What is Network Marketing and how exactly does it work?
Many of you reading this may have come across the term ‘network marketing’ before. It’s an interesting and exciting business concept that is helping thousands of people across the world to earn a decent income. Before we continue with the rest of this very detailed and eye-opening article, it is important that we fully understand exactly what network marketing is and how it works in real life.
To keep it simple, let’s use one of the world’s most popular product brands that you know and probably consume a lot – Coca Cola!. How did that chilled bottle of Coca Cola in your refrigerator get to you? It is very likely that you bought it at a shop in your neighbourhood or at a supermarket in town. Well, that bottle of Coca Cola had to travel through several hands (or middlemen) before it ended up in that shop where you bought it. From the factory where it was produced and bottled, it was sold to a major distributor who sold some of it to a wholesaler who sold smaller chunks to the retailer (a shop or supermarket) who sold it to you. This is a clear example of a traditional way of marketing and distributing a product.
Because of the number of middlemen involved (distributors, wholesalers and retailers), the traditional distribution chain is usually long. However, the sad thing about this type of distribution is that everybody in the chain makes money from the product except you (the final consumer). In fact, consumers in a traditional marketing system cannot buy products directly from the factory or producer; people like you and I must wait until Coca Cola reaches the retailers before we can buy the quantities we want.
Network marketing and distribution (popularly known as ‘direct selling’) is very different from the traditional version. Under network marketing, factories and producers prefer to sell products directly to ordinary people (that’s why it’s called ‘direct selling’). This concept, which cuts away all the middlemen, allows ordinary people like you and I to sign up directly with the factory or product manufacturer to buy and/or distribute a product. As a distributor, you can buy products directly from manufacturers at very low prices and make a profit by selling to other people. You also earn commissions for referring other people (friends, family or total strangers) to sign up as distributors.
Because network marketing companies sell their products directly to consumers, they usually spend very little on advertising and sales of their products. As a result, many of them pay out huge bonuses to their distributors who sell large volumes of products during the year.
Apart from the profits, commissions and bonuses that can be made as a distributor for a network marketing company, the thing that makes this business opportunity very attractive is the passive or residual income that it can make for you. Passive or residual income is money that you make without any active effort. Unlike a 9-to-5 job which you must work at in order to earn a wage or salary, passive income doesn’t require your efforts or presence; it just keeps rolling in. Popular passive income streams include: investment in stocks, real estate, and interest on your bank savings account.
Many people often refer to ‘network marketing’ as ‘multi-level marketing’; both terms are very closely related and we’ll explain. Multi-Level Marketing (popularly known as MLM) refers to the compensation plan used to reward distributors in a network marketing business. Rather than pay distributors a commission for the volume of products they actively sell, the MLM plan also rewards distributors for the work done by distributors they recruit. For example, if you directly recruit five people to join your network marketing business, you will earn. This is the amazing power and opportunity of network marketing. It provides a unique opportunity to make money from your effort (active income) and from the efforts of others (passive income).
Top Networking Marketing companies in Africa
Compared to the rest of the world, network or MLM marketing is a relatively new concept in Africa. There are now just a few network marketing companies in some parts of Africa and nearly all of them are in the health and wellness business – an industry that is worth several billion dollars every year. The products distributed by these companies include nutrition and dietary supplements, weight management, beauty and personal care products. The demand for these products is expected to grow rapidly as more Africans rise above the poverty line and demand products that will improve the quality of their lives.
For reasons we shall discuss in a later part of this article, the network marketing companies listed below have been in business for decades. Very few businesses (if any) with low-quality products or an illegal business model can last very long. Because their businesses have thrived for many years in several countries across the world, the companies listed below are our best examples of network marketing companies that currently exist in Africa. We have listed them according to the products they produce, years in business and presence in African countries.
||Time in business
|Nutrition, skincare and makeup products||
1959 - 54 years
|Avon||Beauty, household and personal care products||1886 - 127 years||Egypt, Morocco, Tunisia, South Africa|
|Nu Skin||Dietary supplements and personal care products||1984 - 29 years||South Africa|
|Forever Living||Cosmetics, nutritional supplements, weight management and personal care products||1978 - 35 years||Angola, Benin, Botswana, Burundi, Cameroon, Congo DR, East Africa, Gabon, Ghana, Ivory Coast, Lesotho, Mauritania, Morocco, Namibia, Nigeria, Congo Republic, Rwanda, Senegal, South Africa, Swaziland, Tanzania, Togo, Tunisia, Uganda.|
|Herbalife International||Nutrition, weight management and skincare products||1980 - 33 years||Botswana, Ghana, Lesotho, Namibia, South Africa, Swaziland, Zambia|
|GNLD||Health and wellness products||1954 - 59 years||Angola, Botswana, Cameroon, Ghana, Kenya, Lesotho, Namibia, Nigeria, South Africa, Swaziland, Tanzania, Uganda|
|Sunrider International||Health, beauty, food and household products||1982 - 31 years||South Africa|
Note: We plan to update this list as we find more network marketing companies in Africa with promising business potentials for entrepreneurs.
An African network marketing success story...
John and Justina Ekperigin are a Nigerian couple and the Number 1 distributors of Forever Living Products (FLP) in Africa. John, who has been a university professor for over twenty years, joined the FLP network marketing program with his wife (a pharmacist) in 2002. With no prior experience at all in marketing and sales, this couple has spent the past ten years building a vast network of downline distributors and customers. From a bonus of $118 earned in 2002, John and Justina received a cheque for over half a million dollars in commissions and bonuses in 2012. Today, John and Justina Ekperigin have become Double Diamond Managers, the first African distributors to achieve such a feat throughout FLP’s 35-year history. The short video below tells their interesting story…
Forever Living Products International is based in the USA and sells aloe vera-based drinks, honey bee-derived products, cosmetics, nutritional supplements and personal care products through a network of over 10,000 distributors in Africa. Apart from profits earned from selling products, FLP distributors earn multi-level commissions from the network of distributors they recruit. Distributors who meet certain targets or sales volumes often qualify for brand new cars, travel to exotic locations, end-of-year bonuses and a share of FLP’s company profits. As you may have noticed in the table above, Forever Living is one of the most widespread network marketing companies in Africa with a presence in over 20 African countries.
John and Justina Ekperigin gave a detailed account of their rise to fame and fortune in this interesting presentation titled 'Building a Diamond Business in Nigeria & How it has changed my life.' You should really take the time to give this document a good read.
How is network marketing different from pyramid or ‘Ponzi’ schemes?
So far in this article, we have explained that network marketing (or multi-level marketing ‘MLM’) is a strategy used by some companies to promote and distribute their products through a network of distributors who are compensated for selling products and recruiting other distributors. On the other hand, pyramid (or ‘Ponzi’) schemes are fraudulent schemes that look very much like multi-level marketing but with some differences that may not look very obvious at first. Pyramid schemes are intended to look like a legitimate marketing strategy in order to deceive and take money away from people who cannot spot them or tell the difference.
Popular pyramid schemes tend to show up from time to time but are soon discovered and shut down. Most times, hundreds of people would have lost their money (investment) before these illegal pyramid schemes run out of business. Since these fraudsters are likely to convince you that their business or investment is MLM and not a pyramid scheme, we have identified the main differences between them below. These ‘warning signs’ will help you identify the fakes who are really desperate to rob you of your hard-earned money. (photo credit: goldsilver.com)
Warning sign #1 - Pyramid schemes do not sell any ‘real’ products
Unlike network marketing or MLM companies which use their distributors to sell their products, pyramid schemes do not sell or promote any product that provides any real value to its users or consumers.
You would have noticed from the list of network marketing companies we shared with you earlier in this article that nearly all of them produce and sell health, skincare and household products that offer real value to people. In fact, the best products for a network marketing business are ‘everyday’ products (like soaps, makeup and dietary supplements) which ordinary people use in their daily lives. The daily use of these products makes it possible for network marketing distributors to sell huge volumes.
Warning sign #2 - Pyramid schemes emphasise recruitment over sales
Whereas the main goal of a network marketing company is to sell huge volumes of its products through its distributors, a pyramid scheme usually focuses on getting more members. This is not surprising since they do not promote or sell any real products.
Pyramid schemes usually focus on recruitment or new memberships because it’s the money taken from these new members that is used to compensate the older members. This is why pyramid schemes usually fall apart when they are unable to get enough new members to sustain the ‘commissions’ they have promised to older members. Pyramid schemes just recycle money, and the last set of members to join the scheme are often the ones who lose out.
Warning sign #3 - Pyramid schemes usually don’t last long
Yes, this is one of the most obvious warning signs of a pyramid scheme. They usually start up with a bang and are very popular; many people join, some make money and all of a sudden, the pyramid scheme crashes when their game is up. On the other hand, many of the best multi-level marketing companies have been around for a long time; some of them are several decades old. Because their business model is supported by large sales of quality products that their customers appreciate and value, MLM companies are able to survive through the years.
Pyramid schemes are a house of cards that are doomed to crash. It’s much better to work with a business with a long history and proven track record than to gamble your money away on a one-day wonder business that promises lots of ‘free money’ and commissions.
How to succeed in Network Marketing in Africa
For those who get it right, network marketing has a huge potential to make a lot of money for serious and hardworking entrepreneurs. Like every successful business, there are a couple of very important things you must consider before starting a network marketing business. We have identified a couple of these important points for you below:
#1 – Join a company that is right for you…
To succeed in networking marketing, you need to join a company with the right products, flexibility, compensation plan and support that works for you. The company must have products that will sell well or ‘move’ in your local market, area or country; there’s no point selling a product nobody is interested in. As a new distributor for the company, there has to be enough guidance and strong support to help you start up and succeed in the business.
Most network marketing businesses are organized around teams which comprise older and experienced distributors who help new members to find their feet. It also helps if you are a ‘true fan’ of the products you are selling and personally use and like them. Many of the successful and high-earning distributors in Africa are strong ambassadors of the products they promote. Yes, practicing or using what you preach is very important in this business!
#2 – It’s not a get-rich-quick business!
While you can make a lot of money from this business via profits from the products you sell, bonuses and commissions, you must avoid the temptation to think of this business as a get-rich-quick opportunity. Succeeding as a network marketing distributor will require hardwork, constant learning and a lot of action. You will need to study the products and know them very well so you can answer any questions that come up while you engage with potential buyers or customers. You need to know how to make sales presentations and follow-up telephone calls. Entrepreneurs who succeed in this business are go-getters, focused and determined to achieve tough sales targets.
As you can see, it’s not a walk in the park. Although it is very easy to become a distributor for an MLM company, the thing that separates successful distributors from the others is that they are hardworking and remain in the business long enough to reap the benefits. It took John & Justina Ekperigin (the successful FLP distributors profile above) about 10 years to earn half a million dollars from the business.
A final word…
Becoming a distributor for a network marketing (or MLM) company can be a very rewarding business. Unlike a traditional job, this type of business allows you to be your own boss – flexible working hours, the power to determine how much money you earn and the opportunity to travel on exotic trips. This makes network marketing a good choice as a home business and for entrepreneurs and people looking for a source of additional or side income. The potential to make passive income from a vast network of distributors is also a huge attraction to many people.
We believe that the opportunity we have shared with you in this article can be taken further by your creativity and energy. If you are confident a network marketing business will work for you, we advise that you visit the websites of the top companies we mentioned earlier. We also recommend that you increase your knowledge of network marketing by reading books on the subject. It could also help to interview existing distributors of the company whose products you would like to promote before you join this business.
You could also choose from many more lucrative business ideas in the Browse ideas section of this website. Please leave a comment or ask any questions you may have in the section below. We would also appreciate that you share this opportunity with your friends using the Facebook, Twitter and Google+ buttons below.
To your financial success!