The referral system is the backbone of the multilevel business, without which it would cease to exist. In business parlance, referral marketing is any kind of marketing in which a company functions by making their customers refer other people to their business. These companies save a lot on their advertising costs because they get free word-of-mouth publicity. For that, they might also give the referrers a commission when they affect a sale for someone else.
This doesn't matter to the company because with the large amounts they are saving on advertisements, they can easily reward people who refer their product to others with some commissions. This becomes a benefiting endeavor for the company, the referrer as well as the referred, because they can further refer the product to other people and get their own commissions.
If you understand this, you will see that multilevel marketing is the most classic example of referral marketing. In MLM, the basic premise is to grow a network of people who will be selling a product and at the same time bringing in other people to the network too. All members here get commissions for what they sell as well as what people in their downline sell. Getting a large number of people to do this is nothing but the referral mechanism in play.
Now that it is established that network marketing is a kind of referral marketing, it becomes much more important to understand how these referrals can be used in the right manner. The following points become of invaluable significance.
1. It is vitally important to guide the referral correctly. In MLM, the referral could come from a direct contact or from a contact of a downline member. But as every person within the MLM framework is a leader in a way, it is their wont to guide all kinds of referrals that come in. The referrals must be told what the business is about and how they can fit into it.
2. Once the referrals become part of the network, a workshop must be conducted to guide them on how to inspire other people to join the network. The referred members must refer the business to other members, or the system wouldn't work.
3. There should be some kind of counseling and problem-solving feature within the MLM network so that all newly referred members can seek answers to their queries. Every MLM leader can provide such assistance within the network.
These are the three basic rules of ensuring that the referrals that are brought in by members of the network function in the right manner to take things forward. Guiding the referrals and ensuring success of the MLM venture should be a collective responsibility and not just of the member that has brought in the reference.