There are many different types of business models but, as a whole, they can be seen as
how an organisation makes money or adds value to or from an experience. Historically, they
tend to be simple and focused around making something and then selling it for more than the
cost to make it. This direct form of business model is now not the only form. Network
Marketing is a business model that “depends on person-to-person sales by independent
representatives, often working remotely” (Hayes, 2022). This can consist of a group of
partners or sales representatives which help with creating sales.
Wolfe (2021) outlines how network marketing consists of single tier, two-tier and
multi-level marketing. Single tier marketing has its strengths situated in that one “does not
need to recruit other distributors” (p.1) and they simply receive commission on sales. One of
the most famous examples of this in the UK is that of Avon who religiously use this system.
An alternative version of this is where the individual receives commission for the amount of
traffic driven to the site measured, with Pay-per-click being the dominant method. Network
marketing also consists of two, increasingly more interconnected methods, two-tier and
multi-level marketing. These methods just increase the level of delegation with Multi-Level
Marketing (MLM) containing two or more tiers.
The main benefits to the start-up are nicely outlined by (Doyle, 2019). He suggests
that a networking marketing model has a “low cost to entry” (p.1) with training easily
covered through relative investment and with a lot of companies transitioning to cloud-based
storage, this can make it “easier to update and distribute to all associates” (p.1). In addition, a
network marketing model is attractive to employees as it as a very flexible job and can offer
them self-development in the form of communicating skills. Doyle (2019), illustrates how
MLM in particular is a very cost effective strategy as it allows connections to a wide
customer base with similar or limited investment. In addition, with the model working across
many levels and the employees being independent, the company doesn’t need to give fixed
salaries reducing fixed costs and sales expenses.
However, network marketing has its drawbacks. Wolfe (2021), suggests that even
with all the will in the world “not everyone who wants to sell something will be good at it”
(p.1) with a lot of the success depending on the participants. In addition to this, after the
initial honeymoon period, the quality of the marketing may drop as if people’s main driver is
to earn money, they “may cut corners or mislead others in an attempt to earn more for
themselves” (p.1). Lastly, the example previously mentioned with Avon is a great example of
how it can be hard to recruit people to join your network marketing model as there can often
be stigma around this job. Working for Avon, particularly in the UK has spurred jokes online
through websites such as “Urban Dictionary” deeming the insult of bringing light to the fact
that someone’s parent is an Avon representative as “the peak, the maximum, the be-all and
end-all of humilitation” or the “ultimate insult of one’s self, one’s family and one’s dignity”
(Urban Dictionary, 2016).
In conclusion, the network marketing business model does provide many advantages
such as a low cost to entry, attractive to participants through flexibility, a potentially large
customer base and reduced sales expenses. However, there are many possible negatives such
as the affiliate marketers being of poor quality as well as having trouble recruiting them due
to stigma around the job. When it comes to the start-up firm planning to market a new range
of legal CBD I would recommend a single-tier marketing business model as to keep things
more simple and focus on quality. This can keep the brand image clear, defined and in check.
As it is a niche product, an MLM model would not be necessary either as there is not the
customer base out there that needs to be reached.
References
Doyle, D. (2019, November 26). The Benefits of Network Marketing - Business Business
Business. Business Business Business.
https://www.businessbusinessbusiness.com.au/the-benefits-of-network-marketing/
Hayes, A. (2022). What Is Network Marketing? How Does It Work? Investopedia.
https://www.investopedia.com/terms/n/networkmarketing.asp#:~:text=Network%20marketing%20is%20a%20business,lead%20genera
tion%20and%20closing%20sales.
Urban Dictionary. (2016). Urban Dictionary: Yer da sells the Avon. Urban Dictionary.
https://www.urbandictionary.com/define.php?term=Yer%20da%20sells%20the%20Av
on
Wolfe, L. (2021). 3 Types of Network Marketing Programs to Make Money. The Balance
Small Business. https://www.thebalancesmb.com/the-network-marketing-businessmodel-is-it-right-for-you-3515493
with it even spurring jokes online through websites such as “Urban Dictionary”
deeming the insult of bringing light to the fact that someone’s parent is an Avon
representative as “the peak, the maximum, the be-all and end-all of humilitation” or the
“ultimate insult of one’s self, one’s family and one’s dignity” (Urban Dictionary, 2016)