Direct Sales and Network Marketing Overview – Usana’s distribution model

June 12, 2012 · Posted in Home business 

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Network Marketing (also know as relationship marketing, word of mouth marketing and multilevel marketing) is a distribution model used by Direct sales companies for the promotion and distribution of their goods and services. In general, the company will be responsible for manufacturing, packaging and distributing the products and the Independent Distributor is responsible for marketing and advertising. The role of the Independent Associate is to identify new customers for the company, in exchange for a proportion of the sale. The reason it is called Network Marketing is because the Independent Associate will traditionally promote the products and services through social networks including family, friends, church, clubs, work colleagues, etc.

As well as promoting the products, an Associate may be interested in promoting the business opportunity, finding new distributors 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 placed in 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 Distributors to promote the products alongside them, reaching more potential customers and opening new distribution channels.

This process can then duplicate for any business partner. 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 Sponsor 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 earn income like an Entrepreneur. What I mean by this is that income is not calculated by the number of hours personally committed. Payment is made based on the quantity of products sold by the individual’s organisation. The cheque they earn is determined by the productivity of everyone in their organisation. Therefore, if you are able to train your organisation to be more effective then you will earn more commission! You have true leverage in your business when your team members are fully trained and are capable of finding new customers and Distributors without your personal involvement. This requires a strong knowledge of your business and strong leadership ability, but the benefits 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 an item 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 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 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 the money you pay 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 an item, but the customer will still pay significantly less for a better quality product.

Network Marketing businesses are usually managed from home, often on a part time basis and promotion is traditionally done via word of mouth marketing. Hence, overhead costs are lower. Also, people are generally more likely 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 find new product consumers, whilst serving existing customers. However, incentives 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.

Andrew Smith is an Independent Associate for Usana Health Sciences, who manufacture world-leading supplements. To read a complete Usana business review kindly visit http://www.mlmsummittraining.com/index.php/mlms-team/.

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