatever works for you, so long as you can reach people and make enough sales.
Choose your preferred companies: There are many network marketing companies out there. As a network marketer, you have the choice of working with only those whose products are ethical and appeal to you.

It is noteworthy however that, before choosing a network marketing company you should thoroughly investigate its primary purpose and core products.

This is because you will be personally responsible for the integrity of these products after marketing them to final users. You would not want to sell something you don’t believe in or something against your personal code of conduct.

It’s a learn-on-the-go job: As a career network marketer, one may not possess all the necessary selling skills at the beginning. Rather, the job allows you to meet different categories of people, understand them and learn the best marketing and selling strategy for a particular product. Basically, the process is a fun-filled learning experience that brings in money.

Cons of network marketing

Network marketing has some downsides which prevent many people from joining the business. Some of which are:

Not being able to sell: Some people are discouraged from joining network marketing because they are shy of selling. The person-to-person business structure requires marketers to communicate with a lot of people and get them to like the product being sold and eventually buy from them.

This process of customer sourcing down to outright making sales is scary for some people. They prefer doing businesses where the customer comes to them rather than them going out to secure potential buyers and convincing them to buy.
Making money can be difficult: Some network marketing programs are really rigorous in terms of the actual volume of sales a marketer must make before withdrawing earnings.

Therefore, it might take a while before a new marketer can realise their profits. Also, some companies have ‘upline policies’ that pays a percentage of your earnings to the person you registered under. That works in two ways, it means you can make more money by simply increasing your downlines in the company.
Shady products being marketed by companies: Some network marketing companies hide under the guise of legitimate business to market harmful or substandard products to the public.

When a person has once been a recipient of such fraud, it becomes a turn-off for them in joining the business. Some companies also defraud the public with respect to their market metrics. In a bid to build a strong reputation and gain recognition, some network marketing companies take advantage of the media’s gullibility to promote unrealistic accomplishments about themselves to excite the public.

What to consider before joining a network marketing company?

Does making money from that particular company require members to sell a product or recruit new members under them?
Is the company’s history suggesting anything illegal, immoral or unethical is being sold?
Do you have an interest in or are excited by the products being sold?
Are people enthusiastic about the product?
Do you have a plan to market the product any differently from how it’s already been marketed?
What sacrifices will you have to make to market the company’s products effectively? Can you bear the costs in the long run?
Is the business profitable to people around you?

Is network marketing a get-rich-scheme?

Although there are some similarities between both business models, network marketing and pyramid schemes differ in some key things.

First off, pyramid schemes offer no real product for sale, whereas network marketing has actual products. Whilst a pyramid scheme is just a game of money-changing hands and is deemed illegal in some places, network marketing operates a legal business structure anyone can benefit from by registering.

Even though the commission offered under both schemes seems lucrative for uplines; it does not favour later members who will eventually lose their money if there are no more new people to keep the business running.

How is network marketing different from affiliate marketing?

Network marketing has a pyramid-like structure where new members are registered under existing members. However, it is different from pyramid schemes in that it operates a legal business selling actual products. Affiliate marketing, on the other hand, is about promoting other people’s products to earn a commission on them. The business model does not mandate having downlines before you can earn. Rather, it’s more like single-tier product marketing.

How to start a network marketing business?

Research a parent company whose products you can conveniently advertise.
Know the company’s history, and the founder’s story.
What are the terms and conditions (especially with regards to commission earned)?
Find out how much it costs to register with them.
If satisfied, proceed with registration (usually via an existing member who’ll become your upline or on their website).

Will I make money from network marketing?

Since it’s a legitimate business there is no reason not to make money. With patience and perseverance using the right selling skills, even new members will get to earn in the long haul.

Network marketing structure rewards consistency by paying on a commission-based system. The more sales you make, the more you earn. Some NM programs allow marketers to earn from sales made by their downlines. That means, if you have enough downlines you can retire from active marketing and let them do the hard work and you get commissions on each sale they make.

However, to avoid losing money to fraudulent schemes in the name of network marketing, it is important to carry out proper investigative research on a company before taking the plunge.

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