How Do Network Marketers Make Money: Is There Money in Network Marketing Business
Network marketers make money two ways: selling products directly to customers and earning commissions on sales made by people they recruit. The second part is what makes it "network" marketing.
Here is how it actually works, what the compensation looks like, and how to tell legitimate opportunities from scams.
What Is Network Marketing?
Network marketing is a business model where independent distributors sell products directly to consumers. Instead of selling through retail stores, companies use networks of individuals who buy products wholesale and sell them at retail prices.
The "network" part comes from recruitment. Distributors can recruit other distributors, and they earn commissions on their recruits' sales. Those recruits can recruit others, creating multiple levels of commission earning.
Other names for this model:
Multi-level marketing (MLM)
Direct sales
Referral marketing
Relationship marketing
Companies like Amway, Herbalife, Avon, and Mary Kay all use network marketing models.
How Network Marketers Earn Income
There are two main income streams in network marketing.
1. Direct Sales Profit
You buy products from the company at wholesale prices and sell them at retail prices. The difference is your profit.
Example:
Wholesale cost: $50
Retail price: $80
Your profit: $30
This is straightforward sales. You find customers, sell products, keep the margin.
2. Recruitment Commissions
When you recruit someone into the business, you earn a percentage of their sales. If they recruit others, you might earn a percentage of those sales too, depending on the compensation plan.
Example structure:
You recruit Person A
Person A sells $1,000 in products
You earn 10% commission = $100
Person A recruits Person B
Person B sells $500 in products
You earn 5% commission = $25
The deeper the network, the more potential commission streams. But the percentages typically decrease at each level.
For more on building sales-based businesses, see our guide on building successful sales funnels.
Network Marketing Compensation Plans
Companies structure compensation differently. Here are the common types:
Unilevel Plan
Everyone you recruit sits on one level below you. There is no limit to how wide you can build, but commissions only go a certain number of levels deep.
Simple to understand but limits earning potential from deep networks.
Binary Plan
You build two "legs" or teams. Commissions are based on the weaker leg's sales volume. This encourages building balanced teams.
Pros: Can earn significant commissions once both legs are strong Cons: One weak leg limits total earnings
Matrix Plan
A fixed structure like 3x5 (three wide, five deep). Once a level fills, new recruits spill over to the next available spot.
Creates urgency to recruit but can feel limiting.
Stairstep Breakaway Plan
Distributors advance through ranks. When they reach a certain level, they "break away" and start their own downline. You earn override commissions on breakaway groups.
Used by older companies like Amway. Rewards top performers but can feel demotivating for newer distributors.
What Network Marketers Actually Sell
Network marketing companies sell physical products or services. Common categories:
Health and Wellness
Supplements and vitamins
Weight loss products
Energy drinks
Essential oils
Beauty and Personal Care
Skincare
Makeup
Hair care
Fragrances
Home Products
Cleaning supplies
Kitchenware
Home decor
Financial Services
Insurance
Investment products
Legal services
Utilities and Subscriptions
Energy services
Phone plans
Travel memberships
The product matters. Legitimate network marketing companies have products people actually want to buy, not just products distributors buy to qualify for commissions.
Network Marketing vs Pyramid Scheme
This is the critical distinction. Get it wrong and you could lose money or face legal trouble.
Legitimate Network Marketing
Revenue comes primarily from product sales to end consumers
Products have real value independent of the business opportunity
You can earn money without recruiting anyone
Income is based on sales volume, not recruitment fees
Company buys back unsold inventory
Pyramid Scheme
Revenue comes primarily from recruiting new members
Products are overpriced or have no real market demand
Recruitment fees are the main "product"
Only early participants make money
No inventory buyback
The FTC test: If the majority of revenue comes from recruiting rather than product sales to actual consumers, it is likely a pyramid scheme.
Red flags to watch for:
Heavy emphasis on recruitment over product sales
Required large inventory purchases
Income claims that seem unrealistic
Pressure to recruit friends and family
Products nobody would buy without the business opportunity attached
Income Reality in Network Marketing
Let us be honest about the numbers.
Most network marketers do not make significant income. FTC studies and company income disclosures consistently show:
50-70% of participants earn nothing or lose money
20-30% earn small amounts (under $5,000/year)
5-10% earn moderate income ($5,000-$25,000/year)
1-3% earn substantial income ($25,000+/year)
The people making real money typically:
Joined early in the company's growth
Have large existing networks
Treat it as a full-time business
Excel at sales and recruitment
This does not mean network marketing cannot work. It means you should go in with realistic expectations and treat it seriously if you want results.
For alternative income strategies, see our guide on affiliate marketing newsletters.
Getting Started in Network Marketing
If you decide to pursue network marketing, here is how to approach it.
1. Research the Company
How long have they been in business?
What is their reputation?
Are the products legitimate and competitively priced?
What does their income disclosure statement show?
Have they faced legal action?
2. Understand the Costs
Know what you are committing to:
Startup kit cost
Monthly minimum purchases
Training or event costs
Marketing materials
Auto-ship requirements
Calculate your break-even point before you start.
3. Learn the Products
You cannot sell what you do not know. Use the products yourself. Understand their benefits, ingredients, and how they compare to alternatives.
4. Build Your Customer Base First
Focus on selling products before recruiting. A real customer base provides:
Immediate income
Social proof
Testimonials for recruiting
Recruiting without customers creates an unstable structure.
5. Develop Sales Skills
Network marketing is sales. Learn:
How to prospect
How to present products
How to handle objections
How to close
How to follow up
For sales communication strategies, see our guide on writing sales pitch emails.
Building a Network Marketing Team
If you want to earn recruitment commissions, you need to build a team. Here is how successful network marketers do it.
Find the Right People
Not everyone is a good fit. Look for people who:
Are entrepreneurial
Have sales experience or willingness to learn
Have a network they can tap
Are coachable
Can invest time and some money
Lead With Value
Nobody wants to be recruited into a "business opportunity." They want to solve a problem or achieve a goal. Lead with how the products or opportunity helps them.
Train and Support
Your success depends on your team's success. Provide:
Product training
Sales training
Regular check-ins
Recognition and motivation
Systems and tools
Neglected recruits quit. Supported recruits produce.
Duplicate Yourself
The goal is to build leaders who can build their own teams. Teach your methods so others can replicate your success. A team of independent leaders scales better than a team that depends on you.
For team-building strategies, see our guide on growing service-based businesses.
Marketing Strategies for Network Marketers
Traditional network marketing relied on home parties and personal networks. Modern network marketers use digital strategies too.
Social Media Marketing
Build a following on platforms where your target customers spend time:
Share product testimonials
Post lifestyle content
Go live to demonstrate products
Engage with comments and messages
Avoid spamming. Provide value first, sell second.
Content Marketing
Create content that attracts potential customers and recruits:
Blog posts about problems your products solve
YouTube videos demonstrating products
Podcasts interviewing successful distributors
For content strategies, see our guide on finding your niche as a content creator.
Email Marketing
Build an email list and nurture relationships:
Share product tips and education
Announce promotions
Tell customer success stories
Email works well for follow-up and maintaining relationships with both customers and team members. See our guide on email nurture campaigns.
Referral Programs
Encourage customers to refer friends. Many network marketing companies have customer referral bonuses separate from the distributor opportunity.
For referral strategies, see our guide on referral code examples for businesses.
Network Marketing vs Affiliate Marketing
These are often confused but work differently.
Affiliate marketing might be a better fit if you:
Do not want to recruit
Prefer online-only promotion
Want minimal upfront investment
Have an existing audience
For more on affiliate approaches, see our guides on promoting affiliate links and Amazon affiliate links.
Common Network Marketing Challenges
Market Saturation
Popular products and companies become saturated. Everyone knows someone selling that product. Differentiation becomes difficult.
Social Pressure
Recruiting friends and family can strain relationships, especially if they are not interested or have bad experiences.
Inventory Risk
Some companies require large inventory purchases. Unsold inventory is your loss.
Reputation
Network marketing has a mixed reputation. Some people will dismiss you immediately based on the industry, regardless of the company or products.
Income Instability
Income depends on your sales and your team's sales. Both can fluctuate significantly month to month.
Evaluating a Network Marketing Opportunity
Before joining any company, ask these questions:
Would I buy this product if there was no business opportunity attached?
Is the pricing competitive with similar products in retail?
What does the income disclosure statement actually say?
What are the ongoing costs and requirements?
Does the compensation plan reward product sales or just recruitment?
How long has the company been in business?
What is the company's reputation with the BBB and consumer protection agencies?
Can I talk to current distributors about their real experience?
Legitimate companies welcome these questions. Companies that pressure you to sign up quickly or discourage due diligence are red flags.
FAQs
How do network marketers make their money?
Network marketers earn money through direct product sales (buying wholesale, selling retail) and commissions on sales made by people they recruit into the business.
Is network marketing a pyramid scheme?
Not inherently. Legitimate network marketing focuses on selling real products to consumers. Pyramid schemes focus on recruitment fees with little or no real product value. The distinction matters legally and financially.
Can you make money in network marketing without recruiting?
Yes, through direct product sales. However, the compensation plans of most companies make significant income difficult without building a team. The recruitment component is where leverage and scale come from.
What percentage of network marketers make money?
Industry data suggests 50-70% earn nothing or lose money, 20-30% earn small amounts, and only 1-3% earn substantial income. Results vary significantly by company, individual effort, and timing.
How much does it cost to start network marketing?
Startup costs range from $50 to $500+ depending on the company and starter kit. Ongoing costs include monthly minimums, events, and marketing materials. Calculate total costs before committing.
What is the difference between MLM and network marketing?
They are the same thing. MLM (multi-level marketing) and network marketing are interchangeable terms for the same business model.
Looking for marketing strategies that do not require recruiting? Inagiffy helps brands build content and email programs that grow audiences organically. See how we work.
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