Network marketing (MLM): definition, strategies and pitfalls to avoid

Network marketing is a strategy that divides as much as it intrigues. Often associated with MLM, it’s a strategy that relies on the power of human relationships and networking. 🫱🏽‍🫲🏼

Whether to sell a product, promote a service or develop a b2b business, network marketing can be interesting but, not without risks. 👀

In this article, we’ll sort out the real from the fake: what is network marketing, what are the advantages and disadvantages of using it, how can you use it effectively?

Sit back and enjoy a cup of tea. 🍵 (Reading time: 3 minutes).

What is network marketing?

Network marketing is based on a simple concept: using the power of human relationships to promote and sell products or services.
Unlike traditional sales methods, it’s certain people (distributors, resellers and affiliates) who play the role of salespeople. 👀

Each participant earns a commission not only on his or her own sales, but also on those generated by members of his or her network.

This approach encourages personal involvement and word-of-mouth, while limiting advertising costs for companies.

But that’s not all. Network marketing also encompasses affiliate marketing, or b2B partnership programs but, we’ll come back to that below. 👀

Let’s see if network marketing can meet your needs. ⬇️

The advantages and disadvantages of network marketing

✅ Benefits	❌ Disadvantages
Flexible scheduling: ideal for companies or entrepreneurs who want to manage their own schedule.	Time and energy to invest: building a high-performance network requires a lot of initial work.
Low initial investment: few marketing expenses, especially for small B2B companies.	Pressure from sales targets: need to maintain constant performance to generate results.
Potentially uncapped income: the system is based on the multiplication of sales via an efficient network.	Bad reputation of MLM: wrongly equated with pyramid schemes, which can damage the credibility of some companies.
Strengthening business relationships: develop strong partnerships with other companies.	Possible lack of experience: some companies may underestimate the skills needed to succeed (sales, prospecting).
Savings for the company: network marketing limits advertising expenditure and outsources promotion.	Difficulty recruiting partners: finding competent affiliates or ambassadors can be a challenge, especially in a B2B context.

What is MLM?

Multi-level marketing is a specific method of network marketing.
Here, participants (distributors or representatives) sell products or services while recruiting others to join their network.

These recruits, in turn, generate sales and can also recruit new members.

What’s special about MLM is the compensation system, meaning that each participant earns commissions on their personal sales, but also on those generated by their network. 🛜

Why is MLM often misunderstood?

One of the main reasons is the frequent confusion between legal MLM and pyramid schemes, which are illegal.

Some MLM companies lie about financial gains, saying that it’s easy to generate significant income. The reality is that the majority of participants earn little or nothing, fuelling feelings of mistrust. 👀

But that’s not all: some distributors can be aggressive in recruiting or selling, which, let’s face it, doesn’t help.

For example, some distributors may encourage their recruits to invest in large quantities of unsaleable stock, ostensibly to help them achieve their goals. 😶‍🌫️

Pyramid scheme vs. social network marketing

New vocabulary, the pyramid system. 🥁

At first glance, this strategy seems interesting: you invest a sum to join the system, recruit other participants and start earning income based on their contributions.

As your network grows, your earnings seem to increase, on paper of course 😅.

But in reality, it’s all about recruiting new members, not selling products or services.

I smell a rat, let me explain. 🤔

Well, participants are encouraged to invest ever more to supposedly “climb the pyramid”, while those at the top cash in on the profits. 💸

Of course, making money fast attracts a lot of people. But the bigger the pyramid gets, the more complex the model becomes. Why? 🤔

Because, sooner or later, there won’t be enough recruits to feed the system. 👀

As you can see, the major problem with a pyramid scheme (like the Ponzi scheme) is that it benefits a small handful of people, leaving everyone else out to dry.

Moral, if one day you have an opportunity that’s too good to be true, well, it probably is 😅.

What are the differences?

Well, enough of that, let’s get down to the nitty-gritty: the differences between the two strategies. ⬇️

Aspect	Pyramid system	Network marketing
Main objective	Recruit as many members as possible to generate revenue.	Sell quality products or services and develop a sales network.
Source of income	Based mainly on entrance fees and new member contributions.	Based mainly on commissions on sales.
Products or services	Non-existent or low-value products, often just an excuse to recruit.	Real, often high-quality products/services, with market demand.
Compensation model	Rewards only members at the top of the pyramid.	Rewards sales efforts and network performance on several levels.
Legality	Illegal in most countries due to its fraudulent nature.	Legal when it respects the rules (income mainly from sales).
Durability	Unsustainable: collapses when recruitment stagnates.	Sustainable if sales and demand for products/services are maintained.
Recruitment methods	Unrealistic promises of quick profits and pressure to recruit at all costs.	Recruitment based on presentation of real opportunities and products.
Member training	Minimal training, often focused on recruitment.	In-depth training to develop sales and network management skills.

The different types of network marketing

Network marketing is not limited to a single model. Depending on objectives and target audience, it can take several forms. These include the reseller network, often B2C-oriented, and affiliate marketing, particularly effective in the B2B context. 👀

Let’s take a closer look 🔎 how they work.

1) Dealer network

In this effective b2c model, a company recruits independent resellers to promote and sell its products or services directly to consumers. These resellers are considered ambassadors for the brand, promoting its qualities within their personal or local network. 🗺️

Okay, but how does it work? 🤔

Resellers buy products at a preferential price or receive commissions on each sale they make.

Unlike MLM, this model puts a little more emphasis on selling than recruiting. 👀

Here’s an example from Vorwerk and the famous Thermomix. 🧑🏼‍🍳

At least one person you know has probably already told you about the famous miracle food processor, the Thermomix. ✨

Well, this company has an extensive network of independent dealers.
They organize in-home demonstrations, where they show product features directly to groups of consumers. 🏘️

2) Affiliate marketing

This model, particularly effective for b2b this time, is based on a simple principle: partners (affiliates) recommend a product or service to their network in exchange for a commission on the sales generated.

In fact, unlike the retailer network, affiliates don’t directly manage inventory or logistics, making this model much more accessible and flexible. 🔥

But how does it work? 🤔

B2B affiliation is often used to promote digital tools, training or professional services. The company provides affiliates with traceable links or specific codes, enabling them to precisely track sales made thanks to their recommendation.

Okay, let’s take an example with Waalaxy and its ambassador platform. 😇

If you don’t already know, Waalaxy is an automation and prospecting tool on LinkedIn and uses a platform dedicated to its ambassadors.

Ambassadors (often b2b professionals or LinkedIn experts) share their Waalaxy experience with their network. In return, they earn commissions on subscriptions generated by their recommendations.

If you’d like to become a Waalaxy ambassador, it’s possible!

Leveraging networks

These days, social networks and online platforms are indispensable if you want to succeed in network marketing.

Why? Because they allow you to reach 🎯 a wider audience, engage your network and build a community around your product or service. 😇

However, each platform has its own particularities, and it’s important that you get to know them all.

Let’s find out how to use them effectively to get your strategy off the ground into a new Galaxy. 🚀

1) LinkedIn

If you had to choose just one platform for your b2b marketing, I’d say choose LinkedIn without hesitation. With over a billion user members, it’s the ideal place to build a solid professional network or promote your products or services. 🗿

But, it’s not enough simply to be present on it, you need a real strategy. 👀

1️⃣ Look after your profile.

Your LinkedIn profile is like your business card. Your profile photo and your title need to be carefully crafted.
For example, instead of putting “Consultant”, put “I help SMEs increase their sales through effective digital strategies”.

2️⃣ Target the right people.

It’s important to target the right people, using advanced search filters, to find the right profiles, such as decision-makers, marketers or entrepreneurs.

3️⃣ Engage with your network.

Once connected, you need to engage. To do this, comment on your prospects’ publications, share useful content and offer private discussions.

2) Facebook and Instagram

While LinkedIn is a nugget for b2b, Facebook and Instagram are just as interesting where the visual and emotional take center stage, especially in b2c.

Let’s take a closer look. ⬇️

1️⃣ Facebook: building communities.

When I speak of Facebook, I’m thinking in particular of the creation of private groups or active communities around your product or service.
These groups enable you to share exclusive content (webinars, case studies), answer members’ questions and build your credibility. What’s more, you have access to tools like Facebook Ads to precisely target your audience with campaigns. 👀

By the way, Waalaxy has a private group if you’d like to take a look.

2️⃣ Instagram: the power of the visual.

Instagram, on the other hand, is perfect for sharing visual and engaging content. You can post :

• Customer testimonials.
• Product demos.
• Behind the scenes of your business.

3) Forums and newsletter

Beyond classic social networks, forums and newsletters are also very powerful tools. 💥

You have, for example, Reddit, aka the kingdom of niche communities.

Inside, you’ll be able to interact directly with people who share your interests or professional goals.
For example, if you sell btob tools or services, you can participate in discussions on subreddits like “r/entrepreneur” or “r/startups”.

Finally, newsletters, or how to cultivate a qualified audience.

Newsletters are a great way to keep in direct contact with your audience.

You can either :

• Create your own newsletter.
• Participate in those of other designers.

For example, a newsletter like Supernova helps promote tools, like Waalaxy. 👽

How about a recap?

Network marketing is a powerful but divisive tool. Used well, it can transform ideas into concrete results, connect people around a shared vision, even open up opportunities.
Used badly, it becomes a slippery slope, mixing disappointment and illusions. 👀

In reality, this strategy, whether you love it or criticize it, depends on what you do with it. 🫵🏼

Choosing a product or service that makes sense to you, and investing your energy in quality rather than shortcuts, is where it’s all at. 🔥

Frequently asked questions

Don’t rush off, we still have a few questions to answer. 😇

Is MLM legal?

Theoretically, yes, MLM is legal in many countries, as long as certain rules are respected, especially this one:

• Revenues must come mainly from the sale of real products or services, and not simply from recruiting new members.

This means that if a company focuses solely on recruitment, it can be considered a pyramid scheme, which in turn is illegal. 👀

How can I work in network marketing?

If you want to work in network marketing, here are a few key rules:

• 🔹 Choose a reliable company.
• 🔹 Test products or services.
• 🔹 Get trained.
• 🔹 Build your network.
• 🔹 Use social networks.
• 🔹 Set yourself clear goals.
• 🔹 Stay ethical.
• 🔹 Be persistent.

Is MLM a pyramid scheme?

No, MLM is not necessarily pyramidal, but it can come close if certain dubious practices are implemented. Let me explain:

• Legal MLM ⭢ income comes mainly from the sale of real products or services. Recruitment is secondary and is not directly remunerated.
• Pyramid scheme ⭢ income comes mainly from recruiting new members, not from sales.

You know all about network marketing. See you soon! 🐉