Экономические науки/6.Маркетинг и менеджмент

Галюк Л.В., студентка 4-го курсу напряму підготовки 6.030507 «Маркетинг»,

Науковий керівник Нікітенко О.В.

Національний університет харчових технологій, Україна

NETWORK MARKETING

Network marketing programs feature a low upfront investment - usually only a few hundred dollars for the purchase of a product sample kit - and the opportunity to sell a product line directly to friend, family and other personal contacts. Most network marketing programs also ask participants to recruit other sales representatives. The recruits constitute a rep's «downline» and their sales generate income for those above them in the program.

To understand how network marketing works, it may be helpful to think of a business model that most consumers are familiar with, franchising. In a franchise, an owner pays a company for the right to do business using that company’s products, services, and name. The parent company agrees to provide the owner with training, development, advertising and marketing support. While the name on the outside of the building is that of the parent company, the actual location is privately owned by an independent business owner.

While networking marketing is not actually a franchising model of business, it does work in a similar fashion. In fact some large multilevel marketing companies refer to its business plan informally as «private franchising». In network marketing, a company distributes its products and services through independent business owners (IBO), who in turn market these products and services to customers of their own.

The key factor that has made network marketing so attractive is that independent business owners not only have the ability to sell products and services to retail customers they are also able to expand their business by setting up others in their own businesses as well. This is commonly known as «sponsoring» in the multilevel marketing industry. Sponsoring others allow a business owner to not only profit from what he directly sells, but also allows him to profit from the sales production of those he has sponsored.

The salient characteristics of multilevel marketing make it attractive to people who:

· have not done well in their business or profession and have little money saved up to invest;

· have no previous experience owning or running a business;

· have no previous experience in sales;

· have little or no experience developing business relationships other than that of employer/employee/co-worker;

· are not satisfied with their current level of income;

· have unrealistic expectations of the amount of work involved compared to the revenue realized.

Because of the structure of a network marketing business, many people mistakenly believe that all multilevel marketing companies are illegal pyramid schemes. In actuality legitimate network marketing companies are not pyramids. The belief that multilevel marketing companies are illegal pyramid schemes may have popularly taken root in 1975, when the United States Federal Trade Commission (FTC) accused Amway Corporation of being an illegal pyramid. However in 1979 a US Federal Judge determined that the networking marketing plan used by Amway was indeed a legitimate business model. This decision in turn helped to legitimize other multilevel marketing companies.

This does not mean however that all companies who purport to be legitimate businesses, are. The entrepreneur who is considering network marketing should consider these factors:

· The length of time the company has been in business;

· The up-front investment to start the business. Many reputable companies do not require a large start-up fee;

· The product return policy of the company. Legitimate companies generally allow for the return of products;

· The amount of training and development available to IBO.

Network marketing is a great opportunity for people to have their first business, their first sales role, etc. If you've never owned a business before, if you've never done sales before, if you've never networked before, you need to learn about how to do so, not just from the network marketing experts, but from established experts in those fields.

Network marketers who are serious about building a business should be reading and learning about business fundamentals, the latest sales and marketing techniques, strategies for networking and business development, etc., not just swapping tips at your team's weekly or monthly meeting. Act like a small business owner, and people will treat you like one.

References

1. Bloch, Brian. «Multilevel marketing: what's the catch?» Journal of Consumer Marketing. 1 Oct. 1996, Volume 13, Issue 4: 18-26.

2. Coward, C. «How to Spot a Pyramid Scheme.» Black Enterprise. 1 Feb. 1998, Volume 28, Number 7: 200.

3. Dokoupil, T. «A Drink’s Purple Reign.» Newsweek. Newsweek Inc., 11 Aug. 2008.

4. FTC. «The Bottom Line About Multilevel Marketing Plans and Pyramid Schemes.» Protecting America's Consumers. Federal Trade Commission, 1 Oct. 2009.

5. Vander, N., Peter, J., Keep, W. «Marketing Fraud: An Approach for Differentiating Multilevel Marketing from Pyramid Schemes.» Journal of Public Policy & Marketing. 1 May 2002, Volume 21, Number 1: 139-151.

6. Walsh, J. You can't cheat an honest man: How Ponzi schemes and pyramid frauds work and why they're more common than ever. Aberdeen, WA: Silver Lake Publishing, 1998. 183-202.