Definition: A business model in which a distributor network is needed to build
the business. Usually such businesses are also multilevel marketing
in nature in that payouts occur at more than one level.
Network marketing is a type of business opportunity that is very
popular with people looking for part-time, flexible businesses.
Some of the best-known companies in America, including Avon, Mary
Kay Cosmetics and Tupperware, fall under the network marketing
umbrella.
Network marketing programs feature a low upfront
investment--usually only a few hundred dollars for the purchase of
a product sample kit--and the opportunity to sell a product line
directly to friend, family and other personal contacts. Most
network marketing programs also ask participants to recruit other
sales representatives. The recruits constitute a rep's "downline,"
and their sales generate income for those above them in the
program.
Things can get sticky when a network marketing network
compensates participants primarily for recruiting others rather
than for selling the company's products or services. A network
marketing system in which most of the revenue comes from
recruitment may be considered an illegal pyramid scheme.
Since network marketing programs are usually exempt from
business opportunity regulation and aren't defined as franchises
under state and federal franchise laws, you'll need to do your own
investigation before investing any money.