MLM business and network marketing: what is it, what are the pros and cons of this direction. Network Marketing: Business Pros and Cons

The concepts of network marketing appeared in Russia relatively recently, but despite this they are already very popular. Many have earned on this, and someone. on the contrary, he was dissatisfied. Because of this, a whole army of those who are entirely for or categorically against has formed around the pyramids of network marketing. In this article, we will dispel all the myths and try to paint an objective picture of what is happening, having examined in detail all the pros and cons of network marketing.

What you need to know about network marketing, basic concepts

Network or multi-level marketing is an independent sales network that operates through distributors in a non-store way. That is, responsible sales representatives are appointed who make contacts with potential buyers, usually on a long-term basis. The effect in this case is achieved by the “word of mouth method” and clients bring others along with them. Due to the fact that suppliers do not have their own stores and outlets the effect of reducing the cost of goods. In what as a rule also convince clients implementers.

What are the benefits of network marketing?

Network marketing- a structured system in which everyone will find for themselves both advantages and disadvantages. As practice shows, many people have built in this area successful business, made a fortune. One of the main advantages of this system is the structure of the pyramid, where from each client brought and a successful transaction, a percentage of earnings goes to its top. If you got into this system at its very foundation, you have every chance to earn money - the main thing is patience!

Many give up doing this business just starting and not seeing the first results, but in vain. As they say. "patience and a little effort!". Therefore, you should not expect millions of profits from such a business instantly. It is very important to work hard and go to your goal.

Obvious pluses:

Earnings are almost unlimited! It is impossible to predict how successful the next project of network earnings will be, and not a single specialist will be able to predict it. You need to believe in success and be obsessed with your idea. A lot here depends on personal ambitions, if you think that this is a way to earn easy money, you are mistaken. In practice, there are many examples where people made millions on this, but they did not become rich in an instant.
Close-knit team where you are your own boss. One of the hallmarks of network marketing is always a huge team of like-minded people. If you are its founder, you will become the undisputed leader. But it is very important to find people who are result-oriented and support you in everything. Those who are not afraid of difficulties.
No need to work "for someone" or "for a salary". Yes, at first it will be difficult, but in the long run you get complete financial independence and permanent, for the most part passive income from referrals who work for your material benefit. With this money you can secure material well-being for a lifetime.

What are the disadvantages of network marketing?

The disadvantages of network marketing are also enough, and for the most part they are associated with the desire to earn "here and now", which is often difficult to implement.

The need to constantly work. If you are a lazy person by nature, it is best to leave this venture. You will need to constantly offer products, be in search of new customers, sell goods. Do not think that everyone in the world dreams of buying something from you, search target audience is a very complex process in any business, including in the network structure.

Unstable earnings. Unlike a warm workplace in the office where you can sit out your pants and work for a salary, network marketing is an unstable structure. Especially if the company has just opened and little is known about it. You can earn a lot today and nothing at all tomorrow. You need to be prepared for such jumpy earnings in advance.

So, summing up, we get a clear picture of what is happening: network marketing is a really effective and profitable method of earning. But at first it will be difficult, you just need to understand it. You can make your income almost unlimited, but it takes time, material investments, constant work and work on yourself. Only by observing these conditions will you achieve material success in the network field!

Much has been written about network marketing. Not much is said about him either. Many people are very, very skeptical about this type of business. But with emotion suppressed and cold calculation in place, let's try to look at network marketing from both sides.

Network marketing- this special scheme distribution of products by creating a network of independent firms / people who purchase these products.

Well, let's look at the main advantages and disadvantages of network marketing.

Small starting capital. In order to start working in the field of network marketing, you need very little money.
Free education. For those who want to gain new knowledge, often provided various material opportunity to consult and learn new things. This, of course, is a very big plus.
Independence of business from place of residence. On the this moment network marketing, following other areas of business, flows into the world wide web. Therefore, you have the opportunity to work wherever you want.
Unlimited earnings. The realization of your own goals in this business depends entirely on you and your desire. If you really want to make money, then you have everything you need for this.
Possibility to combine with the main work. Network business is often a source of additional income. But in the future, everyone can decide for themselves whether they should leave their previous job or continue to combine.
Opportunity to use quality products. Many network marketing companies produce their own products good quality. So if you want, you can buy it at a low price or even get it for free.
Opportunity for everyone to start this business. Regardless of your education, age, marital status and other criteria, you can start earning in the network business. Weigh the pros and cons and make a decision.
Getting new skills. You will be able to study the psychology of people, sales and negotiation technologies, as well as develop skills correct presentation one product or another

Opportunity to run into scammers. Sometimes under the guise of companies network business scammers or financial pyramids work.
People's distrust of network marketing companies. When you start talking to people about network marketing, you begin to feel skeptical about this area of business. Most people think that network marketing is a scam. Because of what it is sometimes difficult to interest and attract a new person.
High competition. In large areas of network marketing, there are a sufficient number of distributors who have regular customers and extensive experience. So it won't be easy to compete with them.
Too expensive products. As a rule, products of network marketing companies are more expensive than similar products in retail stores.

In the end, we hope that after weighing all the pros and cons, you will be able to come to the right decision! Do you think network marketing is evil or is it good?

Network Marketing Pros and Cons

In this article I will try to be as objective as possible and today we will not talk about the products of different companies, financial pyramids, etc.

And let's talk about the network marketing business, its pros and cons, without any super praising and listing tons of pluses, only the most important points in my opinion.

Why Network Marketing or Turnkey Business?

The benefits of network marketing include:

— One one of the first advantages is that you can start almost from scratch, say, with minimal investment, unlike a linear business, where you will need a tidy sum to open, for example, a cafe, especially if it is somewhere in the center big city. And the question arises, where to get this tidy sum, because if you had it, you would probably have opened your own cafe or pizzeria. And in the end, starting in business, you can reach very decent incomes, it's no secret that there are people who once started from a minimum today earn tens of thousands of dollars a month.

— Second moment, in this business you are taught everything in the process of work. You do not need to graduate from a university for 5 years, then do an internship, etc. You will have ready team support, which will teach you how to do business, the basics, rules and laws of business. So let's say a team of business coaches interested in your success, and in your earnings, since their income directly depends on your income. This is not the case in a linear business, and at work, too, since you are a competitor.

— Third, most likely you will also go through more than one, and personal growth training, which you will get almost for nothing. Since in comparison, if you undergo such training on your own at good business trainer, it will cost you more than one hundred dollars for a few hours of training.

— Fourth, this is your schedule and lack of attachment to the place of work. Yes, you can build modern network marketing through the Internet, and not be tied to any particular place. For example, if you have free time only in the evening, then you can communicate via Skype with people who are in different corners planets. No need to go to the office, etc.

The disadvantage of network marketing, perhaps, is that it is still not quite your business. You are a partner of the company and cooperate with it, that is, you have a partnership. And from here, such a situation may arise that the company may close, change the marketing plan, change the product line without consulting you. And it may even be that everything seemed to be fine with you, there is growth in your territory, while in other countries there is a decline. In total, the company incurs losses and this may be the reason for the closure, and no one is immune from this. And since your check depends on people, on your team, then different reasons not all people will follow you in new company. And in some sense, the business will need to be built from the beginning.

Very often in the expanses of a rapidly developing market industry you can hear the term "network marketing". What is it, what are the features of the concept, how does it affect the performance of companies - questions that are of interest not only to business sharks, but also to those who are trying to start their own business or are simply looking for sources of income.

You can find out the answers, as well as read the reviews of the owners and employees of companies who were able to successfully use the principle of network marketing in their work, from the article below.

What is network marketing

Multi-level or network marketing (MLM) is an inherently specific process of product realization, which uses direct contact between the manufacturer and the buyer. This process can be carried out either directly or through a trained distributor. His distinctive feature is the fact that through such communication it is possible not only to sell the necessary products, but also to attract other interested people to work.

At the same time, the payment scheme is absolutely open - not only the seller receives money and benefits, but also everyone through whom the goods pass in this chain. At the same time, earnings are official, real and depend only on the number of goods sold. While, for example, in the case with which network marketing is often compared, the pros and cons are not so obvious, because in this case the receipt of money is carried out at the expense of the investments of other participants, and their timely issuance is not at all guaranteed.

Advantages and disadvantages

Like every concept, the MLM structure is not without its positive and negative sides. You can highlight all the pros and cons of network marketing by examining the impact it has this scheme of doing business for each individual structure - companies, employees and consumers.

Benefits for the company:

the possibility of unlimited earnings;
no advertising costs;
no costs for renting premises for shops;
no shipping costs;
minimal intervention from public services, lack of documentation.

The last point may also include the introduction of minimum tax duties. Due to the fact that the products fall directly into the hands of the consumer, and not through stores, it is extremely difficult to control the volume of sales.

What are the benefits for employees of MLM companies

Trained and satisfied with the conditions of earnings, distributors are the key to successful business building for MLM companies, therefore, when working with their team, management offers them the following prerogatives:

the possibility of unlimited earnings (as you can see, both for the company and for employees, this item is common and fundamental);
financial independence, i.e. the possibility of carrying out activities without constant pressure from the employer;
the possibility of lifting own business with minimal investment regardless of age, education;
flexible work schedule;
continuous improvement of personal qualities.

Improper organization of the workflow - a disadvantage?

The disadvantages of network marketing are observed if people with lacking experience are at the head of corporations or among the team. In the process of activity, they can stop work processes, negatively affecting the level of sales. There are several reasons for this:

high morale of the staff on the part of customers, other distributors;
instability of earnings (sales levels in different months of work can bring different profits);
due to a sense of responsibility for the rest and the lack of organizational skills, as a result of a large turnover of staff, dissatisfied with the quality of the work process.

What is the benefit of MLM principles for buyers

For the consumer, the pros and cons of network marketing are completely different features. For example, the disadvantage may be excessive obtrusiveness on the part of the distributor in an effort to arouse the interest of the buyer and, in case of refusal, wasted time for both. The advantages are in the following factors:

saving time on trips to the store;
full awareness of the quality of the offered product;
control of financial spending;
the purchase of goods is cheaper due to bonuses, discounts, sales;
You can order and receive goods at any time. convenient time days.

Also, thanks to the MLM concept, it became possible to visually compare, check the compositions, share your opinion, earn money, receive recommendations for the types of goods purchased. Ratings also allow you to establish how the pros and cons of network marketing affect the efficiency of doing business and purchasing activity.

what does it mean for network marketing

By itself, the rating is a kind of evaluation of the effectiveness of a particular type of activity. To compile it, you need data that can be obtained through social surveys. This is done by special firms that process the information received and transfer it to customers for further use.

In the process of data processing, all the pros and cons of network marketing used to develop a certain company in a certain region to promote certain products become clear. Also, the results obtained allow us to track and record the financial results of corporate activities, as well as apply new strategic tactics for business development in the further planning of the company's economy.

Rating of network companies

A separate subject for ratings that allow you to track how effective network marketing is - companies, a list of which can be compiled both for the international arena and for each individual country or region individually. The data included in the structure of these top ratings characterize how attractive the product being sold is to the consumer, how changes in the internal structure of the company or the introduction of a new product affect sales figures, etc.

IN this case rating is an identification of competitiveness on modern market and how much the company has grown financially over a given period of time. Also, the data obtained based on the lists of companies allow us to give a complete detailed analysis financial opportunities in the future, understand what to do to double / triple performance in the future.

List of MLM companies in Russia

Below is a list that includes large domestic companies using effective network marketing. Russia compiles the list on the basis of their annual activities and includes various economic, technical, cultural and social factors. Top 5 network companies with a high percentage and profit growth for 2015 includes:

Avon Prod. Inc.
Amway Corp.
Oriflame Cosmetics SA
Mary Kay Inc.
Faberlic JSC.

If we compare the same top list with indicators, for example, in 2012, Oriflame's sales volume will decline to grow (in 2012, it took 2nd place). To summarize, the economic crisis has affected the decline in sales for all companies without exception. However, the Avon corporation was able to maintain its leading position: as before, it accounts for a third of the perfect turnover of all listed companies. And this means that as a result of the rating research, Avon is one of the most competitive and promising network companies in the Russian market.

How to influence the increase in sales and rating

Naturally, in difficult economic situations, a way out of difficult financial regulations companies is to encourage employees to increase sales. This is called "motivational network marketing". What is the essence of this program? It allows you to move the company up the top list due to additional financial support for the employee and building his own profit scheme by attracting third parties.

In other words, in such cases, a reward is introduced:

for the sale of a large volume of products;
for attracting additional staff who will sell a large volume of products and search for a new

Checked that this construction network marketing schemes can significantly increase the company's profit growth and recoup costs. And all you need for this is the desire to get easy additional income and effectively present your product to the buyer. That is why the number of people involved in this business structure is already more than 6% of the Russian population, and these figures are growing from year to year.

How to Avoid and Succeed in Network Marketing Scams

Naturally, not everyone can succeed in the MLM business, but there are 3 rules that can be followed to avoid fraud and financial failures and comprehend the principle of network marketing:

the company must be registered (you can check whether the company belongs to the declared association using the rdsa.ru resource), this significantly increases the factor of trust in the company and is an indicator of its official activity;
for employment, you must choose a company with high rating sales, which occupies a leading position in the modern market, is a guarantee of its success, effective self-improvement, and hence prospects;
the maximum manifestation of active personal qualities (capacity for work, desire to learn, improve their communication skills and persuasion), the position of a leader is the key to success in running a network business.

The main thing to remember is that the buyer must have the right impression about the type of activity of the company. It should not resemble an inexplicable confusion, scam or financial pyramid. Everything should be as transparent as possible, accurately, meet the stated requirements.

It's hard to believe, but until quite recently, most enterprises did not have marketing departments. In the USA and others Western countries marketing departments grew out of sales departments. In many Russian firms, the positions of “head of the marketing and advertising department” are still found, that is, the fashionable word was simply introduced into the name of a long-existing unit.

Marketing departments grow so rapidly that they often become larger in staff and/or costs than sales departments, the main breadwinners of the company.

Having encountered marketing for the first time and started to apply it in professional activity, it is difficult then to imagine how it was possible to do without it before. For example, a company wants to create New Product. A study is being conducted that answers the question: “does the buyer need this product?” Next, you need to find out the real and potential market share of this product, the price situation, the number and characteristics of competitors. Finally, a positive decision was made. Now the question arises about appearance product, its name, packaging, type of packaging, etc. etc. For each of the items, a market research of potential buyers is carried out. The next step is to advertise the product. We came up with an advertising move - we studied its perception by the buyer. We released the product on the market - we studied the opinion of wholesalers, the reaction of buyers, the distribution of goods on the market, and so on, so on, so on. To exaggerate, before making any decision, it is necessary to conduct a study that will show the current state of the market, its development prospects and give recommendations on how to act to achieve your goals.

Today in Russia there are not only marketing departments at enterprises, but also independent research companies that offer their services for market research. For many managers, the question is still relevant: what is better: to have your own marketing department or to periodically order research from outside organizations.

The main arguments cited by supporters of research carried out only by their own employees

	Marketing company
- competence of employees in this area (who can better know the specifics of the enterprise and its customers)	- incompetence of universal marketers
- availability of confidential intra-company information (the most valuable information is never taken outside the company)	- inaccessibility of confidential internal company information
- respect for confidentiality by employees (an employee depends on the enterprise, he is already verified and trustworthy)	- the possibility of reselling research results to competitors
- objectivity of their employees (the employee is interested in the prosperity of the enterprise)	- the possibility of rigging the results
- low total cost of the study (after completing the study, employees can be transferred to another front of work)	- high research cost

The main arguments that supporters of doing research only in specialized marketing companies give

Marketing company	Company's internal marketing department
- high professionalism of marketers in conducting research and analysis (for successful research, you need not only to know technological process how much to own sources of information and methods of its processing and analysis)	- lack of professionalism of employees, often loaded with other things
- respect for confidentiality by the company (even the suspicion of a double game will erase the company from the market forever)	- the possibility of reselling research results to competitors (you can go to another company with a promotion)
- objectivity of marketers (they do not know the client's expectations)	- high probability of results manipulation (influenced by “corporate opinion” - general expectations, attitude, beliefs)
- low total cost of the study (work is done quickly, there is no need to pay salaries all year)	- the high cost of research (the salary of the department must be paid all year, and also rent, taxes, etc.

The same arguments are used by opposite parties with equal success.

A small survey conducted by N.V. Dolgopolova, head of the marketing department of the State Unitary Enterprise “State Laser Center “Rainbow” among fellow marketers of “problematic” state unitary enterprises, showed that the proposal to attract external consultants is most often perceived by management as a manifestation of the incompetence of their own specialists. A priori, it is believed that in-house specialists should conduct any research faster, cheaper and better than those involved. As a result, there is a widespread practice of own analytical reports based on incomplete or inaccurate information, but corresponding to corporate ideas.

In December 2001, a discussion was held on the functions of the marketing department in the enterprise. In the table, we present the opinions of real experts - heads of marketing departments of enterprises and employees of marketing companies (34 specialists from Moscow, Omsk, Yekaterinburg, Novosibirsk, Kazan, St. Petersburg, Kyiv participated in the discussion).

There was no objection that every modern enterprise should have at least one marketing specialist on its staff. The main controversy was raised by the question of whether the company's specialists should conduct the entire scope of research on their own, or their role is only to control the activities of external performers. And the whole complex research work- from primary data collection to analysis - should be outsourced to specialized marketing agencies. As usual, there is no single recipe.

When making a decision, one must remember the central role of the marketing department in the enterprise and the whole range of issues that its employees deal with. The marketing department develops a strategy for the production and marketing of products, prepares information for management on the market situation for decision-making, coordinates the actions of all other departments (production, sales, finance, etc.), and provides support to the sales department in promoting products.

Most enterprise marketers admitted that they spend no more than 15–20% of their working time directly on market research, the rest is taken up by other tasks, including sales and advertising. This means that the agency will complete the study at least 5 times faster than an in-house specialist! And this is a very important indicator for any market where the situation is changing rapidly.

There are three main criteria for determining whether to organize market research - in-house or with the help of research companies: the ratio of work and human resources, cost-benefit ratio and competence of research companies.

Here is an approximate, far from complete, list of research activities: development of a research program; identification of sources of information and acquisition of statistics; recruitment of interviewers, their training and development of questionnaires; operational management information gathering: the need to constantly communicate with a large number of counterparties; processing of received data; writing an analytical report; preparation and presentation of the report.

It is very difficult for a person who has other responsibilities to do the above amount of work at the proper level of quality and on time. Thus, it is necessary to take a special person to conduct the study, and, most likely, to release him from other duties for this time. If it is possible to find such a person and occupy him at the time when the research is over, then the question of the amount of work is not decisive for the company when deciding whether to do the research itself or outsource it to other companies.

About the cost-benefit ratio. Let's say we're doing research for an architecture and construction company. Getting one client for such a firm can pay off all the costs of research. On the other hand, this one client will probably come to this company anyway. Well, what if he doesn't come, but the current clients leave? Can a research company guarantee results? The answer is no, maybe you are already doing everything right. Can you guarantee yourself that you are doing everything right?

In almost all investment projects, one cannot spare money for research. As a rule, investments in equipment, real estate, hiring people, etc. an order of magnitude more than the cost of marketing research. At the same time, even if you have a person who can conduct marketing research, do not be lazy, go to several research companies, maybe they will seem more competent to you. The cost of incompetence may be too high.

Of course, employees in the company know the specifics of their activities much better (at least, this is commonly believed). But do you really think that it is absolutely impossible for an outsider to understand it at a level that would allow him to correctly pose questions? In addition, the customer approves the research program, which includes a list of results and methods by which these results will be obtained.

Exist organizational matters, the solution of which is likely to be better for a research company: more efficient and convenient work with interviewers, well-functioning control of work, a convenient questionnaire, a convenient and strict structure for presenting data in the final analytical report, etc. This is due to the presence of ready-made forms that make the work faster and better. And this is only because the research company regularly “stuffs itself on this bumps” and improves its work. There is one more important point, which determines competence: a marketer in a research company works with statistics from different markets. This develops an outlook that is difficult to acquire working in one company; and this allows a very sober look at things from the outside (which is one of the main arguments in favor of conducting research “by proxy”).

For marketing research two principles should apply: 1) the cost of information should not exceed the benefits received from its use, 2) the quality of information should correspond to the purpose and objectives of the study.

Results

Every company should have its own marketer, but only a few very large companies can afford to maintain a department to carry out the full range of work, including research. The main function of the marketing department of an average company is to set research goals and objectives, implement the enterprise's marketing strategy, and collect and process current information. The main function of a marketer of a small firm is to set goals and objectives of the study, to implement the marketing strategy of the enterprise.

The size of the marketing department depends very much on the size and scope of the enterprise itself. The more product range you have, the more competitors, the more advertising plays a big role, the more numerous the internal marketing department should be. It makes sense for every company to use the services of external analysts. Any investment project requires joint work internal and external analysts.