Understanding Network Marketing: A Definition

Network Marketing
  • Network marketing (NM), also known as multi-level marketing (MLM), referral marketing, or home-based business franchising. The business model is a strategy for selling products or services through a non-salaried workforce.
  • One of the most attractive benefits of working a network marketing business is the ability to create a residual income which is an income you repeatedly get paid on for past work
  • The roots of NM date back to the 1920s and 1930s with companies like California Vitamin (Nutrilite) and California Perfume (Avon). Amway was a pioneering company that spread all over the world having developed a multi billion dollar company
  • In network marketing, independent representatives engage in person-to-person sales. Reps work from home, and today online may collaborate with a network of business partners to generate leads and close sales.
  • Participants in network marketing can earn commissions not only through their own sales but also through sales made by their team. Their team referred to as their ‘downline’, with higher earnings typically for those early in the tier or at the top.
  • As network marketing reps you are leveraging the power of a team, plus their time, money, social media and the internet.

The Structure of a Network Marketing Business

  • Multilevel marketing (MLM) businesses rely on nonsalaried members to sell products and recruit other members into their network.
  • Independent representatives in MLM companies earn commissions from their personal sales as well as from the sales their team.
  • In MLM, the commission structure ensures recruiting members earn commissions from their recruits’ sales, establishing a hierarchy of earnings..
  • MLM structures involve multiple levels of networks, where leaders train, motivate, manage, and handle tasks for their downline team members.
  • Members earn commissions from growing networks by recruiting more people, with reduced percentages per level for company profitability.
  • Sponsors educate, support, and provide business tips to team members, utilizing tools, team chat groups, and Facebook for communication.

Independent Distributors

  • Independent distributors in network marketing companies, also known as ‘representatives’ or ‘associates’, run their own small businesses.
  • Independent distributors are tasked with generating personal and team product sales. They are also responsible for the recruitment of new members to sustain and grow their businesses. Unlike a normal sales job the reps don’t have a manager or sales quotas. The success of their business is solely down to their own efforts and those of their team.
  • Successful independent distributors mentor and support recruits, preferring network marketing companies with thorough support and training programs.
  • The success of independent distributors is influenced by their hard work, time investment, and a steadfast commitment to not give up.

The Pros and Cons of The Business Model

  • Over 96% of network marketing participants face financial challenges, with only a small fraction achieving significant income. This is normally due to false expectations of the amount of learning and work that is needed to succeed.
  • Despite the challenges, NM can offer higher income potential compared to some industries and allows entrepreneurs to start with minimal investment.
  • Network marketing offers flexibility, allowing home-based work, but success usually demands a significant time commitment.
  • Network marketing participants acquire skills like leadership and sales, without requiring higher education, offering diverse career opportunities.
  • Professionals in network marketing can over time create significant residual income and time and financial freedom.
  • I personally started in the industry in 2003 and it took me 4 years to get my breakthrough and since then have been a full time network marketer.

Distinguishing NM from Pyramid Schemes

  • Network marketing is a legitimate business model that involves selling real products or services to the public, which is a primary differentiator from pyramid schemes.
  • Pyramid schemes prioritize recruitment over product sales, offering commissions mainly for enlisting new members rather than actual goods sold. These are often referred to as Ponzi schemes or money games.
  • The absence of a legitimate product or presence of low-value products used as a facade for the scheme is a common trait of pyramid schemes.
  • Significant indicators of a pyramid scheme include aggressive recruitment tactics and unfounded promises of high returns with minimal effort.
  • Legitimate MLM plans follow regulations, compensating for sales, preventing recruitment as the sole income source.

In the video, Robert Kiyosaki explains the cashflow quadrant and how network marketing fits into the “B” quadrant.

You can learn more about my personal network marketing journey by getting a free copy of my ebook The Residual Income Manifesto


Shush Arya is a top International expert in Network Marketing. His achievements include being nominated in 2012 as UK DSA (Direct Selling Association) Direct Seller of the Year, top International income earner with Seacret Direct 2020 till 2022, top International income earner with WorldVentures 2011 till 2020, fastest International Diamond distributor for VM Direct (4 months) in 2007 and no.2 income earner in Tiscali Network 2005 til 2009.

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