Introduction To Network Marketing
Network marketing is one of the fastest growing, yet most misunderstood methods of moving products and services.
One hundred percent of the people outside of network marketing do not understand it, while eighty to ninety percent of the people inside network marketing do not understand it.
In addition, many company owners do not understand network marketing.
Understanding Network Marketing
Annually, over $200 billion dollars of products and services move through network marketing companies.
That is twenty times larger than the National Football League. (The NFL had $11.9 billion in revenue last season.)
Worldwide sales from the network marketing industry are larger than global music sales ($20.2 billion), the U.S. sports market ($75 billion), and global box office sales ($42.5 billion)...combined.
The network marketing industry is larger than the number one soft drink company ($37.27 billion), the number one fast food chain ($37 billion), and the number one coffee house chain ($26.51 billion)...combined.
The purpose of this book is to show you, through illustrations and examples, what is network marketing. (This book will also show you what is not network marketing.)
You will also learn how to effectively explain network marketing to other people.
This book should be treated as a training manual. It is intended to be used as a tool to help you train the people in your organization.
Don Failla developed the napkin presentations, upon which this book is based, in 1973. (He has been involved in network marketing since 1967.)
This book will cover The Ten Napkin Presentations.
Before going into the details of The Ten Napkin Presentations, allow me to answer one of the most frequently asked questions:
"What is network marketing?"
(Throughout this book, we will interchangeably use network marketing and multilevel marketing.)
Let's break it down. Marketing simply means moving a product or service from the manufacturer to the consumer.
Multilevel refers to the system of compensation given to those people who are moving the product or service.
"Multi" means more than one. "Level" refers to what may better be termed as generation. It could be called multi-generation marketing.
We will stay with multilevel, since that is the most common term. It is so common, in fact, that many illegal pyramids and chain distribution schemes or chain-letters try to pass themselves off as being a multilevel program.
This creates a stigma, which causes many new network marketing companies to use other names for their type of marketing.
(Some of the names you will hear are unilevel marketing and co-op mass marketing.)
There are essentially five basic methods of moving products and services to the consumer.
1) Retailing - A grocery store. A drug store. A department store. Going into a store and buying something is retail.
2) Direct Sales - Computers. Insurance. Cookware. Encyclopedias. Fuller Brush, the Avon lady, and Tupperware home parties are examples of direct sales.
3) Network Marketing - Network marketing is the one we will be discussing in this book. It should not be confused with retailing and direct sales. (Network marketing is often confused with direct sales.)
4) Direct Marketing - Mail Order. Telemarketing. Infomercials. It is any marketing or direct communication to individual consumers, rather than a third party, such as mass media.
5) Online Marketing - A way to move products and services over the Internet. Online retail stores such as Amazon, eBay, and Etsy. (Google Adwords. Email Marketing. Social Media Advertising.)
Another type of marketing, often mistaken with network marketing, is a pyramid scheme. These are illegal. One reason they're illegal is they do not provide a legitimate product or service.
If they do not provide a real product or a service, how can it be called network marketing?
The main reason most people do not get into network marketing is because they do not understand the difference between network marketing and direct sales.
This confusion is understandable, because most network marketing companies belong to the Direct Selling Association.
You have been conditioned to think of them as door-to-door sales programs, because your first encounter may have been when a distributor knocked on your door with something to sell you.
There are some features that differentiate network marketing from retail and direct sales companies. One difference is that in network marketing, you are in business for yourself, but not by yourself.
By being in business for yourself, especially if you are operating out of your home, you may be entitled to substantial tax breaks.
(We won't get into tax advantages in this book. Most people can get that information from their accountant or from the many books that have been written on the subject.)
Being in business for yourself, you are buying the products wholesale from the company you are representing. This means you can use these items for your own consumption.
Many people initially get involved with a company to buy wholesale. Eventually, some of these people will want to build a business.
(Since you are buying your products at wholesale, you can, if you wish, sell those products at retail and make a profit.)
The most common misunderstanding about network marketing is the notion that to be successful, you have to retail the products. There is a lot to be said for selling retail and it should not be ignored. Some programs even require a retail quota be met in order to qualify for a bonus.
You may sell if you want to or have particular requirements of your program. However, to make the larger sums of income, the real success is in building the organization.
Important Point: Let your sales come as a natural result of building your organization. More people fail than succeed by trying to do it the other way. They try to build the organization by emphasizing selling.
As you read through the napkin presentations, you will see this concept unfold before you.
The word "selling" triggers negative thoughts in the minds of most people.
In network marketing, you don't need to sell the products in the traditional sense of the word. However, in order for you to get paid, you do have to move products.
(I define selling as trying to convince strangers to buy something they do not need, want or can afford.)
Again, you do not get paid if there is no movement of product.
Retailing
When you build a network marketing organization, you are building a pipeline through which you can channel your products.
Retailing is one of the aspects of network marketing. Sales in network marketing come from distributors sharing with their relatives and friends, as well as their neighbors. They never have to talk to strangers.
You need balance in order to build a large business. You need to sponsor and teach network marketing. In the process of doing this, you can build a customer base by retailing to your relatives and friends, as well as your neighbors.
Don't try to sell the world on your program. Remember, network marketing is building an organization in which you have a little retail from a lot of distributors. This is far better than a few people trying to do all of it.
You Don't Need To Advertise
With network marketing companies, there is no reason to spend large sums of money on advertising. Advertising is done exclusively by word-of-mouth. This allows companies to have more money to put into development of products.
As a result, network marketing companies usually have higher quality products than what you find in retail stores.
You can share with a friend a high quality product they are already using. You're simply replacing their old brand with something you have discovered, through your own experience, to be better.
It's not going door-to-door every day calling on strangers. Most network marketing programs teach to simply share the quality of their products or services with friends and family.
Sponsoring vs Recruiting
Another thing that differentiates network marketing from direct sales is the sponsoring of other distributors.
Many direct sales and network marketing companies call it recruiting.
However, sponsoring and recruiting are not the same thing. (It is important for you to remember this concept.)
You sponsor a new person, then teach them how to do what you are doing, which is build their own business.
There is a big difference between sponsoring someone and simply signing them up.
When you sponsor a new person, you are making a commitment to them. If you are not willing to make a commitment to them, then you should not sign them up.
(Important: You sponsor a new person, so you can go to work for them.)
At this point, you need to be willing to help them build a business of their own. This book is a valuable tool to show you how to build a network marketing business.
It is the responsibility of a sponsor to teach a new person how to build their business. Things such as how to order products, how to get started, and how to build their organization.
This book will go a long way toward helping you to meet that responsibility.
Sponsoring is how you grow a network marketing business. As your organization grows, you are building toward becoming an independent business person. You are your own boss.
In a direct selling company, you work for the company. If you decide to quit that direct sales company and move to another area of the country, you end up having to start all over again.
In network marketing, if you move to another area of the country, you can continue to sponsor new people, without losing the volume generated by your first group of people. You can build on that volume. You do not have to start all over again.
In network marketing programs, you can make a lot of money. This comes from building an organization, not by selling the products.
You can make a decent living in some programs, by selling the product. However, you can make a fortune by building an organization.
Most people get started in a network marketing business with the idea of making $50, $100, or even $200 per month. Eventually, they realize if they become serious about the business, they could make $1,000 to $2,000 per month or more.
Again, remember that a person does not make a lot of money by selling the products. They make a larger income by building an organization. This is the purpose of this book. It teaches you how to build an organization the right way. (You will also learn to think the correct way about network marketing.)
Is Network Marketing An Illegal Pyramid Scheme?
If a person believes network marketing is illegal and a pyramid scheme, then you are likely not going to sponsor them.
You can show them the facts about network marketing and let them decide if this is something they want to do.
One example you could show them is the illustration below. A pyramid is built from the top down. Only those who get in at the beginning can ever be near the top.
In network marketing, everyone starts at the bottom. They have an opportunity to build a large organization. A new person can build an organization much larger than the organization of their sponsor.
The idea is to have a general discussion with your prospect about network marketing. You can explain to them the difference between retailing, direct sales, and network marketing. Then you may have an opportunity to sponsor them into your network marketing company.
As I stated earlier, annually, two hundred billion dollars of products and services move through network marketing companies.
Most people do not realize how big is network marketing. This industry has been around for over seventy years.
Several companies have been in business for over seventy years and are doing a billion dollars per year.
I know of one company that did over $6.5 million in its first year of operation. In its second year it made over $62 million dollars. For their third year, they projected $122 million dollars. They are on track to hit one billion per year by their tenth year.
The principles explained in this book will make that a reachable goal for any network marketing company.
Network marketing is a practical way for an inventor or manufacturer to put a new product on the market, without investing millions of dollars and without having to give up control of their product to other investors.
Even better, network marketing gives you the opportunity to share in the financial benefits of this economic model.
That's what we will explain in the next chapter.
Summary: The purpose of the Introduction is to convey with illustrations and examples, what is and what is not network marketing.
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