Network Marketing vs Referral Marketing. What's Better?

There are a lot of different marketing methods out there for you to use for your business. Two such strategies are network marketing and referral marketing. The ladder of which we talked about a lot, for example how to use a referral program for success as a solopreneur. These two strategies differ quite a lot in how they work. For example, referral marketing is more centered on getting your current customers to refer you to their network. Such as friends or coworkers. Whereas network marketing is a lot more complex and controversial as it can be seen as a pyramid scheme.

By the end of this blog, you should have a good amount of information on both. And be on the way to deciding what would work best for you.

Let’s jump into it.

What Is Referral Marketing?

To start off with something most likely up your alley, and most defiantly up ours, is the referral marketing strategy. This strategy relies on the same basic concept that network marketing does. In that, both use individuals or personal relationships in order to sell products. Referral programs are a great example of this marketing strategy since they turn your customers and friends into assets that market your product or service for you. Which saves a lot of money and time for your business.

Benefits Of Referral Marketing

Benefit from credibility – Human beings are social creatures by nature, and we are always scared of new things. Referral marketing sidesteps this issue for the most part. When someone refers you to a company or product that natural edge is mostly dulled, even more so if the person referring you is a close friend or family member. In simple terms, the customer’s trust rubs off on the person they are referring to your business instantly.

Referral Marketing Is A Vastly Rewarding Strategy – Referral marketing is considered one of the best channels for conducting business. Customers are normally of higher quality and require less work to convert as they are already convinced of your business.

Rapid Growth -  If you have a good referral program in play, this strategy can lead to very quick growth. It can act as a compounding effect where someone is referred, they like your product or service, then they join your referral program and refer more. So on and so forth.

Able To Track Customer Satisfaction – Another boon of referral marketing is that you can track how your customers are feeling. You can do this with a well-made referral program. Other KPIs can help, but a program that a lot of people use is a great way to see if you are building not only a wide customer base but a happy customer base.

Network Marketing

Whereas referral marketing is a more straightforward and massively rewarding road to take. Network marketing is a very large and complex strategy that many are wary of. It is commonly called out to be pyramid schemes where the workers are negatively affected. Why is this strategy more negative? We said before that it stems from the same basic concepts as referral marketing, but where does it diverge?

What Is The Deal With Network Marketing?

To understand why this marketing strategy is looked at with a careful eye, you have to see the basic outline of it. The definition according to Investopedia is, “Network marketing is a business model that depends on person-to-person sales by independent representatives, often working from home.” This is often structured like a pyramid (ironically enough) and there is a strong financial incentive dangled in front of each sales rep. The more sales a rep makes the more money they are granted in a bonus, also if that rep persuades people to join the company they have the possibility to receive more compensation.

This may not look bad right away. However, if a company starts to make many different levels of salespeople, this is a red flag. When this occurs it is likely the sales rep at lower levels are getting pushed around and making very little money for their efforts. Essentially, people lower down on the scale or pyramid, in this case, are making revenue just for it to get siphoned to the top. The CEOs and top corporate leadership and so on. This is why the networking marketing strategy is often looked at with a grain of salt. Though not all companies that employ this method are hostile or serpents in sheep’s clothing. Matter of fact this method has brought great profit to companies that use it morally and not with greed.

For example, Amway, which sells health, beauty, and home care products, made 8.8 billion in 2019 according to s4ds.com. It’s a risky strategy but it can be rewarding if done ethically, but what are some of these benefits?

Benefits Of Network Marketing

Make Your Own Schedule – If you join an MLM company (multi-level marketing) you will more or less be able to have your own schedule. As long as you sell the product you are assigned, you have a lot of freedom.

Low Risk – This one varies, if you find a company that is doing network marketing and it’s not a pyramid scheme then there is a low investment to join. Essentially all you need is a computer and a small investment for possible training. Some may not even need investment to get started.

Work From Anywhere – Due to covid a lot of businesses changed to an at-home format, though the virus did not introduce this idea. MLM companies always normally employ an at-home workforce. So you will be able to work from home, and going along with the first point, make your own schedule.

You Get Out What You Put In – It makes sense that you get out of a job what you put in. If you work more hours, make more sales, and so on, you would want to be rewarded for that right? With an MLM company, this is exactly the case, you earn what you put in. So it is in your best interest to work hard and try to climb up the ladder internally.

Conclusion

The only question that remains is what would be better for you? That depends on exactly what you are looking for, referral marketing could be better if you wanted to help a company grow through word of mouth, whereas network marketing is better for those centered more around sale calls. Either way, they each have their positives and negatives, the only thing to be mindful of is possible scams. There are plenty of warning signs that a company is using an illegal structure to fuel a pyramid scheme. If you see any, it’s best to avoid that business altogether.

NuOp is a great place for businesses to grow their referral network as well, if you want in on this action make sure you sign up for free today! You will get access to a host of tools and a great support team ready to help you grow your business. If you liked this blog check out our growing collection of other blogs on interesting topics!