When we hear or read the labels network marketing and/or multi-level marketing, we instantly put up our guard or delete. In our minds, we think that both labels are the same thing. However, in reality, are they really the same?
The FTC (Federal Trade Commission) wrote an article called “Multi-Level Marketing Businesses and Pyramid Schemes” and Wikipedia relate similar meaning in their own article Multi-Level marketing. Both entities claimed that network marketing and multi-level marketing to be the same.
However, as I dug deeper and researched a little more. I find that they are similar yet slightly different. The answer is yes and no. In this article, we will discuss network marketing vs multi-leveling marketing. After reading, you can decide for yourself and answer the question “Are they the same?”
Here is a great YouTube video explaining network marketing and pyramid scheme:
————> Pyramid Scheme – Network Marketing <————-
What do they mean?
Network marketing is a business model that depends on the interaction with other people from person to person sales. It relies on a network of distributors to grow a business. It involves three basic types of strategies to make money: lead generation, recruiting, and building and management. The Balance Small Business describes network marketing quite well in their article. It is a generic term or another word an umbrella that includes single-tier marketing, two-tier marketing, and multi-level marketing (MLM).
What are the Differences?
Single-tier marketing is a subset of network marketing. It has only one layer of distributors. The distributors make commissions from direct sales. An example of a single-tier network marketing is Avon or affiliate programs such as Wealthy Affiliate.
Two-tier marketing is the second subset of network marketing. It does include some recruiting distributors under the first level however the bulk of your commission is still coming from direct sales.
The third subset of network marketing is multi-level marketing. This model contains two or more tiers of distributors. A distributor can make more commissions and residual income with distributors’ multiple down lines than direct sales.
With the single-tier, you may have a higher commission for direct sales than with multi-level at the start. With multi-level, it takes a little bit of time to build the team and the direct sale commission is smaller to start. However, when you build a solid and successful team you will make more money in the long term through residual income. There is no right or wrong. It depends on your preferences.
Which is a Pyramid Scam?
For the most part, network marketing is a legitimate business structure that offers real products and services. However, there are companies that may not be legitimate. Keep in mind that these illegal businesses are not only in network marketing. They can be internet companies or service companies who will take your money and not deliver the products or services once received payments.
We got scammed by a local service repairman for our oven this past year. We found him on the Thumbtack app. He came to our house and gave us a quote on a part that he was supposed to purchase and install. Once we paid him for the part, he left and never showed up. He not only scammed us but he also did the same for 3 or 4 other people. We found out through the comments on Thumbtack.
A pyramid scheme is when a company promotes multiple tiers of distributors with one person on top with two to three below which split into two to three below each person, left and right. It continues splitting down the tiers and creates a pyramid shape.
It becomes a scam when a company promises distributors a big return of investment with little work, high fees to get into the network, no tangible products, and/or usually, the ones on top of the pyramid make all the money. They collect the money and then close the doors. The other problem is the sale pressure. Sale tactic varies from one person to another. However, it is commonly seen that MLM has high-pressure sales.
There are illegal companies out there that make legitimate network marketing companies look bad. Also, high-pressure sale tactics get people to turn off their listening. It is very unfortunate. Consumers lose trust in most if not all network marketing companies.
We do have a tendency to see the pyramid scheme as a scam. We commonly visualize a picture of a pyramid, the top gets more paid and the bottom is spread thin. Does this sound like a corporate structure as well? The CEO or the founder of a company makes the most and then down the chain of commands.
Advantages or Disadvantage
The advantage of network marketing is that you can work from home, your business can have low overhead, and the start-up cost can be minimal. Take advantage of the existing system that is already working in the network and receive support from a team of up line. The multi-level marketing company has an additional incentive. The distributors can make residual income through commissions from sales of the multiple levels down line distributors.
The disadvantage is that it will take lots of consistent and hard work for the first few years to establish your network. Gaining the consumers’ trust and overcoming the negative vibe from people who think network marketing is a pyramid scam can be a challenge.
Network marketing is a generic word for multi-level marketing. Whereas, multi-level marketing is a specific level of the network. The big difference is the payment structure. When you are a network marketer, does not mean that you would make residual income. However, when you are a multi-level marketer, you have the potential to make residual income.
You can make money as a multi-level marketer and a network marketer. They both require work just like owning your own brick-and-mortar company traditionally. The primary difference is the potential of making residual income and more available for multi-marketing than your traditional corporate jobs.
Network marketing and multi-level marketing are similar. Do your own research. Listen but don’t rely totally on the first article or someone who had a bad/good experience with certain network marketing. Get multiple opinions and do your own due diligence. Yes, you will make mistakes along the way which is part of growth and expansion. Learn from those mistakes and make wiser decisions next time.
According to Ventaforce, network marketing or multi-level marketing is a popular business model in several parts of the world. It is estimated to value US dollars of $167 billion in 2019. They also mentioned in their final thoughts that network marketing is an excellent potential for individuals to earn and the network marketing industry is expected to surpass a half-a-trillion valuation five years from now.
Love to hear your experiences, questions, or feedback. What are your experiences with MLM or how would you find the right network marketing for you? Please leave your thoughts below.