So, what really is network marketing? Is it what a lot of people outside of the industry think it is- where the person on top makes all the money? You'd be surprised to know what mlm really is and that's there's a little truth to all those stereotypes.

What is network marketing?

Network marketing is just a distribution model to get the products out into the marketplace. Companies use this business model as a way to cut down on and even reduce their marketing expenses. They rely on distributors to do the marketing for them and get their products into the hands of the end consumer.

If you studied the distribution model of how products get into your supermarkets, you'll be surprised at how many different channels products have to go through before products end up on your grocer's shelf. Everybody along the way has to get paid.

Profits are eaten up in that distribution channel - wages, pensions, worker's compensation, insurance and other typical expenses businesses have to pay. Due to the way network marketing is set up, these expenses are very nominal and minimal at best.

Network marketing simply cuts out the middle men thereby reducing costs. Distributors are not paid a wage. They are only paid when they produce results. This is why network marketing companies can thrive in a down economy while other mainstream companies struggle and even go out of business.

From a distributor point of view, think of network marketing as marketing within your network i.e. your friends and family. This is originally how network marketing or MLM as it was referred to back then, was marketed.

Amway and Shaklee were just two of the pioneers of this form of distribution model as it began back in the '50s. These two companies, some 50+ years later, are still going strong today.

Keep in mind that network marketing and MLM are used interchangeably, but they are not the same thing.

Here's a mind twister – all MLM companies are considered in the realm of network marketing, but not all network marketing companies are MLMs.

Here's why...

MLM is referred to the way the compensation is paid out - on multiple levels. You earn a small percentage on the sales of people you bring in and the people they ultimately bring in. The whole gist of multi level marketing is to get paid off the efforts of other people.

The other types of businesses that don't use the the typical MLM compensation structure pay out a larger percentage because you are not building a downline; you make money mostly in relation to your efforts alone.

So, what is network marketing?

It's simply just an economical way to get products distributed out into the marketplace.

Sound off: Has network marketing gotten a bad wrap? Is it justified? What do you think?