People always wonder how others make so much money in network marketing. Also, the analytical minds won’t accept that in reality. So, I am dedicating today share info about how network marketing works. Let’s get started.

Why Network Marketing Business Model Came into Existence

As you know, every invention takes place to fill a gap in society. Even now, as work from home started, a new business idea of renting the inventory of the office emerged.

In the same way, to fulfil one problem that emerged, network marketing emerged. Yes, it was not as it is in the initial years. Like any other industry, network marketing also emerged. It got started as a uni-level plan and, with time, evolved into multi-level marketing.

Before we dive deep into the subject, let’s understand traditional marketing. There is an open secret that the manufacturing cost of a product is 20-30% of the MRP. Don’t you believe me? How much do you think the cost of coca-cola is? It is just 1.25-1.5Rs. You may think if it is so less, why the MRP is so high? It is because of the involvement of the distribution channel before it reaches end customers. Also, it is due to celebrity endorsements.

You can refer to the below image to understand the traditional marketing chain.

Also, the licence amount will be high to be a part of the distribution channel. The higher level it is, the more money it demands. Also, most of the celebrity endorsements are not genuine. Sourav Ganguly’s ad for fortune rice bran oil is the latest example. Also, the oil companies pulled down those ads featuring Sourav Ganguly to safeguard their reputation.

Due to this, even people become sceptical about the genuine products and because of their unique benefits.

How Network Marketing Model is Helping in This Scenario

The actual scenario is the products in the network marketing model are so unique with many benefits. So, describing their advantages in a 30 seconds ad becomes highly impossible. At least 10 minutes is required. Also, people won’t believe it if promotion happens through ads. So, NutraLite, the first network marketing company, hired people in the innovative model where they share the products through word of mouth.

And the persons get compensation based on their performance.

Moreover, in this model, there won’t be any distribution channel and celebrity endorsements. So, the companies save 70-80% of the money. And that money is being paid to the direct sellers on a performance basis.

You can refer to the below image to understand the difference between traditional marketing and network marketing.

Compounding takes place in network marketing, due to which there will be exponential growth. That is the reason people make insane money that people can’t accept in general. Also, the business works through the word of mouth promotion.

Final Thoughts

I am sure you can’t agree with me. Just pick products from reputed network marketing companies and do basic research about them. Then question yourself if you can understand their benefits from a 30 seconds ad. You will get the answer to why products are promoted in the network marketing model. Just go to geometric progression in maths then you will understand the power of exponential growth.

What is your understanding? Share your thoughts in the comments below.