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Internet Technologies: Rise of Network Marketing & Direct Selling Industry

Did you know network marketing is a USD200bn industry, globally?

Photo by Campaign Creators on Unsplash

Background in the context of economic growth 

This decade will be known not just in Asia but all over the world as “the decade of entrepreneurship.” This decade will also be thus known for revolutionising the Start-up ecosystem and for innovation in finding solutions for many small and big problems faced by the general consumer, which fuelled the entrepreneurship drive.

Talking in the context of Asia, we saw some major changes in behavioural and consumption patterns which got constantly driven by three major factors:

  • Increase in employment opportunities
  • Large population of youngsters in 18-35 years age category
  • High disposable income of families

There were other macroeconomic changes also taking place simultaneously, such as higher growth of the service sector vis-à-vis manufacturing sector. Loans & credits, and even business financing through Banks or private venture capital firms became easier. Import and export of goods and services became easier. Geographical boundaries got blurred.

Consumption gave way to opening up of a vast number of e-commerce companies and also an equally large number of hyper-market and wholesale chains of stores, coined nowadays as modern trade. This resulted in millions of jobs getting created in the service sector, such as in facility management services, warehousing & logistics, door delivery of groceries & food, sports, leisure & entertainment, travel & hospitality, healthcare, personal grooming, lifestyle and many more. These in turn provided a much needed boost to the primary sector, viz., agriculture, fisheries, dairy, mining, etc., and also to secondary (manufacturing) sectors such as automobile, metal, construction, plastics, herbal cosmetics, and so on.

Many service sector jobs were not really very lucrative in terms of remuneration or career growth, although many of them required various soft skills, as compared to certain jobs in the manufacturing sector, which were high paying with high career growth prospects as they desired candidates to possess certain technical skills. With the rise of BPO industry and service sector, we saw many existing HR companies diversifying into training & skills development, and this also helped the rise of many new organisations purely dedicated to training and skills development, both soft as well as technical skills.   

With globalisation and growth in both manufacturing and service sectors, there has been a rise in affluent class population in metropolitan as well as in other urban cities and towns, fuelled by cross-border deployment of manpower resources, which created demand for many niche products & services, such as wellness industry, vacation membership, lifestyle club membership, health supplements, advanced and hi-tech water purifiers, CBD (cannabis based natural products), and many other such pricey products and services.   

With new-age entrepreneurs devising products and services that were meant for people who wanted to lead and enjoy a lifestyle different and exclusive from others, and with Internet and digital communication technologies growing as fast as one could imagine them to be, we saw a sudden big rise in Direct Selling Industry, and a big new class of marketers called  Network Marketers and Affiliate Marketers.

Relevance to Internet & Communication technologies

Rise of Network Marketing, also known as Referral Marketing, industry can be attributed to two factors:

  • Internet-savvy people who wanted to lead independent lives, financially, escaping 9-to-5 routine jobs
  • Companies having digital and online products and services who could sell without employing salespeople on regular payroll

This is a very big industry growing at double digits year on year. Network Marketing, or Multi-level Marketing (MLM), as it is called, is a 200bn USD industry, globally. They have an organised structure with highly educated and skilled professionals manning the operations, marketing, and training. It’s a very competitive industry, too.

It’s an industry that is growing very fast and is supported by promotional and advertising algorithms defined by social media and communication giants such as Facebook, Google, and Microsoft. Potential of the industry can be gauged simply by the fact that there are hundreds of training modules available online just to teach the basic and advanced modules of website designing, social media marketing, SEO, lead generation, affiliate marketing, and whatnot. You name it, they have it!

It’s quite similar to the physical infrastructure that traditional markets have – Manufacturer, Distributor, Retailer, and Buyer, but are replaced in Network marketing terminology by Vendor (manufacturer or service provider), Affiliate Network, Affiliates, and Consumer (Buyer).     

Conventional MarketingNetwork marketing
ManufacturerVendor
DistributorAffiliate Network
RetailerAffiliate
ConsumerConsumer

Many vendors selling through Affiliate Network pass on commissions ranging from 20% to 80% of the product price to the affiliates. Viewing it from a technical angle, the affiliates own their business as they are responsible for generation of leads and pitching their products to the prospective consumers. How smartly they invest in lead generation techniques, viz., E-mail, Facebook advertisements, Google advertisements, etc., decide the quality of their leads, and how they pitch their products or services through website landing pages or YouTube, determine how effectively they generate sales.

In case of Direct Selling companies, the Affiliate Network and Affiliate are replaced with Direct Sales associates, who are independent individuals creating their own member group through referrals. The larger the group and the higher the sale, the higher the commissions accrued to the direct sales associate. 

Many companies have come up in the last five years in many countries offering product ranges combining skincare, herbal health supplements, leisure travel, and so on according to their strategies. There are many companies who have their high-end products sold through conventional brick and mortar distributor-retailer networks, and also through Direct Sales associates.

In all these, the internet technologies are playing a pivotal role to facilitate business, right from advertisement, lead generation, ordering of product, and delivery to after-sales support, and training. All these functions are taken care of from Laptop or Smartphone. Meetings and conferences are virtual through video conferencing via one of the many Apps (mobile applications, Android or iPhone based) available freely, and trainings are also imparted online.

The advantages are manifold, in a sense that fixed cost of office rentals are done away with, and travel through airlines or trains are avoided, resulting in cost saving that is eventually shared with the sales team. In case the members need to meet to discuss and review their sales plan or to meet a new prospective member, they choose a café or a meeting room available on an hourly basis in one of the many business centers specially designed to hold such meetings, formal or informal.

We are going to see Network Marketing growing exponentially in years to come.

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Sanjeev Kumar Sanju
Written By

Sanjeev is an entrepreneur and marketing consultant with interests in Tourism & Hospitality, Lifestyle & Fashion, and Green Energy. Follow him on LinkedIn.

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