Network Marketing is a business model that relies on a network of distributors to grow a business.
...But what does that mean?
pay to play
As a distributor, you’ll purchase products in bulk (your inventory) from a network marketing company and sell them to customers to earn commissions (a percentage cut of your sales). You’ll need to pay for a start-up kit and any other fees to become a certified distributor.
In other words, you’ll have to ‘pay to play.’
However, to officially become a distributor, you’ll need to be recruited by an established distributor. This distributor will be your upline and you’ll be their downline. Your upline will also get a commission from your sales in exchange for providing you technical and moral support.
Your upline can recruit multiple downlines.
You’ll earn commissions by selling your products to customers. Every company has a different commissions structure. In general, you’ll earn a commission from your sale, and so will your upline…
…and their upline.
A LINE OF UPLINES
Many uplines will get a cut of your sales, with the largest cut reserved for the company. For the company to remain profitable while giving out commissions to your uplines, the selling price of your products will be high so that there are enough profits to be shared.
In most cases, only the company has control over the selling price of your products.
play to lose?
High retail prices can put off potential customers. Besides low sales, you may need to constantly purchase inventory to maintain special perks with the company. These perks can include slightly higher commissions or discounts on inventory purchases.
Earning a decent income is difficult under these circumstances. At this point, you may consider earning extra commissions by recruiting others and becoming their upline. But how much can you really make from recruiting?
Say that all of your 1st Generation downliners recruit 5 people each. In just 14 Generations, you’ll have almost run out of human beings to recruit.
blood from a stone
Clearly, endless recruitment is not possible and you’ll reach a dead end quickly. This is called market saturation and it will limit how much money you can make. The company may also put a cap on how many downlines you can have, further limiting earning potential.
It’s recommended that you look at the company’s Income Disclosure Statement (IDS) to get a full picture of your earning potential. These statements can easily be found via Google.
consider the following
Besides the financial considerations of joining network marketing, you should also ask yourself the following ethical questions: