What is network marketing? Advantages and disadvantages of network marketing
Very often in the vast expansesthe emerging market industry can hear the term "network marketing". What is it, what are the features of the concept, how it affects the performance indicators of companies - questions 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.
Learn the answers, as well as read the reviews of owners and employees of companies that could successfully use the principle of network marketing in their work, you can from the article further.
What is network marketing?
Multi-level, or network marketing (MLM) -it is inherently 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 scheme of payments in this case is absolutely open- money and benefits are received not only by the implementer, 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 devoid oftheir 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 applythe 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 earningsdistributors 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 (as is evident, both for the company and for employees this item is common and fundamental);
- financial independence, i. 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 of flexible convenient work schedule;
- constant improvement of personal qualities.
Is the wrong organization of the workflow a drawback?
Disadvantages of network marketing are observed if inthe head of corporations or among the 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 clients, other distributors;
- instability of earnings (sales levels in different months of work can bring different profits);
- psychological pressure due to feelingsresponsibility 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 pros and cons of networkingmarketing are in completely different features. For example, the excessive obsession on the part of the distributor in an effort to arouse the buyer's interest and, in case of refusal, 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;
- the purchase of goods is cheaper due to bonuses, discounts, sales;
- You can order and receive goods at any convenient time of day.
Also thanks to the concept of MLM appearedthe ability to visually compare, check the composition, share their opinions, earn, receive recommendations for the purchased types of goods. Also to establish, how pluses and minuses of network marketing influence efficiency of conducting business and consumer activity, ratings allow.
What is rating, what value does it have for network marketing
The rating itself is a kind ofevaluation of the effectiveness of a particular activity. To compile it, you need data that can be obtained through social surveys. This is done by special firms that process the received information and transfer it to customers for further use.
In the process of data processing, they become clearall the pros and cons of network marketing, used to develop a certain firm in a certain region to promote certain products. Also, the results obtained allow us to track and fix 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 allowto 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-ranking 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 identificationcompetitiveness in the modern market and how the company has grown financially over 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 a list of majorDomestic, applying an effective network marketing company. 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 withindicators, for example, in 2012, there will be a noticeable trend towards a decline in the growth in sales from Oriflame (in 2012, it was in second place). If to generalize, then the economic crisis has 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, with complex economicsituations, 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 engage in the search for a new customer base.
It is verified that the given construction of the network schememarketing allows you to significantly increase the growth of the company's profits and recoup the costs. And you need for this just a desire to get easy additional income 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 businessnot everyone can, but there are 3 rules that can help you avoid fraud and financial failure and understand the principle of network marketing:
- company must be registered(you can check the affiliation of the company to the declared association using rdsa.ru resource), this significantly increases the factor of trust in the company and is an indicator of its official activity;
- for employment it is necessary to choose a companywith a high sales rating, occupying 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 a misunderstood 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
Let's better understand how the network worksmarketing, what it is, 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 assimilation of a large amount of information, but also to the emerging sense of alertness.
Coping with all prejudices, as well aseasier to delve into all the processes allows the availability of seminars, lectures, trainings, finished catalogs, which detail about the features of the proposed products, 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 suchnetwork companies 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 likepositive, 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.