The term network marketing has two different meanings. In generally it is a synonym for multi-level marketing and often by mistake considered the same as a pyramid scheme.
The idea of “network marketing” is often used to describe a marketing concept that emphasizes on the inter-connectivity of market players and transactions and can be observed as the application of systems thinking to marketing. According to network marketing premise other marketing schemes see the discipline as constant dyadic relationships such as one buyer and one seller. Network marketing tries to rise above this constraint by looking at transactions and relationships from the perspective of all those concerned.
These outlook initiated in industrial marketing, also called B2B marketing, where multiple contact points are distinctive. It is not rare to have a number of decision makers in a company’s “purchasing centre”. Likewise, the marketer can be planned into a “selling team”. With multiple players on each side of the transaction, a complicated network is created. This paradigm is further intricate by resultant players like information gatekeepers, influencers, business promoters, advertisers, and middleman. This network can expand over time as more people get engaged.
The network-marketing phenomenon considers marketing as a structure of social networks where the associations between each of the links must be tacit, simultaneously counting potential feedback loops; the system must be realized as a whole.
Instead of using the regular distribution course that moves from manufacturer to warehouser to wholesaler to retailer to end customer, Network Marketing companies use a network of self-governing marketers to pass the products directly from the manufacturer to the end customer.
The self-governing marketers bring in a percentage of the profit in each sale they make. While it’s possible and highly recommended to make an income by selling to end customers directly, the real clout of Network Marketing is that you are allowed to build a layer of other independent marketers below you, and make a percentage of their combined sales.
There is limited amount of time for a person can spend working. By having a sub layers working with a marketer, he can multiply that time. Imagine having sub layers of 100 people each putting their effort and only an hour a day in five days a week. In one month 20,000 hours of work would be done. It would take one person 10 years to produce the same amount of work.
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