Network marketing, also known as multi-level marketing, is a direct sales model pioneered by Amway that involves recruiting independent distributors who sell products through a multi-level distribution network. Distributors recruit sub-distributors who then recruit further levels of distributors, allowing the products to reach customers through a chain of distributors. This allows manufacturers to bypass traditional retail and directly market and sell products. The approach provides advantages such as lower overhead costs compared to traditional marketing and the ability to quickly enter new markets through an expanding distribution network. However, limitations include difficulties with sales forecasting due to the variable multi-level structure and potential loss of control of the company to distributors who become the largest customers.

1. Network Marketing: Concept,
Advantages and Limitations
Conceptof Network Marketing:
Network marketing is a new conceptof marketing products pioneered by Amway
Corporation (manufacturing household goods, personal care and nutritional
products).
Network approachto marketing (also calledmulti-level marketing) consists in
recruiting independent business persons by the manufacturer, who act as
distributors of company’s products;these distributors, in turn, recruiting sub-
distributors and sub-distributors recruiting sub-sub distributors to sell products,
usually in the home of customers.
In network marketing, each distributor can further engage sub-distributors and so
on. Hence, it is also called multi-level marketing. The productreaches customers
(usually in homes) from manufacturer via distributors at different stages. It is a
mode of direct marketing by the manufacturer completely by-passing the
conventional retail route of selling to customers.
We can depict network marketing, by means of the following chart:
Explanation to the Chart:
At the first level, the company is selling directly to customers and distributors. At
the second level, the distributors are selling directly to customers and to sub-
distributors. At the third level, the sub-distributors are selling directly to customers
and to sub-sub distributors. In fact, there may be many levels of marketing; and not
just three, as depicted in the chart.

2. Advantages of Network Marketing:
Following are some advantage;
i) No formal marketing infrastructure is required. There is also no need for
advertising. Hence, overhead marketing costs are lower.
(ii) Distribution network grows continuously; and it is quick and easy to enter new
markets.
(iii) Because of direct selling approach, new and innovative products ofthe
manufacturer can be easily pushed through the market, at high margins of profits.
Limitations of Network Marketing:
Following are some limitations of network marketing:es of network marketing:
(i) In theory, we may say that network marketing does not require advertising.
However, in reality, it is not possible for any manufacturer to promote ‘brand-
building’ and ‘brand-loyalty’, in the absenceof advertising. When, therefore,
network marketing is coupled with advertising, the advantage of lower marketing
overheads may be considerably reduced.
(ii) Because of multi-level system of marketing, sales forecasting is a problem.
(iii) A danger associated with multi-level marketing is that distributors (who often
become largest customers) may take over control of the company.