“Network Marketing is a scam.”
“This is not the right way to earn money and you will get scammed.”
“Nobody will respect you.”
Well, you must have come across these statements many times whenever someone talks about the Network Marketing Industry.
But you also must have heard people earning in lakhs working in the Industry.
So what’s the catch? Are those persons lying?
Let’s decode “NETWORK MARKETING.”
What is Network Marketing?
Network marketing or Net marketing is just another marketing strategy that a business adopts to distribute its products to its end consumer.
Yes, it is just a marketing strategy.
Today, most of the business (especially FMCG industry) adopts Traditional Marketing Model for distributing the products.
The Traditional Distribution model has three/four levels:
- The Manufacturer
- The distributor (sometimes, depending on Industry)
- The wholesaler
- The Retailer
Here, the manufacturer supplies the product to the DISTRIBUTOR.
The distributor supplies the product to the wholesaler, after adding his expenses and profits.
Wholesaler again adds his expenses and the profits and supplies the product to the Retailer.
Retailer again adds his expenses and his profits and finally sell it to consumers.
In the process, the price of the product increases as the intermediates(Distributor, Wholesaler, Retailer) add their expenses (transportation, marketing, advertisement, etc.)
And their profit margins to the final price of the product, which is bear by the consumers.
Suppose the Market price of a bathing soap is Rs 40.
Do you know what will be the manufacturing cost?
It is in general 20%-25% of the market price; around Rs 8.
The difference Rs 32 (Rs 40- Rs 8) is the profit made by the distributor, wholesaler, and Retailer. Distributor, in general, makes a lot of earnings than wholesaler and Retailer. It is evident from the above image that ‘WE’ as a consumer does not make any profit from our purchase. Instead, we are helping the distributor, wholesaler, and Retailer to earn profit from our purchase.
So, How can we change that?
How can we make profits from our purchase?
The answer is NETWORK MARKETING.
Network Marketing Model supplies the products directly from the manufacturer to the consumer.
Network Marketing Business model has The Network of people acting both as consumers as well as distributors. The Network enjoys benefits of both lower product price and profit-sharing.
Network Marketing Business model does not depend on traditional marketing methods (TV Ads, Banner ads, hoardings, etc.); instead, it depends on us. We are responsible for advertising the product via word of mouth publicity.
Let’s know what are the essential characteristics of Network marketing model.
- DIRECT SELLING. A network marketing company doesn’t adopt the traditional distribution model. Instead, supply products directly from the manufacturer. Members of the Network are responsible for the sales and promotion of the products.
- INDEPENDENT BUSINESS OWNER. Members of a Network marketing company acts as an independent distributor responsible for the sales and promotion of the products and enjoy profits from their business.
- LITTLE TO NO ADVERTISEMENT. A network marketing company doesn’t adopt the traditional form of advertisement; instead, the company relies on “Word of Mouth” publicity by the members of the Network.
- ACCOUNTABILITY. The members are accountable for their actions and growth. They are not answerable to anyone.
So, above are the critical characteristics of a network marketing company.
You must be wondering “What is multi level marketing?”
Network Marketing company is also called Multi-level marketing or Direct selling Company, which is evident due to the very nature of the business.
Now let’s see what advantages the Industry offers.
Advantages of network marketing industry
- PASSIVE INCOME: The members of the Network enjoy the profits from their regular expenses. As there is no limitation to the number of members in the Network, there is no limitation to your earning potentials. One can simply enjoy the benefits of passive income and time freedom as the Network grows.
- LEADERSHIP SKILLS: A network marketing company has a robust culture for the development of its people. The members of the Network are responsible for each other’s growth and training.
I hope you must have gained some clarity about the Network Marketing Industry and its business Model.
So you might be wondering and probably excited to join the network marketing company. Isn’t it?
But wait, before starting the Network Marketing Business, it is crucial to analyze the company.
So, lets understand how we can do that
HOW TO SELECT THE RIGHT NETWORK MARKETING COMPANY
Once you understand the business model, it is essential to analyze the Company before becoming part of it. It will ensure that we are joining the right Company and prevent our hard work to go in vain.
Let’s understand how to evaluate a Network marketing company.
We should follow the three P model while evaluating a network marketing company, which is
- Company’s PROFILE
- Company’s PRODUCT
- Company’s PLAN
Let’s try to understand each and every point in detail.
Before joining the Company, it is essential to have a proper analysis of the profile of the Company which includes points like
- When was the Company incorporated? How old is the Company?
- Who are the top earners of the Company?
- What is the turnover of the Company for the last five years?
- What are the various training programs organized by the Company?
- Does the Company focus on skill development?
The above questions tell us about the Company’s profile. It helps us to understand the vision of the Company and its people’s philosophy.
The Company’s focus should be more on skill development than profit.
The Company’s turnover is an important metric to understand its growth. If the turnover is increasing, then it means the Company is performing well, and people are happy and satisfied with the Company’s culture and plan and products.
After evaluating the Company’s profile, it is time to assess its products.
So why are the products essential?
Naturally, products are the fuel of the Company. Just like the fuel helps in running a machine similarly, the constant sales of the products fueled the Company.
The Company will grow only if its products are excellent and satisfy the consumers.
There are a few points to consider
We should understand the nature of the product. Different network marketing companies indulge in different kinds of products. It could be FMCG products, it could be electronics products, or it could be service like travel packages, etc.
For a network marketing company to grow, its products must be of repeat order nature. The frequency of purchase should be high.
Let me give you an example.
If a company is selling electronic items like speakers or headphones or laptops, what do you think the purchase frequency of such products will be? Once in two years or once a year. So it will become challenging for the network marketing company to run. Hence products should have high purchase frequency.
On the other hand, we consume FMCG products like Soap, Shampoo, Detergent, Toothpaste daily. So these products have a high repeat order, monthly maybe weekly. So one must look for a Network marketing company selling daily use products.
Also, another important parameter is the pricing of the products. The price of the products should be reasonable. It should justify the market and at par with the per capita income of the nation. For example, in a developed nation like the USA, consumers have high purchasing power than consumers of a developing country like India.
Another point to consider is the quality of the product.
Quality is an important parameter while selecting a product. It doesn’t matter if the product is cheap but poor quality. If we want to build a long term sustainable business then it is very important to have superior quality products.
You may try some products before joining the network marketing company to understand its products USP and quality.
The basic principle behind the business model of network marketing is that its consumers are its distributor and enjoy profit sharing from the Company’s turnover.
But how do we know whether the Company is distributing its profit or not?
And whether the profit amount is legitimate or not?
The network marketing business Plan helps us to understand that.
Different Network marketing companies have different marketing plans; it could be a binary plan or a generation plan, etc. But the basic principle remains the same. The network must enjoy the profit it generates from its business. As a general rule of thumb, The Company must distribute around 40%-50% of the total business turnover.
Before joining any Direct selling company, it is important to study the distribution plan carefully and to understand it.
So above are the three key parameters to analyze before joining any network marketing company.
I hope it has given you a better understanding about the Industry.
But do you know what is the status of Direct selling Industry of India?
Why experts say that it is the best time to join the Network Marketing Industry in India.
SCOPE OF NETWORK MARKETING IN INDIA
Let’s dive into the Indian Network marketing industry.
Network Marketing Industry came to India in the early 1990s post-liberalization.
Since then, the industry has seen lots of ups and downs primarily because of a lack of clear guidelines and regulations from the government.
And also a lack of understanding about the business model of Network Marketing.
Let’s look into some stats about the Indian Network Marketing Industry.
As per the IDSA report, the Indian Direct selling industry witnessed a growth of 13% in around 2018-19. The total annual sales stand at around 13000 crores. Wellness and healthcare products are the most popular product segment contributing around 50%. Cosmetic and personal products stand second and third, respectively.
Although the Indian Direct selling industry has been growing at a healthy rate still, it is far behind the global leaders of the industry.
The total global sale of the direct selling industry is around 192 billion USD.
The top leaders are the USA and China, each with an 18% contribution to the industry.
Look at the graph below to have a better understanding of the industry.
It is evident from the graph that India’s contribution to the industry is far lower than the global leaders.
FUTURE OF DIRECT SELLING INDUSTRY IN INDIA
Should you invest your time and energy in Direct selling?
Should you be part of it?
Let’s find out.
Study the graph given below.
The graph represents the total turnover of the Direct Selling Industry across various Nations along with their total population.
USA and China top the list, each with nearly 18% contribution to total turnover.
Other countries like Korea, Germany, Japan contributes around 9%, 9%, and 8% respectively.
India’s contribution to the total turnover is only around 0.8%.
It is surprising to note that the Direct selling industry is people’s industry, and its people or Network fuels it, but still, India’s contribution is only 0.8% even though that it is the second most populated country after China.
Countries like Korea, Germany, Japan with a much lower population are sitting at the top in the network marketing industry.
What is the reason behind it?
Why is India lagging in the industry, which has so many advantages?
Let’s explore the potential reason behind this discrepancy.
Let us first understand the growth cycle of any new industry in a nation or the world. Every new industry has to go through four stages:
- NEGATIVE PHASE
- POSITIVE PHASE
- GROWTH PHASE
- COMPETITION PHASE
So what is the Negative Phase?
The negative phase is the time when people are skeptical about a newer industry. People do not have enough faith in the industry, probably due to a lack of understanding about the business model or unwillingness to accept any change because our mind resists any changes.
Every industry, be it the banking sector, the Insurance sector, etc. had gone through this negative phase.
The first time when the banking sector was making its way into people’s life. How tough it would have been for the industry to convince people to give their money and deposit them in a safe locker. Isn’t it?
But today we all know banks are the best ways to store money and enjoy many benefits.
Today we cannot think about living our life without these sectors.
After Negative phase, comes the Positive phase.
The Positive Phase is the time when people start accepting the newer industry into their life. They started believing in the industry and starts developing faith.
People start using the benefits of the industry and start publicizing about the industry to their
Friends, relatives, and other people.
Then comes the Growth Phase
The Growth Phase is the phase when more and more people start joining the industry and the industry witness exponential growth. In this phase, people have complete faith in the industry and are very well aware of the benefits and consider it an integral part of their life, just like the banking and the insurance industry.
After the industry has witnessed significant growth, then comes the competition where people are competing with each other. Take the case of the banking sector. There are too many people in this sector who are competing for profits. Isn’t it?
So, what do you think?
In which phase network marketing in India exists?
Well, I think network marketing in India is in a negative phase but gradually turning into a positive phase.
In India, people are still confused about the business model of the network marketing industry.
Also, due to past scams by a few network marketing companies, people’s faith in the industry has deteriorated.
However, many people have started realizing the power and advantages of the network marketing company.
Recently, the Indian government came up with guidelines to regulate direct selling companies. The objective behind it is to protect people from
Fraudulent activities and fraud companies.
To aware people of the direct selling industry.
To create a positive atmosphere about the business.
The biggest concern for the Indian government is unemployment and it believes that the direct selling industry has the potential to address the problem.
The industry has seen exponential growth in the past 2-3 years.
As per the IDSA report, there has been a 13 percent increase in total turnover to Rs 13000 in FY 2019.
Also, the recent FICCI-KPMG study on the Indian direct selling industry suggests that the industry has the potential to reach Rs 64,500 crores by 2025.
The above facts indicate that now is probably the right time to enter the network marketing industry in India. People are getting aware of the business and its advantages.
Its time to change, its time to change our mindset. Change is the only way one can progress in life, be it be an individual or a company.
One who embraces the change and accepts it will survive others might not. Take the case of KODAK and NOKIA. Both the companies were once a leader in their domain, but now they are nowhere as their leaders did not progress with changes and were not ready to accept THE CHANGE.
Network Marketing is a Business model of the 21st Century. In the future, many companies may accept Network marketing as their business model.
So what are you waiting for?