Comparing Franchising and Network Marketing
Organisation Strategy
Network Marketing is similar to carpet bombing. Create channels as many as possible. Chain of people who become teams. Purely a distribution form of channelising sales. From an organisation perspective, the overheads are minimum. Does'nt mind if one team clicks or not. There would be hundreds of channels without any territory or boundaries and in a war, lot of them get killed but the war continues.
A franchising is much more process oriented and has a lot to do with commitments both ways. There is a lot of emphasis on the brand and the way it gets delivered eg. A car showroom has an experience to share and hence you need franchised showrooms who would take care of the sales and service. Also, franchising is about running the business yourself and then if at all you have area developer / master franchise rights, you could further recruit franchisees. Most franchisees are single unit developers, hence there are no tiered payouts.
A product like shampoo is experienced at home and hence the distribution at as many shops is very important. It depends on the strategies of the organisation and the objectives set apart for a Network Marketing.
Generally it is seen that you have a pool of products in hand and the distribution could be through people or the visible channels like shops etc. Another example could be Life Insurance Corporation (LIC, one of largest insurance companies in India) you look at it it may not be a Multi Level Marketing, but it is again on a network channel wherein he has products which are attracted to different classes and masses and hence needs more bisected territories viz. In Mumbai, at a smaller suburb, Matunga alone there would be atleast 100 LIC agents and they would map the entire territory and start penetrating, now this network gives Life Insurance Corporation, a huge advantage and that is probably why it is # 1, Life Insurance Company in India.
Success Rate
The two are not really compatible even though both business models work. The failure rate of network marketing is much higher than the failure rate of franchising, both because of support systems in place and due to the nature of the people investing in each model.
Training and Support
In network marketing, you are depending largely on the person that recruited you while in franchising you have direct access to a business development team (or should have at least).
Risk vs. Reward Factor
The risk vs reward factor is different for the two. Granted you can become and amway distributor for INR 5000 (USD 1000) but you have to do everything yourself. You can get a INR 30,00,000 Subway Franchise (USD 60,000) and the business can practically run itself. In a network marketing company, you are buying into a job that can have a long term payout, in franchising you are often buying a business that does not depend on you.
What's Common...
However, what is common in a Franchising Business, say like Aptech and a network marketing business, say like RCM, that they provide you with the supply mechanisms as well as the training and other tools to succeed. Either of them would fail if you quit.
Comparing Franchising and Network Marketing - To learn more about this author, visit Dhawal Shah's Website.
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John PowerJohn Power, founder of Biltmore Franchise Consulting, has extensive experience developing and marketing franchises and business opportunities. He has been in and around franchising for over twenty years. From 1980 through 1990 he conceptualized, organized, and developed the American Video Association. He grew AVA to 2,000 national members, before selling the company it 1990. It was later merged into another home video marketing company. From 2000 to 2005 he worked as a contract marketing and human resources consultant to several local and national companies. In 2005 Mr. Power began working as a franchise development consultant on a full-time basis. Since that time he has helped more than three dozen companies initiate and develop their franchising program. He notes that there are many companies interested in developing a franchise program, and who need his specialized assistance. Mr. Power is a “hands-on” franchise consultant. He said, “I am the ‘nuts and bolts’ person who tends to the details for my clients.” Mr. Power holds a B.S. degree with a major in Marketing. See: www.biltmorefranchise.com You may contact Mr. Power at: jpower@biltmorefranchise.co - Visit John Power's Website |
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Stephanie RobeyStephanie Robey is President and CoFounder of Pivot Positive, LLC - an Internet marketing business focused on helping people start work at home ventures. Previously, she was employed at The Search Agency with over 20 years experience in graphic design and 10 years experience in online marketing. She was responsible for launching the Conversion Path Optimization (CPO) unit where she and her team have conducted hundreds of optimization tests for online companies across multiple verticals. She is a successful entrepreneur having started and sold 2 companies and remains on the board of directors of the third, PhotoSpin.com Stephanie began her career in the direct marketing realm creating and producing direct mail for many of the major cable television companies and directly attributes her understanding of Internet marketing to those early offline experiences. Stephanie is a graduate of San Diego State University with a BFA in Graphic Arts and also holds an Executive MBA from the Graziadio School of Business and Management at Pepperdine University. Read Steph's Blog Meet Steph and Dave Sign up for our Free 7-Day BootCamp: Self Employed & Rich - Visit Stephanie Robey's Website |
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Jay Kubassek(Jay's Full Bio: EvanCarmichael.com/jaykubassek) In five years, Canadian-born entrepreneur Jay Kubassek went from selling mufflers at a Midas franchise to revolutionizing Internet marketing with the 2004 launch of CarbonCopyPRO, a online marketing education company, now worth over $20 million with customers in over 160 countries.
As an independent film producer, his upstart film fund Aliquot Films is currently producing a films with Spike Lee and Abel Fererra (starring Ethan Hawke and Dennis Hopper.)
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