For business owners who are curious to learn about the distribution method of network marketing, here is a SWOT analysis of the industry.

Strengths:

For decades, business owners have noted that word of mouth is one of the most powerful advertising methods. Businesses that distribute their products in network marketing can experience exponential growth due to the viral effect. Ordinary people can become distributors for your company and bring the products to their local market. This is based on the philosophy that people are more likely to buy products or services from people they know and trust than from a sales representative.

Compensation is based on performance, as there is often a pay table to satisfy certain quotas. Having this type of pay structure reduces the risk for the business owner because if a new distributor doesn’t work, the financial burden of getting the new distributor/associate is minimized. Customers are loyal to both the Independent Distributor who represents the company and the products. Products are often consumable, which creates repeat orders, so increasing sales from quarter to quarter is common.

Weaknesses:

As business owners, we will want to cover weaknesses as part of our SWOT analysis of the network marketing industry. The first and obvious weakness is that the growth of the company becomes dependent on the strength of its distributors. This is not entirely out of the control of business owners, but it can be difficult to influence. Compensation is the main motivating factor for distributors. Dealer retention is an industry-wide problem. Just as it’s easy for a distributor to join a company, it’s just as easy to leave. This distribution model works best for products or services that are consumable. This creates repeat orders that can ideally be set up on a monthly cycle. It works best for products between $30 and $180, making it affordable for customers and still profitable for the business.

Threats:

Taking a look at the Threats part of our industry SWOT analysis, downline raids can happen at any time. Downlines are known as a group of distributors who work with and benefit from each other. If a key distributor decides to join another company and bring in their team, a portion of the sales may be lost. Having incentives and agreements in place is the best way to avoid this situation.

Another threat to the business owner and company is that distributors are free to promote in the field by following certain guidelines. These guidelines may not always be followed, which can lead to potential lawsuits or defamation of the company’s brand.

Opportunities:

Expanding into new markets is at the top of the list of opportunities as part of our network marketing SWOT analysis. As people are satisfied with the products in one market, distributors will be ready to expand into a new market. This will also be possible due to the low marketing budget required for the main communication flow to be through distributors, who only get paid when a product is sold.

Since the marketing budget is not as taxing as traditional advertising methods, business owners have been able to allocate more resources to the product, allowing them to be more competitive in the marketplace. And as sales increase, another opportunity business owners take advantage of is being able to expand the product line to existing customers who are often open to adopting the new products.

This SWOT analysis of network marketing for business owners is not complete, but it does give you a starting point on 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 a network marketing business for the owner and for the distributor. One recommendation would be to integrate technologies that will optimize your leverage to reach the largest number of qualified prospects.