Network marketing, otherwise known as multi-level marketing (MLM), is a business structure in which “hiring” consists of recruiting others into the company, and “payroll” consists of personal sales and commission from downline sales.
At the end of the day, everybody becomes salespeople who sell products and get other recruits to sell products. You earn for each product you sell and for each product your recruits sell. It can be thought of as a networking matrix, where the more recruits you get on board, the more income you make.
Pros of the System
It is possible to make money in a MLM system. The key is to get in at the right time and do well selling the product. Studies show that the majority do not make enough money to live off in such an environment, but the average does make between $2,000 and $3,000 a year. Getting in at the right time is important. In the early stages, the system has more possible people to recruit, while in the later stages it can be difficult to recruit and sell products.
Cons of the System
The system is widely criticized for a number of reasons. It widely resembles a pyramid scheme where the bottom pays the top. It is only different in that there is a product involved. Once the system reaches a certain level, there will be a shortage of recruits in the market, which may lead to it failing. A 5×5 matrix (each recruit getting 5 more recruits) will fail around level 10. At this point, the recruits towards the bottom will begin dropping out because they are losing money, which leads to a domino effect all the way up to the top.
That’s why MLM companies are often stigmatized as get-rich-quick or pyramid schemes. Still, some network marketing companies are nonetheless establishing solid reputations and pulling more and more interest from people disillusioned with the job market, failing pensions, and their lack of financial independence.
While the myth that all network marketing companies are scams is steadily being dispelled, some still question whether these businesses are actually worth getting involved in — can ordinary people be successful at them?
My answer is yes, especially if you consider the following tips.
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