First Step Marketing

The advantages and disadvantages of network marketing over conventional selling

Direct selling, network marketing, person-to-person, door-to-door, party-plan selling and other variants have certain advantages and disadvantages over conventional selling:

Advantages

• The customer is seen in the comfort of her home. No effort is required to get to a shop.
• The goods are often delivered directly by the distributor.
• Old and frail people who cannot get about are easily served.
• There is a considerable degree of personal attention.
• Direct selling is often made to friends, so it is a warm and enriching experience, not a sales experience.

Disadvantage

• If the product range is extensive, the distributor cannot always take the full range with her to the prospective purchaser.

The factors that make network marketing companies successful

In a nutshell, three reasons may be cited:

• Network marketers offer a service.
• The products offered are competitively priced and offer real value.
• The network marketing system develops people.

This last point requires comment. Many start-up networkers assess success by how much business they have done: ‘We did R10 000 [or R35 000, or whatever the figure is] this month,’ they say. That’s fine. But the real measure is not rands and cents but the strength and depth of your down- line. The key question is: how many people (downliners) did you develop?

Many networkers don’t fully appreciate that in network marketing you must create depth — a downline of people who want to make money but who are more than willing to go out of their way to make others wealthy, too. If you help others make money by sponsoring and teaching them, why would they want to leave your network?

Here’s why the development of a network is important. If you go out and sell part-time on a one-to-one basis, you may be able to sell to 50 customers per month. At an average commission of R100 per month per customer, your maximum potential earnings in any one month is 50 x R100 = R5 000. You can’t earn more because there is a limit to the number of sales contacts you can make in a month.

This is not so with a downline. As we showed earlier, if you introduce just two distributors (and not 50) into your network per month, your downline will outsell the best sales person after five months (63 orders per month). By the end of the year it will be miles ahead!

Think about this: Even if you slash the above figures by 90 per cent, the number of people in your network at the end of the year is 819. And even if you slash the commission you make by 90 per cent from R100 per order to R10, you will still make 819 x R10 = R8 190. There is no way the individual sales person can match the performance of a network.

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This entry was posted on Saturday, March 22nd, 2008 at 1:34 am and is filed under Business Management, Marketing, Sales, Startup. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.