Multi-Level Vs. Network Marketing
Multi-level and network marketing businesses lure many people seeking alternative ways to become entrepreneurs. Both types of businesses require little capital to get started relative to a brick-and-mortar startup. However, the principal business strategies between multi-level marketing business and network marketing companies are very different. Before committing to either business, gain an understanding of the essential differences.
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Using a Network
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Both multi-level marketing and networking marketing businesses rely on your personal network in order to gain sales. Network marketing is based on the casual process of inviting friends to meetings, events or presentations where they can purchase products or services you provide. For example, Mary Kay is a network marketing business where parties are held for friends and family members of the distributor in an attempt to sell products. Multi-level marketing focuses more on the recruitment of your social network into the business.
Pyramids
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Beware of multi-level marketing that operate solely as pyramid schemes where the only way to make money is to recruit others into a business. The Federal Consumer Trade Commission (FTC) warns consumers against "plans where the money you make is based primarily on the number of distributors you recruit and your sales to them." Learn about the product you are selling to determine whether the business is focused on gathering money for the people at the "top" of the distribution chain or whether it is focused on the sale of the product or service.
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Compensation
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Multi-level marketing and network marketing business owners are compensated on a commission-only basis. Rarely will a network marketing or multi-level marketing business pay money up front in the form of a salary or bonus before the sales representative makes a sale. Each business has goals the sales representative must meet before compensation is given. In both business models, some sales representatives never receive compensation on money invested into the business.
Product or Service
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Network marketing businesses are focused on products or services rather than sales. You can gauge the legitimacy of these products by performing research in newspapers, the Internet and via word of mouth. Finding out whether friends or family members have heard of the brand and getting their personal experiences is a great way to determine the credibility of the product you are selling. Legitimate multi-level marketing programs may be more "management" focused than product/service based. These companies train you to manage a sales force rather than recruit a new one.
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