What is Network Marketing? (+6 Business Questions to Ask Before Joining)

Derek Doeing
Derek Doeing  |  July 26, 2018

Do you remember those Tupperware and Pampered Chef parties your mom would host when you were younger?

You’d have to clean the house all day just to get confined to your room while your mom dealt some high-quality kitchen gear and entertained the other moms in town. You weren’t entirely sure what was going on outside your bedroom door those nights.

Turns out, your mom was an entrepreneur – running her own home marketing business and participating in network marketing. 

Types of network marketing

Network marketing can be broken down into three essential categories. These categories are similar in that they call upon individuals to use their personal networks to run their businesses. Through these networks, individuals make sales or recruit others to sell products.

Network marketing, although similar, is not to be confused with influencer marketing

Direct marketing

This single-tier marketing system requires an individual to sign up for a program to sell a product or service. Individuals who sign up for these programs do not need to recruit other distributors and are paid only on the direct sales they make.

Direct marketing is the most immediate form of sales. Find a product you like and get your friends and family to buy into it. A few top companies involved in this type of network marketing are Mary Kay cosmetics, Avon cosmetics, and Pampered Chef kitchen supplies.

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Affiliate marketing

A newer aspect of network marketing is using online affiliate marketing programs. Website owners and bloggers integrate links to specific products on their platforms. When people click on those links and purchase products, the website owner is rewarded a referral fee. This provides customers with access to a trusted site where they can immediately purchase the products being advertised.

It’s important for those using affiliate links to be transparent about that. A simple disclaimer at the bottom of a blog post fits this purpose and lets your audience know that you’re making money from these links. Amazon’s affiliate program is one of the most well known, but Partnerize and Google’s Affiliate Network are also options.

Those are thousands of affiliate programs out there for both brands and individual individuals can leverage. Be sure to research the most high-paying affiliate programs out there before you join a program.

Multi-level marketing

Multi-level marketing (MLM) is a distribution-based marketing network that includes direct sales and a downline of distributors. These home businesses tend to get a lot of bad press for their similarity to pyramid schemes. In reality, they have one key difference. Where pyramid schemes require people to invest in a false promise of wealth, MLM organizations sell real products or services that distributors believe in. 

 Many MLM companies provide a healthy infrastructure and great training, plus extra rewards for high performers. Scentsy, Herbalife, and Advocare are some well known players in the MLM field.

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There are also many MLM software tools to help multi-level marketing organizations run efficiently.

Find the best Multi-level Marketing software on the market →

To understand how these network marketing systems have evolved and become prominent, let’s take a look at where these marketing strategies originated.

History of network marketing companies

During the Industrial Revolution of the 1800s, a large number of new products were being invented that needed to be sold to consumers. These products were often complex and required explanation to potential buyers. Network marketing began to hit its stride following World War II in the 1940s with the California Vitamin Company (renamed Nutrilite in 1939) and the California Perfume Company (now Avon).

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The products produced by the California Vitamin Company were in such high demand that founder Carl Rehnborg began recruiting independent distributors to increase the number of salespeople. These independent distributors were instructed to find new distributors in their circles of friends, acquaintances, and customers. The representatives were paid on the sales of the distributors they personally recruited.

In 1959, two employees of Nutrilite, Rick de Vos and Jan van Andel, founded their own company: Amway. Amway was created using the MLM organizational structure and paved the way for MLM companies to be established in other countries like Canada, the United Kingdom, Australia, Germany, and France. Amway allowed for companies like Panasonic, Palmolive, and MasterCard to include network marketing in their omnichannel marketing strategies. Amway's success has even led them sponsor an NBA arena, the Orlando Magic's Amway Center (and the older Amway Arena), since 1989.

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By the 1980s, the landscape of U.S. economics was transformed. A financial boom coincided with women entering commercial life. These women were a huge target for network marketing companies, as they sought jobs that allowed them to earn money without neglecting their children and families. Women were able to acquire high positions within these companies, creating opportunities for women to achieve financial independence without giving up their families.

At the end of the 1990s, network marketers were learning to harness the power of the internet. The implementation of online shops and electronic orders made employing social networks much easier for individual distributors and businesses. Since the rise of social media platforms, it’s become common to see advertisements by people in your network for companies like Rodan + Fields or ItWorks.

The categories network marketing is conducted in will continue to grow and evolve as society does. At its core, though, building relationships will always be the key to successful network marketing.

However, there are some other things you should take into consideration if you think network marketing is for you.

What to consider when entering network marketing

If you’re ready to start your own home business as a network marketer, there are some things you should consider and research first. These organizations want access to your network of friends and family.

You value the people in your life, so protect them and only market what you personally find valuable.

Like in any career, you need to make sure you are securing yourself and your customers. A large number of scams exist, claiming to be network marketing opportunities. Use the simple checklist above to begin research into network marketing organizations.

Remember that this is a business. You are your own boss and your own employee. If you want to call the shots, you need to be okay with facing failure and trying again.

Keep in mind that not everyone in your network may be supportive.

Additionally, have a clear understanding of how this affects your taxes and finances. If you’re not versed in accounting, consider hiring an accountant. There are many people who specialize in dealing with home-based businesses.

Mentorships are key to successful network marketing

If you joined a network marketing organization, chances are you were recruited by someone you know. This person has likely been around longer than you and should function as your mentor until you get off your feet.

It’s in the best interest of your mentors to help you succeed, so be willing to listen to them and learn the system.

Equally as important, it’s vital for you to be a good mentor when the time comes. When you recruit someone into your organization, support them and teach them how to be a successful network marketer.

Long-term relationship building is how you’ll find success in network marketing.

Network marketing is here to stay

We’ve covered almost everything there is to know about network marketing, including what it is, the different types, its history, how to choose an organization, and the importance of mentorships.

As you go forward and employ your network to sell a product or service, keep in mind that before they are your customers, they are your friends and family. Building a great relationship first and selling a product second is the way to be an effective and successful network marketer.

Derek Doeing
Author

Derek Doeing

Derek is with G2 specializing in HR and Recruitment trends and insights. He's a recent graduate of Iowa State University and a proud son of Chicago. Can usually be found discussing pop music, politics, and digital marketing on the internet.