MLMMLM = Multi Level Marketing = Network Marketing

 

Although the origin of MLM (Multi Level Marketing) dates back to the 1940’s, it is still today clouded in mystery for a majority of people.  Also known as Network Marketing it frequently gets referred to as “scam” and “pyramid scheme”.

 

The Structure

 

Let’s compare the structure of a MLM company with that of a traditional (non-MLM) company.  With a traditional company the sales force exists of a sales manager with sales reps appointed under him/her.  So, there are only 2 levels involved.

 

As the company grows and sales increase, more sales reps are employed until the number of reps exceeds their manager’s ability to effectively manage them. Additional sales managers are then employed with reps reporting to each of them.  Thus the sales force of the company expands in a horizontal direction.

 

A MLM company would start off in the same way.  The difference here is that the sales manager can recruit his/her own sales reps.  The sales reps also have the opportunity to become sales managers themselves (then referred to as sponsors) and recruit their own sales reps. And so the process repeats itself.

 

The expansion is now vertically and can go many levels deep, depending in the policy of the company.  The result is thus multi level marketing.

MLM Structure

 

Marketing

 

For any company there are a variety of ways to distribute a product or service.  It can be done by printed media, radio, TV, the Internet etc.  With a traditional company the marketing is all done by the company. With MLM each sales manager (known as distributors) do their own marketing, while the company usually assists by providing tools and marketing material.

 

Network marketers could use the very same channels, but market the product or service as a satisfied user. Even non-MLM companies consider MLM the best way to market a product or service, and try to encourage it. That is, the user of the product shares and recommends it to other people – word of mouth method.

 

Compensation

 

With most traditional companies sales reps are paid a basic salary and commission on sales.  With MLM reps are only paid on sales of the product or service.  You are thus not paid to simply turn up for work, but for production.

To encourage distributors to expand sales, the MLM company also pays commission on sales generated by all levels under you (your downline). This encourages the distributors to take an active interest in the success of their downlines.

 

If the company pays out too small commission, it will be difficult to get good distributors in numbers. If it pays out to much, the company will get into cash flow problems, To solve this the company makes its top commission structure achievable, but only if you put in a lot of effort, build your business, and become a leader.

 

Is it legal?

 

MLM has been proven in the US courts to be a legitimate business (FTC vs. Amway, 1975).  I am referring here to the MLM industry, and not individual companies.  The FTC stipulates that a company has to deliver a product or service not to be classified as a pyramid scheme.  So, it is up to individuals (you and me!) to exercise due diligence and investigate a company before you join its business opportunity.

 

Legal, but ethical?

 

To decide if any business opportunity is ethical, one has to look at the consequences of participating in it. For me, the primary question is: Can it improve people’s lives?  With  MLM the answer is undoubtedly yes.  Can people lose money. Yes, as with any business venture – but that does not make it unethical.  One has to remember that the US stock market is responsible for the biggest financial losses by far – and I have not heard anybody asking whether investing in stocks in unethical.

 

Is MLM for You?

 

You can become involved with MLM for various reasons.  You may enjoy the social interaction, or you would like to add some additional income, or you want to pursue your dreams.

 

These things are all available when participating in MLM, depending if you treat it as a hobby or serious business.

 

For me, the most powerful attribute of MLM is that you can multiply your output to achieve whatever your are after. If you are in a job, you trade your output for money. With MLM, you can multiply your output by building a strong team, This means more income, but also more personal time – one of the most precious commodities in life!

 

To your success

 

Johan

 

Related posts:

  1. 5 Keys to MLM Success
  2. Marketing Your MLM Business Online

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