Direct selling and Word-of-mouth Marketing Explained – Usana’s distribution model

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 products and services. In general, the company will be responsible for producing, packaging and shipping the product and the Independent Associate is responsible for marketing and advertising. The role of the Independent Associate is to find 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 goods and services through social networks such as family, friends, church, clubs, work colleagues, etc.
As well as marketing the products, an Associate may choose to promote 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 Distributors 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 vast benefits to building a group of Distributors to promote the products alongside them, reaching more potential consumers and opening new distribution avenues.
This process can then duplicate for any Distributor. Distributors are able to build a customer base of thier own and receive commissions on the orders placed by any new and repeat personal customers, as well as the customers of the Distributors in their organisation. The original Sponsor will receive commissions from any sales generated within their organisation. The structure and commissions will vary 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 create wealth like an Entrepreneur. What I mean by this is that income is not defined by the number of hours personally worked. Payment is made based on the volume of goods sold by the individual's organisation. The cheque they earn is based on the productivity of everyone in their organisation. Therefore, if you are able to teach your organisation to be more effective then you will make more commission! You have true leverage in your business when your team members are fully trained and are capable of finding new customers and Associates without your own involvement. This requires a good knowledge of your products and strong leadership skills, but the benefits are significant.
In retail distribution, the product is manufactured 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 manufacture, 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 item to you for £45 to offset their expenses for staffing, utilities, advertising, etc. and still make a profit. Therefore you are paying £45 for an item 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 buy directly from the manufacturer. Therefore, less of your money goes to the middleman. The products you purchase 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 a product, but the customer will still pay significantly less for a superior quality product.

Network Marketing businesses are typically managed from home, often on a part time basis and advertising is traditionally done via word of mouth marketing. Hence, overhead costs are lower. Also, people are generally more inclined to trust the recommendations of a friend, family member or work colleague than any other form of advertising. In addition, consumers 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 approaches. 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. Learn more at http://www.usanainhealth.com/business

About the Author: Andrew Smith is an Independent Associate for Usana Health Sciences and is the webmaster of www.usanainhealth.com. Check out his health blog at www.usanainhealth.com/products and business blog at www.usanainhealth.com/business

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