Network marketing is a distribution model that sells products without the traditional system: wholesale to retail to consumer. Instead, a network of distributors move products to the marketplace using word-of-mouth marketing. It results in approximately $200 billion in revenue each year. (Yes, that’s b. Billions!)
Entrepreneur.com’s business encyclopedia notes that some of the world’s most recognizable companies operate under the network marketing umbrella. You need look no further than Tupperware, Avon, or Mary Kay Cosmetics to find examples.
Network marketing is “a network of passionate people sharing a product,” says Eric Worre, author of Go Pro: 7 Steps to Becoming a Network Marketing Professional.
This model is more efficient than the traditional distribution system because it leaves out an entire layer: the retailer. Further, word-of-mouth marketing is significantly more powerful that traditional marketing, particularly with the growth of the internet and social media platforms.
Entrepreneurs are drawn to network marketing for many reasons:
- Low financial investment to startup
- Ability to begin part-time without having to give up existing jobs
- Often no need to carry inventory or deal with shipping product
- Opportunity for passive residual income
- No need for employees
Network marketing is NOT a pyramid scheme, but when you’re researching companies to work with, pay close attention to the pay structure. A legitimate — and legal — business is based upon selling product. If most of the potential revenue changes hands without product sales, you may have stumbled upon an illegal pyramid scheme. If you don’t believe in the product or service you’ll be selling, look elsewhere.