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. Usually, the company will be responsible for manufacturing, packaging and shipping the goods and the Independent Associate is responsible for promoting 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 goods and services through social networks such as family, friends, church, clubs, work colleagues, etc.
As well as marketing the products, an Associate may choose to promote the business opportunity, finding new distributors for the company. When an existing Associate personally introduces someone new to the business, they become the new Associate’s Sponsor or mentor. That new person will also be an Independent Distributor for the company and will be assigned to 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 they personally known may be limited, hence there are vast benefits to developing a team of business builders to promote the products alongside them, reaching more potential consumers and opening new sales channels.
This process can then continue for any Distributor. Distributors are able to build a customer base of thier 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 team. The original mentor 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 create wealth like an Entrepreneur. What I mean by this is that income is not determined by the number of hours personally worked. Payment is made based on the volume of goods sold by the individual's team. The income 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 earn more commission! You have true leverage in your business when your downline members are fully trained and are able to find new customers and Associates without your personal involvement. This requires a sound knowledge of your company and strong leadership skills, but the rewards are more than worth it!
In retail distribution, the goods are produced and is purchased by the wholesaler. The wholesaler distributes the products to various retailers, who sell the product to the consumer.
As a customer / consumer, you will typically be charged 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 produce, 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 goods 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 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 order directly from the manufacturer. Therefore, less of your money goes to the middleman. The products you purchase 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 an item, but the customer will still pay proportionally less for a better quality product.

Network Marketing businesses are usually managed 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, customers have much closer contact with the company through the independent representative who introduced them to the company.
The purpose of both distribution methods is to engage new product consumers, whilst serving existing customers. However, rewards and commissions are awarded differently in the two models. 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. Learn more at