What is network marketing? Advantages and disadvantages of network marketing

Very often in the expanses of a rapidly developing market industry you can hear the term "network marketing". What is it, what are the features of the concept, how does it affect the performance indicators of companies - issues that are not only interested in business sharks, but also those who are trying to start their own business or are simply looking for sources of income.

To learn the answers, and also to get acquainted with the opinions of owners and employees of companies that could successfully use the principle of network marketing in their work, you can read more.

What is network marketing?

Multilevel, or network marketing (MLM) is essentially a specific process of product realization, for which direct contact of the manufacturer with the buyer is used. This process can be carried out either directly or through a trained distributor. Its distinctive feature is the fact that through this communication it is possible not only to realize the necessary products, but also to attract other interested people to work.

The payment scheme is absolutely open at the same time - money and benefits are received not only by the implementor, but by everyone through whom the goods pass in this chain. At the same time, earnings are official, real and depend only on the number of goods sold. While, for example, in the case of the financial pyramid, which is often compared network marketing, the pros and cons are not so obvious, because in this case, the receipt of money is due to the investments of other participants, and their timely issuance is not guaranteed at all.

Advantages and disadvantages

Like every concept, the MLM structure is not without its positive and negative sides. All the advantages and disadvantages of network marketing can be identified by examining the impact of this scheme of business for each of its separate structures - companies, employees and consumers.

Pros for the company:

• The possibility of unlimited earnings;
• Lack of advertising costs;
• There is no cost for renting premises for shops;
• No costs for delivery of goods;
• Minimal interference from public services, lack of documentation.

The last point may also include the introduction of minimum tax duties. Due to the fact that the products fall directly into the hands of the consumer, and not through shops, it is extremely difficult to control the sales volume.

What are the advantages for employees of MLM companies

Trained and satisfied with the conditions of earnings distributors are the key to successful business development for MLM companies, therefore, when working with their team, management offers him the following prerogatives:

• The possibility of unlimited earnings (apparently, both for the company and for employees this item is common and fundamental);
• Financial independence; The possibility of carrying out activities without the constant pressure of the employer;
• The possibility of raising your own business with minimal investment regardless of age, education;
• Availability flexible flexible work schedule;
• Constant improvement of personal qualities.

Is the wrong organization of the workflow a drawback?

Disadvantages of network marketing are observed if at the head of corporations or in the number of staff there are people with missing experience. In the process of activity, they can stop the work processes, negatively affecting the level of sales. There are several reasons for this:

• High moral load of personnel from customers, other distributors;
• Instability of earnings (sales levels in different months of work can bring different profits);
• Psychological pressure due to a sense of responsibility for the rest and lack of organizational skills, as a result of the high turnover of staff, unsatisfied with the quality of the work process.

What is the benefit of MLM principles for customers?

For the consumer, the advantages and disadvantages of network marketing are entirely different. For example, the excessive obsession on the part of the distributor in an effort to arouse the buyer's interest and, in case of failure, an invaluable time for both of them, can be a disadvantage. The advantages are the following:

• Saving time on shopping trips;
• Full awareness of the quality of the proposed goods;
• Control of financial expenditures;
• Buying goods is cheaper thanks to bonuses, discounts, sales;
• You can order and receive goods at any convenient time of day.

Also, thanks to the concept of MLM, it became possible to compare visually, check the composition, share your opinion, earn money, receive recommendations on the types of goods purchased. Also to establish, how pluses and minuses of network marketing influence efficiency of conducting business and purchasing activity, ratings allow.

What is rating, what value does it have for network marketing

The rating itself is a kind of evaluation of the effectiveness of one or another type of activity. To compile it, you need data that can be obtained through social surveys. This is done by special firms that process the information received and pass it on to customers for further use.

In the process of data processing, all the advantages and disadvantages of network marketing that are used to develop a certain firm in a certain region for the promotion of certain products become clear. Also, the results obtained allow us to track and record the financial results of corporate activities, and also apply new strategic tactics for business development in the further planning of the company's economy.

Rating of grid companies

A separate subject for ratings that allows you to track how effective network marketing is, companies that can be compiled for both the international arena and for each individual country or region individually. The data included in the structure of these top ratings characterize the extent to which the product being sold is attractive to the consumer, as changes in the internal structure of the company or the introduction of a new product affect the sales figures,

In this case, the rating is an identification of competitiveness in the modern market and how the company has grown financially for a certain period of time. Also the data obtained on the basis of the lists of companies allow to give a full detailed analysis of financial opportunities in the future, to understand what to do to double / triple the indicators in the future.

List of MLM-companies in Russia

Below is the list, which includes large domestic companies that use effective network marketing companies. The list of Russia is based on their activities for an annual period and includes various economic, technical, cultural and social factors. The 5 leading network companies with a high percentage of sales and profit growth for 2015 include:

• Avon Prod. Inc.
• Amway Corp.
• Oriflame Cosmetics SA
• Mary Kay Inc.
• Faberlic OAO.

If we compare this same top list with the indicators, for example, 2012, there will be a noticeable trend towards a decline in sales growth for Oriflame (in 2012, it occupied the second place). If to generalize, then the economic crisis affected the decline in sales for all companies without exception. However, Avon Corporation was able to retain its leading position: its sales volumes, as before, account for a third of the total turnover of all listed companies. And this means that as a result of the conducted rating research, Avon is one of the most competitive and promising network companies on the Russian market.

How to influence the increase in sales and rating

Naturally, in difficult economic situations, the way out of the difficult financial regulations of companies is to encourage employees to increase the level of sales. This is called "motivational network marketing." What is the essence of this program? It allows you to promote the company up the top list due to additional financial support for the employee and build his own scheme of profit by attracting third parties.

In other words, in such cases a reward is introduced:

• For the sale of a large volume of products;
• For attracting additional employees who will realize a large volume of products and search for a new customer base.

It is checked that this network marketing scheme construction allows to significantly increase the company's profit growth and pay back costs. And you need for this just a desire to get an easy extra earnings and effectively present your product to the buyer. That is why the number of people involved in this business structure is already more than 6% of the population of Russia, and these figures are growing from year to year.

How not to become a victim of network marketing fraud and succeed in it

Naturally, to achieve success in the MLM business not everyone can, but there are 3 rules, guided by which you can avoid fraud and financial failure and comprehend the principle of network marketing:

• The company must be registered (check the affiliation of the company to the declared association using the resource rdsa.ru), this significantly increases the factor of trust in the company and is an indicator of its official activities;
• For employment it is necessary to choose a company with a high sales rating, which occupies a leading position in the modern market, is a pledge of its prosperity, effective self-improvement, and hence prospects;
• The maximum manifestation of active personal qualities (ability to work, desire to learn, improve their communication skills and beliefs), the leader's position is the key to success in running a network business.

The main thing is to remember: the buyer should have the right impression about the nature of the company's activities. It should not resemble an inexplicable confusion, a scam or a financial pyramid. Everything should be as transparent as possible, exactly, meet the stated requirements.

Feedback from active users of the MLM concept

They will allow you to better understand how network marketing is organized, what it is, and the feedback of those who are confronted with the principles of its work. Many employees of such companies noted the difficulties at the initial stages of acquaintance with this method of doing business. This was due not only to the process of assimilating a large amount of information, but also to the emerging sense of alertness.

Coping with all prejudices, and also easier to delve into all the processes allows the availability of seminars, lectures, trainings, finished catalogs detailing the features of the products offered, the policy and financial plans of the company. Such periodic consultations help to develop the skills necessary for work, to become more confident.

By the way, thanks to the feedback of employees of such network companies, the MLM-concept has ceased to be perceived as a means of deception since the beginning of 2014, but is viewed exclusively as a proven source of earnings, the effectiveness of which depends on personal qualities.

Tips for beginners

Based on all the reviews, successfully build your career, guided by the principles of network marketing, you can if you have:

• An experienced mentor;
• Desire to develop;
• A good product, confirmed by a certificate of quality;
• A decent salary;
• Cohesive team.

You can find countless numbers of both positive and negative opinions about how network marketing works. Pros and cons are in each of the methods of doing business. The main thing is to draw the right conclusions from all of the above, rely on the already existing experience of predecessors, skillfully take advantage of the acquired knowledge and successfully implement them.