What Is Network Marketing?


What is network marketing?

When most of us hear the term network marketing, our heart beats faster and we start to feel fear inside. Let me tell you that I had the same doubts and fears that most others felt until I decided to seek more information. Below is my take on what I have learned, after being in this profession for the last 4 years.

Network marketing, direct selling or referral marketing is a tried and proven, legal business model. Yes, there are some companies out there that are not legitimate. However, these companies will usually collapse within the first few years or be closed down by a higher authority. These illegal companies will usually promote some type of "get rich quick scheme".

Because network marketing is a true business, you will need to put in some effort. If anyone says "ill do the work for you" or "just let the team build your income" then RUN! This is not business. Most companies these days run a binary tree structure. What this means is that you must put your own effort into the structure in order to get paid. You will only get paid on the efforts that you place in yourself, matched with that of your team.

For example: If I had 1000 people in my team and the company pays 10% commission on the product sold, then I would earn 10% X 1000 orders right?. Wrong. I will only earn a commission of my matching efforts. So say I placed only 5 people in the business, then I would earn 5 X 10% for my personal customers and 5% from the team.

This really is the fairest system I have seen in business, as you only get paid for the amount of effort you put in. Now the extra commission you earn comes from the company as bonus pay, it would not come from your team members' pockets. Most companies also offer other types of bonuses as well, such as New Customer Bonus, High Volume Bonus, and so on.

Is network marketing similar to pyramid selling?

We have all heard the term "Pyramid Scheme or Pyramid Selling" -- although the structure of network marketing does look like a "pyramid or triangle". It has nothing to do with the shape of the structure. A "pyramid scheme" has levels of hierarchy and the higher people in the tree earn commissions from everyone below.

These types of schemes fail quickly because as the structure grows, it usually can not support itself and pay the commissions. There is usually no product available from the scheme -- just money to buy in and commission out.

In the late 1970s, the US government had taken a global network marketing company to court claiming that it was an "illegal pyramid." After 4 years of litigation, the US Government created a new law called the Amway Ruling, this law states the guidelines for all true and legal network marketing companies, one of which is that the company must offer a product or service to the community.

Another is that to earn commissions from such a company, you must also be a user of the product as well. The company must also pay a large percentage of its income to its distributors as commissions. Again one of the fairest business models in the world.

Now how do we do network marketing?

Gone were the days of stocking our garages full of stuff that we cant sell. Gone were the days of door knocking and cold calling people to please buy our products. Gone were the days of driving our family and friends nuts with our offers. Network marketing had a major change. Now coined as referral marketing or word of mouth marketing, all we need to do is use a product or service we are passionate about (there are hundreds of companies and products out there). Once we have good results, we want to tell the world about it. It's as simple as that!

We do it every day when we eat at a good restaurant or see a good movie. These huge companies now do most of the hard work for us. You get your own referral website, nice printed glossy brochures, samples, clothing, anything you need to promote the products.

People will simply ask, What is that your drinking? or That's a great jacket, what's  XYZ company? and you can refer them to your site. If they decide to order, it will then be delivered to their home. No need to get the stock yourself and deliver it. Its all automated. All you need to do is meet people, have fun and refer them if they find interest in your product. Your goal is to show results in your personal business.

Can I make money doing network marketing?

Well the truth is, it all depends on you. It is said that a lot of people don't make money. This may be true. However, companies must calculate all the people connected with them. More than two thirds will be customers only, so these people would not be earning any commissions unless they decide to start the business.

Out of the third who are business owners, many won't make money because they didn't want to put in too much effort, or they may have not had enough support or didn't stay with the company long enough. This is not an easy profession. For someone who is willing to put in some time and effort, be willing to train and perhaps step out of their comfort zone.

Be willing to work at this for 3 - 5 years. You could almost be guaranteed a very good 6 figure income, if not 7 figures.

Network marketing is a valuable opportunity for anyone. It is a very misunderstood profession but is quickly becoming the business model of the future. Many entrepreneurial types are now endorsing network marketing saying it is the business of the 21st Century. People such as Robert Kiyosaki and Donald Trump to name a couple.

Warren Buffet, the multi-billionaire entrepreneur had purchased three network marketing companies and said it was the best investment he ever made.

Network marketing is really a low investment / high return opportunity that offers great rewards in many ways without the risk associated with traditional businesses. Do your due diligence on the company, sample the products, meet the team, and when your ready, start your business and hold on for the ride!!

Richard Schembri

Entrepreneur - Team Coach and Mentor in Network Marketing at Team Berrygood

Hi, my name is Richard Schembri and I am a successful entrepreneur, business coach and mentor. My passion is helping others in gaining better health, financial reward or a total lifestyle change with freedom! No matter you background or circumstances, I can be sure to help you succeed!

Comments (2)
Andrew Oldham

Andrew Oldham, National Business Manager at

Great article Richard and totally agree with your thoughts. For most people it's just a lack of education (that's not an insult) or a perception from what they have heard from someone in their past. My advice for people is to become educated and do you due diligence as it can be the right path for those with a desire to change.

Richard Schembri

Richard Schembri, Entrepreneur - Team Coach and Mentor in Network Marketing at Team Berrygood

Thanks Andrew. Exactly, and I have to stress that I was one who originally based my perception on others thoughts and comments. I am so thankful now that I had taken the time to look into it for myself.