What Is Network Marketing?

Network marketing is a business model that generates sales through independent representatives who build a network of business partners or salespeople to assist with lead generation and closing. Network marketing is also known as 澳洲幸运5官方开奖结果体彩网:multilevel marketing (MLM), cellular marketing, 澳洲幸运5官方开奖结果体彩网:affiliate marketing, consumer-direct market⛎ing, referral marketing, or home-based business🌜 franchising.

Understanding Network Marketing

Network marketing firms seek to leverage the relationships of their salespeople to identify customers and market their products. It's an alternative to or done in addition to more traditional advertising and marketing strategies. Salespeople are pressured to aggressively target their friends and family, not only to buy their products but also to recruit them as new salespeople.

Each sales representative is encouraged to recruit a network of salespeople in a typical network marketing arrangement, resulting in multiple tiers of recruits. The creators of a new tier or "upline" earn commission on their sales and on sales made by the people in the tier they created, the "downline."

Each new tier can sprout another tier and this adds🅘 more commission to those in the top and middle tiers. The earnings of salespeople depend on recruitment as well as product sales. Those in the top tier make the most.

Network marketing has been compared to pyramid schemes, particularly with regard to the focus on recruiting new distributors. The Federal Trade Commission has warned that many multi-level marketing firms may be pyramid schemes but it stopped short of saying that the model is inherently fraudulent.

Examples of Network Marketing

An individual with a lot of energy and good sales skills can create a profitable business with a modest investment in the network marketing space. An operation that ensures compensation based on actual sales to real customers tends to be more reputable than multi-tier schemes in which people make money based on the number of distributors they recruit, according to the Federal Trade Commission (FTC).

The FTC settled a suit with Herbalife in 2016, alleging that the company deceived consumers into believing they could earn money selling diet, nutritional supplements, and personal care products. Herbalife paid $200 million to compensate consumers and restructured its business.

Skin care provider Rodan and Fields operated as a billion-dollar business in the MLM space before 2024. The company moved away from the multilevel direct business model and established a new affiliate program due to increased online marketing and shops like Amazon or TikTok Shop. 

The Bottom Line

The Federal Trade Commission helps to regulate the operations of network marketing organizations. Net💟work marketing may involve multilevel 𝔍marketing (MLM), cellular marketing, affiliate marketing, consumer-direct marketing, referral marketing, or home-based business franchising.