I was listening to a discussion today about Network Marketing that reminded me of how much even people who do it well spread confusion about Network Marketing.
I have been a student of this type of business model. The reason I say that is because I have learned a lot more than I have done about it which may or may not qualify me as an expert. However, the information I received one day on the topic changed my entire understanding of this business model.
Having lived in Germany for most of my adult life I was involved in a company that really had quite a few great ideas going. During this period I went to some meetings and learned that there was a professor of business at the university in Worms that taught the business model network marketing.
I was stunned!
I remember looking at the course descriptions offered in the university and that it had nothing AT ALL to do with the associate or network marketer but was solely targeted at people studying business as a method in marketing for a business.
(p.s. yes I read, write, understand and speak German fluently.)
I did some research and actually had an email correspondence with the professor personally and it turns out that this professor had done several publications about network marketing that were not only pointed to companies considering using it as their marketing method but also to the associates who promote it.
What is the principle reason a company will use network marketing for their business?
- Is it make the associate network marketer money?
- Is it to make the company money?
Number 2 of course!
The real legitimate reason that a company chooses to use network marketing to market their business is because it is the best way for them to be successful selling their products.
Why is this so important to realize?
Because any company’s first responsibility is to stay in business and grow.
The company must be profitable or it cannot exist at all. That is the truth about all business. Companies who use network marketing are no different.
What must a company do to be profitable?
A company must sell enough of their products to pay for the cost of producing them. This is done by setting a price point to where the business can make money and pay all of the employees and for services that aide them in making and selling their products. A network marketing company is a normal business and it is a brick and mortar business, even if the products are internet based virtual products.
- A company picks network marketing because with this method it is possible to accurately predict how much product they need to produce without over producing.
- A company uses network marketing as their marketing strategy because they only have to pay for the vast majority of their marketing budget when a product is sold.
Those two factors alone are enough of a good reason for certain products to work best with network marketing.
Why Network Marketing Stresses the Associate Benefit
The products are usually high quality products and are expensive to create. So, if you put them on a shelf in a store they most likely would fail because it would be much more expensive than the mass produced products, which most likely are of much lower quality, sitting next to them because most consumers look at the only thing they consider when buying something, they buy the cheapest one.
So a network marketing company needs associates who will help them sell their products and pay them to highlight the benefits of their products to their customers on a word of mouth basis.
In a word, it is the best way to have feet on the ground salespeople working for you without paying them unless they sell a product. No hourly wages, no salaries, no benefits, no hiring or firing. That is a lot less hassle for a company.
The power behind this model is that anyone who has initiative can become an associate and create a huge income for themselves if they do the work and move product. It opens the door for normal everyday ordinary people to build an income of their own without having to apply for a job, ask a boss off for holidays or personal reasons and can create a living income doing so.
The network marketing company wants as many associates as it can get because the associates have to buy product to be able to
- sell those products retail
- for promotional purposes
- and for personal use…
…which is the number one credibility factor for an associate. The associate gives testimony on how the products benefit them to prospective customers and their new associates.
Girl Scout Cookies
I think a good way to look at network marketing is to consider the model of the Girl Scout Cookie business, which is actually really cool if you ask me!
The girls go out with and take orders for cookies. They send their orders in and in a few weeks they go out, collect the money and distribute the product. Or they simply buy product and sell them until they run out.
(Today in most network marketing companies the money exchanges hands directly from the customer to the company only. Unless the associate buys products wholesale for retail sale. Even then, many companies facilitate the sales process by handling the money for the associates.)
The point is, we all know that there will be some Girl Scouts who sell a boatload of cookies and some who will only sell it to their parents and most who don’t sell any at all.
It doesn’t matter to the company.
The important part is, they sell product! Which is why they do the business. The Girl Scouts are a worthy cause no doubt, but at some point the company making the cookies has to make a profit or nobody has anything to sell!
It is no different in Network Marketing or Affiliate Marketing. The company has to make money to stay in business and the only way for it to do that is to sell products.
Therefore, one of the best ways for a company to sell a lot of product is to have as many associates working for them, buying, selling and promoting their products as possible and they don’t have to pay them until they produce sales.
Now, part of network marketing is for the associates themselves to build their own team of associates because this increases their chances at higher commissions. The more associates you sponsor the higher your commission potential becomes.
For the associate, selling product becomes almost secondary to building a team because that associate is also no different from the company, the more associates selling on their behalf the more money they can make.
The associate has two jobs in the company.
- Sell product retail to their customers and wholesale to their associates.
- To build a large organization of associates and encourage them to make sales and create more associates.
It is like building an army. The more people and teams you have in your organization the higher your rank is and the more money you can make.
1.
When you look at network marketing solely from the perspective of the company creating the product, then you can see how advantageous this marketing model can be.
2.
When you look at network marketing solely from the perspective of the associate trying to build an income, you can also see how advantageous this opportunity can be.
3.
As a customer purchasing a product at a retail price, you probably do pay more for it but it is usually a much better quality than you can get off of the shelf at a store plus it is delivered to you and you have your own personal product representative to help you with the products.
Those are three very viable aspects behind the network and affiliate marketing models.
For the associate it is important to understand that you are working for the company FIRST! The company is who pays you, unless you purchase product wholesale and sell it retail, and you can keep the profit. (It is then also a retail business with cost of goods sold and sales taxes to be reported and not just flat 1099 income from commissions on volume of sales. But still, you are selling their products for them.)
The biggest problem with this model is that everyone seems to promote the business from an income producing aspect practically ignoring the benefit of the products. The reason for this is because they want to attract the best associates in the business with the most lucrative compensation model because they will sell a lot of product and make more money.
I think that when you look at network marketing in this way then a lot of things become clear to you and it explains some of the things people get confused about with it.
Just like in the Girl Scouts, you will have those who sell a lot of cookies and those who hardly sell any and the ratio is going to be about the same in affiliate and network marketing. It all depends on the person doing it.
The success of an individual Girl Scout isn’t dependent on the Girl Scout company, it isn’t the cookies themselves, it is the individual Girl Scout who makes the difference when it comes to selling cookies.
The real challenge for companies and associates alike.
The business model for network marketing has been abused in the past by companies and associates. This abuse has led to the perception in society that it is everything from an unfair business model to a dirty rotten scheme. It has damaged the business such that many won’t even consider becoming an associate because they don’t want to be associated with that perception in society.
It is the #1 issue with this business model.
People don’t want to be sold. They want to buy. They want to be free to make buying decisions.
So, when someone is aggressively promoting something and pushing for a sale or for someone to become an associate it gives this business model a bad name.
As a novice marketer it is often difficult to navigate these waters. How do you show enthusiasm for something without being pushy? It is a skill to be learned for certain.
In my opinion, I believe that when you are an associate of a network marketing company and want to promote and sell its products, then you need to have the attitude that you are working for the company and that you believe in the products and the mission of that company enough to want to wear the logo proudly on your chest.
Yes, you are working to build a reliable income for yourself, you are in business for yourself, but in fact it is the company that you have a contractual agreement with, it is the company that pays you, unless you sell retail, and it is the company that will do everything it can to help you be successful. But, you work FOR the company. Make no mistake. But, I think that makes it better for people to understand what you are doing.
Therefore, when you decide to become an associate you need to think of the company as your “employer”, when they are not in fact legally or officially your employer. You are just like a Real Estate agent or a Stock broker. You are an independent contractor.
You own nothing, you represent something.
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What does it take to succeed as an associate in network and affiliate marketing?
I was talking to a friend of mine who has had a life long career in sales and he used the illustration of an hourglass where sand moves from one side to the other through a small opening in the middle.
He said that being a sales person means you are the small opening in the middle that passes information from the company to the customer and back. That it is important to always deliver the following qualities when acting as the facilitator for both the company and the customer.
The sales associate must…
- know their company
- know the products
- understand their benefits
- be truthful in all communications
- show up and present their case to prospects
- follow up and answer questions or comments of the prospects
- report the issues to the company and address those issues to the prospect
- facilitate the sale, making the transaction easy for the customer
- follow up after the sale to make sure everything is going well
- report problems to the company, offer suggestions
- continue to keep contact with customers on a regular basis to acquire more sales and aide them in any other way they can.
It may sound like a lot, but he said that to him it isn’t that difficult to do and is an enjoyable process. Everyone involved is grateful for the person who just does their job and is an enjoyable person to work with.
The last thing he said when I picked his brain was that if you show up and follow up it is impossible to fail in sales because he said that numerous customers and companies all say the same thing…
…”you wouldn’t believe how many people don’t follow up.”
The numbers WILL bend in your favor if you do two things:
Show up & Follow up.
Network Marketing is no different. It is all the same thing. It is all about keeping contact with everyone in your network and following up to help them meet their needs.