Redistribution of the business risk the profit and job salary between Entrepreneurs and Workers.
Here we try to understand the main business effects of Network marketing with the point of view of the Independent distributor that join a business proposal with a specific company.
The previous article Democratic entrepreneurship concern the evolution of the professional contract relationship with the inclusion of a variable salary depending on the company results and the big financial crisis turnout started in 2008 with a really important credit crunch that is causing the default of a lot of company with not so strong and stable financial position.
And at the end you have seen the main characteristics of the Network marketing a new business model with the firsts experiences in US after the 2nd World War and its business effects with the point of view of the company that choose this way to offer own commercial proposition to the market (i.e. go-to-market channel).
Network marketing. Benefits for nascent entrepreneurs.
Now everyone with some interests in this business normally has to answer to a questions like this.
In which way I can develop my Network marketing business?
For us the most important resource are the 300 contacts that on average we have and that we know sufficiently well, our family and friends the neighbourhood the colleagues.
The main idea of Network marketing is that you can use your free time to promote a word of mouth activities with your contacts to distribute useful products and services without any financial startup investment.
Any case before starting every activities like an Independent distributor if you want to catch a Network marketing business opportunity offered by a company you have to evaluate carefully several aspects:
A) The products’ commercial proposition (i.e. the economic sector and competitor, the product quality and price etc….)
B) The starting fee also called Welcome pack because normally you receive several product items and promotional commercial material that it will help you to start-up your business.
C) The recurrent qualification fee that is the amount of product that you have to buy each month if you want to be qualified to receive in that month your commissions.
This thing suggests you that for the company the first Clients are precisely the Networker and on the other side it is more easy that a successful Networker she can be a consumer that like the products.
D) The compensation plan is the fundamental document to understand in which way you can gain your profits so also useful to understand the best way to develop your business with this company. Normally you have several kind of commissions subdivided in two main groups the Direct commissions related to your product selling and Indirect commissions related to your commercial network product selling that you contributed to build. We will see this aspect later.
And finally in which way I can develop profitably a network marketing business?
Like a Networker you can afford some important activities:
With the help of your own Sponsor (your contact that involved you in the Network marketing activities with that company) you can share your product experience with all neighbourhood (Product Promotion) and your business experience to involve new potential Networker in your business (Business Promotion). Your sponsor normally she Teach Help and Support you to develop your business especially at the beginning.
After that with your own experience you can start to sponsor autonomously your contacts and follow them exactly in the same way your sponsor she has done with you so they will be able like a new Networker to do exactly the same things and so on.
To optimize your effort you can group your contacts in different market segments depending on some characteristics to understand which contacts are more likely or which they are just using similar products for their expected benefits.
At this points with the help and assistance of your sponsor you can personalize your word of mouth to your segments and especially at the beginning your sponsor will take charge substantially of these promotional activities to your contacts and gradually she also teach you to do the same (i.e. promote the products and the business opportunity).
From these contacts you have someone interested to the products and someone interested to catch the business opportunity. At this point you can start to follow your new Client and new Distributor and with the last one your sponsor start to teach you to teach them the activities so in this way gradually you will be independent to develop your own business.
Like you have seen before there have two main groups of commissions and in the medium/long-term the Indirect commissions they will be really important for a successful Networker to obtain important benefits with a significant leverage effect in years to come. For this reason building your commercial network it is an important task of your business and for this you can involve directly or indirectly other Independent distributors.
Like you can understand until here the recursive duplication of your job activities is basic for your success.
In many cases well over 90% of Independent distributors in a network marketing initiative at the end is a Consumer who appreciate the products and she buys the interesting product at a reduced price or an Independent distributor that develops a part-time job activity that allows her with the generated profits to buy the product as well as having an additional amount, however, that is not enough to undertake such activities as the main job.
In many cases we can have profiles of distributors with profits of several thousand Euros and more, however, these are normally only a few percentage points.
Furthermore the chance to develop your own business as a Networker allow you to work for yourself to enjoy more freedom and independence without any investment startup and without any particular obligations captivates many people for this reason many companies they can enjoy a significant rate of net increase in the revenue and in the number of Independent distributors.
Any case to understand how much is stable this business for each company some indicators are really interesting starting from the distribution index of the different profile that it allow you to understand for each group of Networker the efficacy and profitability of the time invested there.
In addition to understand the strength of a successful business we need to add another indicator that is fundamental: the attrition rate of Independent distributors and Customers.
Customers leave and no longer buy the product because they are not satisfied with the product quality and with the commercial proposal more in general.
The Independent distributors leave the business for a number of reasons:
1) the commercial proposal for their Clients is no longer satisfactory
2) they do not receive enough support from the company to develop own business,
3) they do not receive enough support from the Sponsor
4) not adequate profits for own effort,
5) excessive amounts of recurrent qualification purchases in order to receive commissions
6) migrate to develop the business with another company that offers a commercial proposal and/or a compensation plan more attractive
All companies show only official data and for sure this information could damage a lot the reputation and the company business so normally they show only good or partial manipulated information able to show only good results to incentive the entrance of new Independent distributors. For this reason it’s difficult to find this information and often it can be a collection of rumors of ex Networker that left the business distribution with this company or change to begin with another one.
In the last case normally a successful Networker normally she also influence to do the same most of the other Networker that previously she involved in the same business.
At the end when you want to assess whether it can be profitable for you the business opportunity in Network marketing that she has proposed to you by the way you want to find reasonable answers to different questions.
Recurrent expensive are acceptable for qualification?
What are the most effective ways to develop the business?
What are the systems to check and optimize results?
In which way the different tasks can be shared effectively?
It is also helpful to share different ideas about the best ways to develop the business?
You have other interesting ideas you want to share then leave your own to enrich and complete this subject.
Next time I will count my own personal experiences in this sector.
The 45 Second Presentation That Will Change Your Life: The World’s Best-Selling Network Marketing Guide.
by Don Failla. Published by Authorhouse
The author: Ing Lanfranco Colella @salud2bienestar
He is a Digital marketing manager and he is working also with salud2bienestar.com, with interests in the Internet market, the social media and Word-of-Mouth Marketing.
Click here for my complete LinkedIn profile