The trends in the global economy have called for companies and commercial institutions to be aware of the changing needs and wants for customers.
To begin with, keeping long-term relationships with profitable customers is the only way to survive the current worldwide market competition. Network marketing encompasses the creation of customer networks that underpin the close relationship within the network.
Network marketing can be commonly defined as a form of marketing that make use of independent channels to announce the company offerings to potential customers. The company can barely reach these customers using the standard marketing communication channel of the business. Network marketing is a channel that lots of companies use.This is where the company limits the hiring of permanent marketers and depends much more on hired network marketers that have direct contact with the customer.
The ultimate goal of network marketing is to increase sales and to expand customer base. In normal circumstances, they change the need for middlemen who will dilute the profits by adding their own profit margin through the supply chain, therefore, diluting the gross profit margin of the producers. Instead of using the middlemen the independent marketing acts as a way to avoid them through their direct marketing initiatives.
Word of mouth recommendation creates a stronger impact in developing long-term relations with customers. Direct marketing initiatives can inspire start-up businesses since they offer an opportunity to build a customer base through the use of referrals. Moreover, this business model acts to revitalize small businesses to create a customer base before spending much of their budgets on marketing against competitors.
Just like any other business, some companies do not use the term network marketing; they instead call it Multi-Level Marketing (M.L.M), which they recognize as a legitimate business model that capitalizes on direct selling techniques and relationship referrals strategy of selling products and or services of the company in question.
The company might be contracting the marketers in their independent capacity but, their existence will resemble the franchising concept since they will be have the product to sell for the company, not for themselves. In some instances, the contractors might work in full representation of the company seeming to be the owners of the merchandise or services.
In order to understand how network marketing works, one needs to shift the focus to a franchise business. The franchisee, in this case the independent marketer, is closer to the customer and knows quite well what the customer wants and the customer also knows exactly what to expect from the seller. Therefore, the franchising company gives all the products and the relevant equipment needed to make the sale.
In this case, the independent marketer requests only products required by customers and sells them in his own capacity using the business name and logos. Moreover, if new products come into the market the independent marketer communicates with members in the network and does test marketing to find out their response to the new product. The parent company, in this case, takes the responsibility of the training requirements of the independent marketer to help him conduct the business. The parent company provides all the marketing support. The independent marketer carries out any business transactions even though the business name will be in the parent company’s name.
Network marketing is so fascinating because self-sufficient business owners have non limited privileges to run other businesses. These businesses are independent to the contract of sale by the parent company.
Although independent business owners will be using the parent company’s name they also have full control of their business, and they can expand from them. In the multilevel marketing business concepts, they refer to the principle as sponsoring. The concept of sponsoring gives the marketer the advantage of profiting not only from incentive of the mother company, but also from the sponsorship sales.
The complexity in the nature of multilevel marketing or network marketing business’s causes people to raise some questions about the legality of the business practice. It is a mistaken belief that network marketing is illegal. Network marketing is a legitimate business internationally. For example in America, the US Federal judge legitimized M.L.M companies in 1979.