Multi-level Marketing, Network Marketing, or Referral Marketing is a popular way of marketing in which the sales force reaches the prospective clients personally that an organization could not reach with other traditional marketing strategies. Network marketing means selling products or services through a chain of independent distributors hired by company sales representatives to improve the revenues. This marketing strategy has been followed from long and in this strategy sales personnel are required to sell the products or services directly to consumers through referrals or direct marketing. Some sources believe that multi-level marketing is a form of direct marketing instead of direct marketing itself.
What is Multi-level Marketing Approach?
As its name signifies, multi-level marketing is an approach wherein a marketing company or its sales force recruits their own sales force for selling products or services. Every single distributor has to:
1)Sell the company products or services
2)Hire more distributor or sales force to increase the sales
These hired distributors then form their own sales force that eventually forms a hierarchical network. This downline formed by independent distributors appear just like an organizational set-up working for a similar goal. Each distributor or sales personnel gets benefits on each product or service that they or their downline associates sell in the form of the commission. The commission is generally fixed, and it ultimately leads to the mutual benefit of an organization and sales force. To keep the confidence of the sales force on top, organizations fix some bonuses or incentives when a distributor meets a certain sales target.
Why Organizations use this Strategy?
As word of mouth or direct selling is the most effective way of marketing, specially when it comes from a person whom you trust, organizations make use of this. Organizations use this marketing strategy to enter your personal network that is the network of your family and friends. As they believe you, it becomes easier to sell off the products or services. As each product or service is meant for a specific purpose, you should understand who all within your network need them and how to approach them effectively. If you have a great convincing power, you can gain a lot.
Multi-level marketing is a good approach to support yourself financially and for organizations its a unique way to find customers that would never be identified otherwise. This marketing strategy though suffers a lot of criticism from a number of national and international sources, the tradition is moving smoothly with time. This pyramid marketing approach has made business even more lucrative for many known brands.