What is network marketing and is it a good career choice?

By Indeed Editorial Team

Published 1 July 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

The term network marketing describes a marketing strategy whereby independent entrepreneurs purchase products from a parent company and sell them. People often use this term interchangeably with pyramid selling, which is considered a controversial sales structure, though there are many reputable businesses that operate this way and prefer the term network marketing. If you are hoping to join a network marketing company, you can benefit from understanding how these companies work and how to protect your interests. In this article, we explain how network marketing functions work, and how to identify legitimate businesses and consider viable opportunities in the industry.

What is network marketing?

Network marketing companies structure themselves in such a way that they can decentralise the sale of the products they manufacture. These companies partner with independent sellers instead of employing a full-time sales team. Typically, salespeople purchase products wholesale directly from manufacturers and use their initiative to sell them, often by hosting sales nights and inviting friends and relatives to them.

Many production fields use this kind of business setup, including those in makeup, household products and clothing. These practices often attract criticism because the salespeople can end up making small profits, while the parent companies profit greatly from the initial sale of stock to salespeople. When considering whether to join such a company, ensure that you research it at length and find out if it properly compensates its salespeople.

Related: How to write a sales cover letter (with examples)

How does network marketing work?

There are two fundamental ways that this system works and understanding both can help you make an informed decision about pursuing a career in this field. The first way that this system manifests in the market is fair and ethical and all network marketing companies attempt to represent themselves as running this type of system. The other is an unethical system in which the company intentionally misleads their salespeople so that the senior members of the company can generate a profit. Unfortunately, the second way makes up most network marketing organisations, so it's important to know how to avoid them.

Here's an explanation of each:

What is good network marketing?

A good network marketing organisation is one that enables its sales force to make a decent profit by selling them high-quality items at a fair price. For this type of setup to work, it's important that the products the salespeople purchase are actually in-demand. In such an organisation, the sales teams can set their own schedule and be their own boss. The company also benefits from saving money on marketing and full-time sales staff, as it's usually up to the sellers to promote their goods.

Some companies don't operate using the above structure. Often, these businesses make the majority of their profits by selling starter packages to sales recruits, meaning that the recruits often lose money unless they also sell starter packages to other recruits. This creates an unhealthy system in which the early participants reap the rewards whilst the sales force struggles to recuperate their initial investment. For these reasons, it's essential to discover whether the company you're dealing with has a proven history of success for its sellers.

Related: Digital marketing skills: definition and examples

Advantages of network marketing

If you're considering starting a network marketing sales career, here are the benefits you may experience when working with an ethical company:

You make your working rules

Though some companies impose rules regarding how you can and cannot sell items, you can still enjoy a significant amount of flexibility because the involvement of the parent company is often limited. This means that sellers can choose to work as frequently or infrequently as they desire. You can also determine your own method of selling, such as by hosting sales parties or through paid online advertising.

Work with products you believe in

Many different network marketing opportunities exist in today's job market, meaning you can probably find a company working with products that you believe in. Being passionate about the products you're selling and having a genuine belief in their quality, makes selling them much easier. Perhaps you're passionate about a particular piece of technology or an environmentally friendly manufacturing method. Working with a product you believe in can give you a sense of pride and purpose.

Sales parties are fun

Professionals working in network marketing frequently hold sales parties at their homes or other venues, as hosting a party gives them the chance to showcase their products to large groups of people. You can hold these amongst family, friends, strangers or a combination of the three. Because network marketing sellers can sell their goods and make a profit whilst having fun at a party, this job can be quite appealing to some.

Related: What are the most important sales skills?

Disadvantages of network marketing

The public typically has a negative opinion of network marketing companies because of the downsides that can come from working with one. Potential reasons to pass on a network marketing opportunity include:

It's hard to make money

Although the exact success numbers for network marketing companies vary, the majority feature low success rates. Typically, the percentage of sellers who turn a profit is in the single digits. Usually, only a small portion of those individuals who turn a profit do so by selling to customers and not selling starter packages to new recruits.

Related: 15 sales jobs that pay well

Many companies misrepresent themselves

It's difficult to tell a trustworthy opportunity from an unreliable one, as companies with low success rates are likely to obscure this information. Companies may display their data creatively, highlighting some information and obscuring negative elements. This creates an unrealistic understanding of your prospects with the company. It's advisable to perform extensive research to determine if a company is being honest with its numbers before joining. You can gain an insight into how trustworthy a company is by searching its name online and reading some reviews from current or ex-employees.

Related: 33 marketing manager interview questions and sample answers

Tips for network marketing

Because succeeding in network marketing companies is a challenging proposition, every edge you can get is useful in your journey. Here are the best tips for succeeding in network marketing:

  • Find your passion: Enjoying what you're doing when selling products doesn't just make you happier, it's great for your business as well. When you have a passion for the type of products you're selling, it's easier to advocate for them and make more sales.

  • Choose quality products: It's important to find products that both you and your customers can believe in. Finding high-quality product lines people want to buy is essential in positioning yourself for success as a network marketing professional.

  • Do your research: There is no phase of finding a good company to work with that is more important than research. The more information you have about different companies, the more effective you are at choosing one that is worth the investment of your time and money.

  • Find a supportive company: The way a networking company collaborates with its salespeople tells you a lot about the level of investment they have in your success. Although you can expect some degree of self-marketing with any networking company, finding a company that offers additional support for its sellers is most beneficial for you.

  • Contact sellers first: Speak with multiple sellers who are already working for the company and not trying to sell you a starter pack. When you remove the financial incentive of pitching to you, it enables you to get an honest assessment of their experience with the company.

  • Investigate where sales originate: One of the most important distinctions between a viable sales opportunity and a fraudulent operation is where sales go. If profitable salespeople are doing most of their sales to new people buying into the company, that is not a successful business and avoiding it is likely the smartest option.

  • Know up-line policies: Many network marketing companies include complex up-line policies where you give a portion of your sales up to the person who brought you into the company, then continuing up the chain to who they joined under and so on. Find a company where you can succeed on the strength of your sales alone.

By keeping these tips in mind, you can assess the merits of any network marketing company before joining to find an opportunity that feels honest and makes sense for you.

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