A simple binary tree diagram illustrating the hierarchical structure of a multi-level marketing compensation plan. (Photo credit: Wikipedia)

Network Marketing, otherwise known as Multilevel Marketing (MLM) has been a proven sales method for many companies since those faraway times when personal computers were just a pipe dream and Bill Gates was busy flunking college. Think Avon, Amway, Nikken. Anyway, although network marketing and multilevel marketing has had lots of bad press and been caught up in many scam accusations over the years, it’s still a very popular and successful form of internet marketing.

Network Marketing relies on independent agents to sell and distribute the goods or services, these agents are encouraged (and compensated) for building a strong sales force beneath them, recruiting, training and managing their own sales force (who are each, in turn, recruiting, training and managing their own sales force) – the growth of some companies has been pretty phenomenal as a direct result of their network marketing strategies and success.

Network Marketing has a single-tier, two-tier, or even multi level strategy, whereby each network marketing agent can get paid on different levels. If you directly sell a product to a client, or direct traffic to their website, then you will be paid $x for each sale or visit, but if one of your sales agents (who you have recruited, trained and manage) sell a product to a client, then you will be paid for that sale too, and in some multi level cases (as much as five or six levels) you keep getting paid down the line. That’s part of the beauty of network marketing, it keeps on building.

Let’s look at an example;

You recruit 5 sales agents on your first level, each of those 5 sales agents recruit 5 agents onto their first level, that means you’ve got 30 people working on your behalf and earning you money, just from recruiting five agents. Some successful network marketers recruit, train and manage hundreds or even thousands of sales agents, and if you happen to get a very successful, hard working agent in the level below yours, then you’ll benefit from their hard work and success too.

I bet that’s cleared one or two things up for you, hasn’t it?