WHERE DOES THE MONEY COME FROM?
BREAKDOWN OF PRICE AND PROFIT
ASSUME THE RETAIL PRICE OF A BOTTLE OF PERFUME IS $10
1. About 10% represents the actual raw materials
2. About 12.5 % represents the manufacturer's production overhead and profit.
3. About 2.5% advertising costs for the manufacturer.
4. About 25% for the wholesaler to cover his transport, storage sales costs and profit.
5. About 2.5% advertising cost for the wholesaler.
6. The balance is the retailers profit and selling costs and advertising.
The manufacturer's TOTAL costs represent only 25% of the retail price of the goods.
The remaining 75% is thus left to be used to either market a product in the normal way or is available to be shared amongst those involved in MULTI LEVEL MARKETING the product.
THIS PRODUCT HAS AN AMOUNT OF $7.50 AVAILABLE TO THOSE PEOPLE INVOLVED IN MARKETING THE PRODUCT
MLM or Network Marketing is a method of marketing a variety of products and services through a "network" of independent representatives who refer customers to the MLM company that they represent. Does your local restaurant, grocery store, gas-station, movie theatre, nutrition store, etc. pay you when you refer customers to them? Probably not. All companies have certain expenses involved in running their businesses. Some of these are production costs, staff, advertising and sales budgets. Traditionally, companies of larger sizes pay millions of dollars in television, magazine, and other forms of advertising plus salaries, commissions, and benefits for sales/marketing people to get customers to purchase their goods and services.
The philosophy behind NETWORK MARKETING is very simple. Unless a company or business is already in the market, or has enormous financial reserves, it cannot
1. afford the huge sums needed for the advertising required to bring new or better products to the attention of the buying public.
2. afford the payments demanded by the major retailers, to allow them shelf space in their outlets.
3. afford the costs of representatives to travel and promote the products
4. afford the warehousing charges/margins to have the product distributed, stored etc.
The only way these businesses can compete is by using
WORD OF MOUTH ADVERTISING
After all, we all prefer to use products and services recommended by our relatives, friends, and business associates.
Network marketing companies have refined the system of rewarding people for their word of mouth advertising.
They do this by allocating the amount of money in the price of their products or services which would normally be used to cover the above costs including a retailers profit, and sharing this amount with the people in their network. This amount can be as high as 80% of the retail price of any product on the normal supermarket shelf.
The network companies recognise that if I introduce you into the business, and you introduce a friend into the business, the company would not have your friends business unless I had first introduced you.
Similarly, if your friend introduces a friend into the business, it is only because of my original work and your follow up. However, NO money is made from these introductions- money is only made in the form of commission or bonus when any of us purchases goods or services from the company.
Obviously, this could not go on forever, so the networking companies have devised various plans to share the available money over a definite number of levels. This is why they are sometimes called Multi-Level companies.
Each company is different- some have simple plans, others have extremely complex ones.
The simpler the plan, the easier it is to make money