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Direct selling and Word-of-mouth Marketing Overview - Usana's business system

by Andrew Gregory Smith



Network Marketing (also know as relationship marketing, word of mouth marketing and multilevel marketing) is a distribution model used by Direct Selling companies to promote and distribute their products and services. In general, the company will be responsible for manufacturing, packaging and distributing the products and the Independent Associate is responsible for promotion and advertising. The role of the Independent Associate is to identify new customers for the company, in exchange for commissions. The reason it is called Network Marketing is because the Independent Associate will traditionally promote the goods through social networks such as family, friends, church, clubs, work colleagues, etc.

As well as marketing the products, an Associate may be interested in promoting the business opportunity, finding new distributors for the company. When an existing Associate personally introduces someone new to the company, they become the new Associate's Sponsor or business coach. That new person will also be an Independent Distributor for the company and will be placed in their Sponsor's team. Both Distributors will receive a commission based on the customers that the new Associate introduces to the products. For some people the number of potential customers that are personally known to them may be limited, hence there are vast benefits to building a team of Distributors to promote the products alongside them, reaching more potential consumers and opening new distribution avenues.

This process can then be repeated for any business partner. Distributors are able to build a customer base of their own and receive commissions on the orders placed by any new and repeat personal customers, as well as the customers of the Distributors in their organisation. The original Sponsor will receive commissions from any sales generated within their organisation. The structure and commissions will vary from company to company and pay plan to pay plan, but the principle is the same.

The Network Marketing business model offers Individuals the opportunity to earn income like an Entrepreneur. What I mean by this is that income is not calculated by the number of days personally invsted. Payment is made based on the volume of goods sold by the individual's organisation. The cheque they earn is determined by the productivity of everyone in their organisation. Therefore, if you are able to train your organisation to be more effective then you will make more commission! You have true leverage in your business when your downline members are fully trained and are able to find new customers and Distributors without your own involvement. This requires a strong knowledge of your products and strong leadership skills, but the rewards are significant.

In retail distribution, the product is produced and is purchased by the wholesaler. The wholesaler supplies the products to various retailers, who sell the product to the consumer.

As a customer / consumer, you will typically pay around 2 to 3 times more for a product than the wholesaler paid the manufacturer for them. Say for example a product cost $10 to manufacture, the wholesaler may then pay $15 for each unit and the retailer then purchases them for $20 from the wholesaler. The retailer will then sell the item to you for $45 to offset their expenses for staffing, utilities, advertising, etc. and still make a profit. Therefore you are paying $45 for something that the manufacturer sells for $15, because everyone in the distribution chain must make a profit on your purchase.

In the Network Marketing model you purchase directly from the manufacturer. Therefore, less of the money you pay goes to the middleman. The products you actually get are generally a higher quality than retail products, due to the company's emphasis on research and development of the product. Network Marketers may be paid up to 30% on the sale of goods, but the customer will still pay proportionally less for a superior quality product.

Network Marketing businesses are typically managed from home, often on a part time basis and promotion is traditionally done via word of mouth marketing. Hence, overhead costs are lower. Also, people are generally more inclined to trust the recommendations of a friend, family member or work colleague than any other form of advertising. In addition, consumers have much closer contact with the company through the Associate who introduced them to the company.

The purpose of both distribution approaches is to reach new customers, whilst serving existing customers. However, incentives and commissions are awarded differently in the two methods. In retail, the owners and managers of the wholesale and retail companies are rewarded on the productivity of their staff and in Network Marketing, the Distributors earn commission based on sales generated by their organisation.



Andrew Smith is an Independent Affiliate for Usana Health Sciences, who manufacture world leading supplements. To read a comprehensive <a href="http://www.mlmsummittraining.com/index.php/mlms-team/usana-business/" target="_blank">Usana business review</a> please visit <a href="http://www.mlmsummittraining.com/index.php/mlms-team/" target="_blank">http://www.mlmsummittraining.com/index.php/mlms-team/</a>.

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New Unique Article!

Title: Direct selling and Word-of-mouth Marketing Overview - Usana's business system
Author: Andrew Gregory Smith
Email: mlmsummit@gmail.com
Keywords: network marketing,home business,business,internet marketing,marketing,make money,money making,finance
Word Count: 760
Category: Marketing
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