Direct Sales and Network Marketing Outline ? Usana's business ...

Network Marketing (also know as relationship marketing, word of mouth marketing and multilevel marketing) is a distribution model used by Direct Selling companies for the promotion and distribution of their products. In general, the company will be responsible for manufacturing, packaging and shipping the products and the Independent Associate is responsible for promotion and advertising. The role of the Independent Distributor 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 products through social networks including family, friends, church, clubs, work colleagues, etc.

As well as promoting the products, an Associate may recognise the benefits of promoting the business opportunity, finding new team members 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 assigned to their Sponsor?s team. Both of them 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 they personally known may be limited, hence there are huge benefits to developing a group of business builders to promote the products alongside them, reaching more potential customers and opening new distribution channels.

This process can then be repeated for any Associate. 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 Associates in their organisation. The original mentor will receive commissions from any sales generated within their team. The structure and commissions will differ 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 generate income like an Entrepreneur. What I mean by this is that income is not defined by the number of days personally worked. Payment is made based on the volume of products sold by the person?s organisation. The cheque they earn is determined by the productivity of everyone in their organisation. Therefore, if you are able to mentor your organisation to be more productive then you will make more income! You have true leverage in your business when your team members are fully trained and are able to find new customers and Distributors without your own involvement. This requires a good knowledge of your products and strong leadership skills, but the rewards are more than worth it!

In retail distribution, the goods are manufactured and is purchased by the wholesaler. The wholesaler distributes the products to various retailers, who sell the product to the customer.

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 product to you for $45 to account for their expenses for staffing, utilities, advertising, etc. and still make a profit. Therefore you are paying $45 for an item 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 buy directly from the manufacturer. Therefore, less of your money 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 a product, but the customer will still pay proportionally less for a higher quality product.

Network Marketing businesses are usually run from home, often on a part time basis and advertising 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 channels 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 Associate for Usana Health Sciences, who manufacture world-leading nutritionals. To read a comprehensive Usana business review please go to http://www.mlmsummittraining.com/index.php/mlms-team/.

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