Network marketing is a popular business model adopted by Crowd1 in addition to many other brands and is based on a person-to-person sales system where sales are executed by independent representatives of the networking company. The representatives, also known as networkers, of the company, are responsible for all sales and bringing in more business for the networking company. Network marketing is a highly efficient marketing strategy as the model initiates and incentivizes the inclusion of more potential customers by monetarily compensating the networkers. Network marketing enables Crowd1 to build international networks and sales forces hence expanding the brand exposure and reach.
Network marketing is known by a wide variety of names including, cellular marketing, affiliate marketing, consumer-direct marketing, home-based franchising, and referral marketing. Crowd1 and other network marketing companies that follow the strategy have a domestic tier system in place which decides commission for the networkers. The networkers earn income based on their own customer sales in addition to the customer sales of the networkers that they recruited.
Not all network marketing companies have a multi-tier system such as Crowd1, it solely depends on the brand and its business model. Some networking marketing companies have a single-tier system, meaning that all members and networkers of the brand have the same and are equal towards the compensation plan. However, the single-tier system only allows the sale of products, removing the benefits of building teams and international networks.
So what are the concrete differences between network marketing models and that of a pyramid scheme?
The definition of a pyramid scheme is a fraudulent system where the financial capital only comes from the affiliation and recruitment of an ever-increasing number of members. In a pyramid scheme, the recruiter of the new member is monetarily compensated when the new affiliate invests in the business and affiliates more members or when it purchases products or inventory from the business. The model is called a pyramid scheme since all the accumulated financial capital ascends towards the assemblage of people that entered the business in the beginning.
Most multinational companies today have some form of incentive for existing customers to recommend and to affiliate new customers to them, by for instance offering them discounts and other types of beneficial rewards. Since network marketing has a commission system correlated with generating more customer sales by building a network, the affiliation process of networking marketing companies are often directly portrayed and defined as that of a pyramid scheme.
In order to create a long term residual income and a career as a networker, it is crucial that the network consists of other like-minded and ambitious networkers. The ambition and goals of the recruited networkers are what ultimately determines the efficiency of the network and the potential customer sales that it is able to generate, which ultimately determines the networker’s income.
It’s true that not everyone succeeds in network marketing, but that is true for every business and industry. Network marketers and digital entrepreneurs who earn large amounts of money are the same networkers who work consistently in and around their businesses. Becoming successful and to which extent people in the industry succeed should, however, not necessarily be how the industry is judged. The definition of success is highly subjective, but many people in network marketing experience their success when they earn enough money to spend more time with their loved ones, on their hobbies, or even paying off debt / loans.
Network marketing has its issues, but many of them hinge around false and misleading information. General means of success can be achieved in a network marketing career, however, the success of a networker is determined by the same factor as in all other businesses and industries. Anyone willing to gain a solid understanding of the industry, choose a company carefully, find a quality sponsor, and commit time and effort to the business can also have a successful career.