For business owners who are curious to learn more about the way network marketing is distributed, here is a SWOT analysis of the industry.
strength point:
For decades, business owners have noted that word of mouth is one of the most powerful advertising methods. Businesses that distribute their network marketing products can experience exponential growth due to the viral effect. Every day people can become distributors of your company and bring products to their local market. This is based on the philosophy that people are more willing to purchase products or services from people they know and trust, rather than from a salesperson.
Compensation is based on performance as there is often a pay grid to meet certain quotas. Having this type of wage structure in place reduces the risk to the business owner because if a new distributor does not perform, the financial burden of acquiring a new distributor/partner is reduced. Customers are loyal to both the independent distributor representing the company and the products. Products are usually consumable which creates repeat orders and thus increasing sales from one quarter to the next is common.
Weaknesses:
As a business owner, we will want to cover weaknesses as part of our SWOT analysis for the network marketing industry. The first and obvious weakness is that the company’s growth depends on the strength of your distributors. This is not entirely out of the control of business owners but can be difficult to influence. Compensation is the main motivating factor for distributors. Distributor retention is an issue across the industry. As easy as it is for a distributor to join a company, it is also easy to leave. This distribution model works best for consumable products or services. This creates recurring orders that can ideally be set up on a monthly cycle basis. It works best with products between $30 and $180 that make it more affordable for customers, and still profitable for the company.
Threats:
Taking a look at the threats portion of our SWOT analysis of the industry, bottom line raiding can happen at any time. The bottom lines are indicated as the set of distributors working and benefiting from each other. If a major distributor decides to join another company and bring their team in, part of the sales could be a loss. Having incentives and agreements is the best way to avoid this situation.
Another threat to the business owner and the company is that the distributors are free to promote in the field following certain guidelines. These guidelines may not always be followed resulting in potential lawsuits or defamation of the company’s brand.
Opportunities:
Expansion into new markets is at the top of the list of opportunities as part of a network marketing SWOT analysis. As people are happy with the products in one market, distributors will be willing to move on to expand into a new market. This will also be possible due to the reduced marketing budget needed for the main flow of communication to be through distributors who only get paid when the product is sold.
Because the marketing budget is not as taxing as traditional advertising methods, business owners have been able to allocate more resources to the product allowing it to compete more in the market. And as sales grow, another opportunity that business owners take advantage of is the ability to expand the product line to existing customers who are often open to adopting new products.
This SWOT analysis for network marketing for business owners is by no means comprehensive, but it does give you a starting point for what to expect. The industry is rapidly evolving and more people than ever are looking to build with reputable companies they can trust. There are different strategies for building an owner and distributor network marketing business. The recommendation might be to incorporate technologies that will improve your leverage in reaching the largest number of qualified leads.