Network marketing, otherwise known as multi-level marketing, is the business design of profits going downwards in a stream from the company owner to those who sell the products, either directly or indirectly. What this means is that small companies work for the larger parent company, so for example a parent company might make a certain product or perform a certain service and the process of network marketing brings all kinds of customers and clients to the parent company through referral of the smaller companies. This doesn’t mean that the product is shipped from the parent company to the smaller companies and the smaller companies sell, package and ship the products, but rather that the small companies create client bases and make sales, which are simply referred over to the parent company.
In essence, it’s the smaller companies who are making most of the sales and have all of the contact with customers and do all of the advertising for the products; however, it’s the parent company who is responsible for getting the item to the buyer once the order has come to the smaller company and been passed on to the parent company.
If one talks about services instead of products, the scheme is a little different in network marketing as compared to product sales. In terms of services, the process works a little differently. In this case, the smaller companies are doing the advertising for the larger parent company. They advertise the services offered and recruit clients. This process of recruiting clients is usually a lot more labor intensive than the process of recruiting customers to buy a certain product in the case of product sales. When recruiting clients for the parent company, it’s not only the act of doing a lot of marketing work; it’s also the act of having superior customer service skills. First, good advertising has to be done in order to make the client interested in your particular service instead of the competitor’s, but then the client will contact you directly to talk about possibilities.
This whole process of making deals with the clients takes some time and it’s certainly a job for someone who has excellent skills working with people. In general, the network marketing scheme is less labor intensive and less focused on the customers, but the commissions are also generally more modest. In this way, the recruiting of clients can bring more money from each client whereas in product sales each sale will bring less money, but there will be a higher volume of commissions.
This tiered structure of network marketing is a business model that is in place for many larger companies and is growing more and more common. Their services and products are advertised by smaller companies and buyers are recruited by the smaller companies. The smaller companies are a kind of middleman between the client and the parent company, taking a lot of work out of the hands of the parent company and hopefully bringing a decent income to the smaller companies.
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Stuart Smith owns the websites Success Home Working and Internet Business Opportunity Site and writes articles around these areas of interest.
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