Network Marketing offers unprecedented scale
If you have international aspirations then Network Marketing is an excellent vehicle. The average successful network goes through three distinct phases. The initial phase, which I call the Founding Member Phase, is slow and linear. The goal is to recruit 100 company-sponsored agents who will form the basis of the initial growth. These 100 agents will start recruiting and training new members and, depending on your launch strategy, will provide the groundswell needed to achieve critical mass. Recruiting these first 100 people is probably the toughest part of building the network but if you get it right, you will set your company up for ballistic growth.
Critical mass is the point at which the growth enters the exponential phase. It has been my experience that once you have 2,000 active members the network achieves critical mass. You can achieve critical mass through slow linear growth but there are several effective strategies that will get you there within a few short months. Please take a read of the launch blog http://netready.co.za/Blog/Launching for more information.
Exponential Growth in Network Marketing
A network marketing team traditionally grows at a factor of 1.2 per month. This may not seem like a large number but if you extrapolate over 12 or 24 months, you will find that the numbers grow at a surprising rate. Let's take a look at an example:
1. Growth Factor: 1.2
2. Network Marketing team size at the time of achieving critical mass: 2,000 active members
3. Average monthly sales per Network Marketing member: $50 (this varies from company to company and can be as high as $500 per month. For the sake of this example, we will keep it at the lower end. Growing a network has almost no limitations.)
As you can see from this example, the team has grown to 17,832 active members with total sales of $891,610 per month in one year. This equates to $4,749,660 for the 12-month period and in excess of $10M in the second 12 months. If you think this is pie in the sky, you are wrong. I have personally helped companies achieve a turnover of $5M within their first 6 months from a totally cold start. This is very hard to do through traditional retail if you do not have a large budget.
Financed by Cash Flow
Another huge advantage of Network Marketing as a route to market is cash flow. Traditionally there is very little price resistance. All sales are made face-to-face. This provides the opportunity for a well-trained agent to highlight the features and benefits of the product or service. Once the customer understands the benefits of the product, they are prepared to pay a premium. On average, a product within the Network Marketing industry is sold at a 6x factor. If your cost is $1 then the wholesale selling price would be $6. The maximum commission is normally around 40% leaving the company with a gross profit after commission and cost of the product of $3,60. This is a substantial profit margin and it provides the opportunity to bootstrap the company’s growth.
Stock holding is one of the big issues when it comes to growth. If your company is growing fast, your forward stock planning and the cash required to hold the stock can become considerable. This is especially true if you have a long production lead time. Upfront cash with a 30-day supplier account will provide you with all the cash flow to sustain growth indefinitely (and without borrowing a cent).
Network Marketing is Low Risk
When starting a Network Marketing business there is no need for big overheads, a large staff contingent, expensive offices, large stock holding, big warehouses and expensive distribution channels. For the most part, a Network Marketing business is conducted in coffee shops, people’s homes and online. Your network will be peppered all over the country and very few of these members will ever visit your offices. You can, therefore, keep all overheads on the floor and let the business grow organically. Purchase stock as needed, add staff when necessary and grow the office footprint as the cash flow allows. By making every possible part of your business a variable cost you can limit your exposure even further. An example would be to use fulfilment houses instead of running your own warehouse. These companies warehouse, pick, pack and ship your products and charge a percentage of the invoice value. When thigs are going well it will cost you a little more but if the sales dip, you are not exposed to high fixed overheads.
Network Marketing Offers Massive International Potential
Once you have established a solid presence in a country you can take the next step and move into the international arena. If you have ever tried to take a product international through traditional channels you will be aware of how difficult this is. Network Marketing offers simple and rapid penetration into an international market.
An average network will have approximately 30,000 active members. When you are ready to enter a new country you simply contract a fulfilment warehouse and ask your team who they know in the target country. If you choose the target country wisely you could have 30,000 active members in the new country in record time. You will have 60,000 active members to help launch country 3 and so on. International expansion can be explosive and does not require anywhere close to the infrastructure, manpower and capital of other distribution models.
Network Marketing is Fun!
Imagine running a business with an army of motivated, enthusiastic and fully committed people, who know your business, love the product and are intensely loyal to the brand. Network Marketing provides this type of environment. There is no secret as to why this occurs - it is simply that positive and knowledgeable people stay, and negative people resign.
You will also run travel incentives and take your people all over the world on exotic and extravagant holidays. And you are not just taking anyone - these are the most positive and excited members of your team. They love your product, business, and probably love you for providing them with the opportunity. You are travelling with fun people and that makes all the difference.
Another aspect is that when you achieve critical mass and the growth goes vertical, it is like winning the lottery. Everyone is making money, the product is flying out of the warehouse, people are recruiting others and there is a general air of excitement. The bottom line is that running a network marketing business is fun!
Advertising and Marketing
Apart from the word of mouth advertising that is a natural consequence of a network of sales agents, you can also leverage the network's marketing budget. If you are clever, you will provide your network marketing team with intensive marketing training and a plethora of marketing material and marketing ideas. If you do it right, you will be able to leverage every one of your network member's advertising budget. By combining their paid online and below the line advertising with their social media activity, it would not be unreasonable to expect a $100 per member per month advertising spend. Now multiply this by 30,000 members and you have an advertising budget of $3,000,000 per month. That equates to $36M per year. There are very few companies that can afford to spend that type of money on marketing and even fewer that will be able to compete with you in your market segment.
I find it hard to understand why manufacturers and service providers discount Network Marketing as a route to market. Who in their right mind would go the traditional route when they could enjoy the benefits that I have laid out above? If you have reached this part of the article there is a good chance you are interested in taking a deeper dive. Click here and let’s talk. I am sure I can show you a better way!