Commonly referred to as multi-level marketing, network marketing is a concept where individuals come together with a parent company and act as independent contractors in the sales of a product or service. In return for helping to promote and sell the parent companys product or service, individuals are financially compensated in an amount that has already been determined. The actual amount of compensation will vary from one network marketing opportunity to another and will be strictly dependant upon the companys policy.

A legitimate network marketing opportunity will not grant money for recruiting new members, which are required to pay sign-up fees. Instead, they should be paid based on the commissions that they earn from the sale of a product or service. One of the main problems that many network marketing companies face is their comparison to illegal pyramid scams. However, there are a large number of legitimate network marketing companies that operate regularly in every state and in dozens of countries. Today, they are commonly referred to as affiliate marketing or programs.

The best way to distinguish a legitimate network marketing program from a fraudulent operation is through the companys policy. First and foremost, questionable operations will require high entrance fees and/or the requirement for members to purchase expensive products. Typically, these types of companies fail rapidly when the merchandise cannot be resold for profit, which leaves the members in financial distress and the founders with a large bank account.

With the increasing popularity of the internet, it is important that entrepreneurs be able to recognize the differences between a legitimate and fraudulent company. As a general rule, affiliates should never have to pay a sign-up fee in order to help a company sell its products. Simply put, it makes no sense to pay money in an effort to help someone else promote and sell their products. Instead, it is more realistic that the sign-up be free and the individual be paid based on the sales that they generate for the company.

The majority of large internet retailers offer affiliate programs, which allow members to track their commissions and log in to their account at any time. One of the best ways to ensure a network marketing opportunity is legitimate is to know the parent companys reputation by checking with the Better Business Bureau and through speaking with other entrepreneurs and gaining feedback on their experiences. Every day, individuals find great success or simply a way to earn extra cash through a combination of the internet and a legitimate network marketing opportunity.

The author is a regular contributor to MLM Dr. where more information about network marketing is available.

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