What Is Multi-Level Marketing?
Also known as network marketing, multi-level marketing (MLM) is a form of direct sales. A big draw is that people who sell products for MLM companies very often find financial independence and flexibility in their working lives. However, legitimate multi-level marketing tends to get a bad rap. This has to do with the fact that multi-level marketing businesses and pyramid schemes very often get conflated.
If, though, you think that your company could benefit from having independent recruits distribute your products through direct selling, then read on to find out what MLM is really all about and how to establish yourself as a legitimate MLM business.
What Is multi-level marketing?
The vast majority of multi-level marketing businesses that you come across will be the real deal. And, they will operate in all types of business sectors. So, in basic terms, what a genuine multi-level marketing company will do is use a distribution model as a means of selling their product.
To put it another way, a typical MLM strategy will involve a brand recruiting salespeople to carry out sales of products for them. Rather than having to rely on physical stores or eCommerce to drive their sales, MLM businesses use direct sales to get their products to consumers. Examples of multi-level marketing companies that use this model successfully include Avon, Amway, and Herbalife.
But, a good MLM program is about much more than just selling the company's product. In fact, when done right, multi-level marketing MLM strategies are a great way of growing a business. This is because companies offer financial remuneration to recruits who bring more salespeople on board, in the form of compensation plans.
Clearly, then, they present an ideal business opportunity to companies that have great products, but not the in-house staff or physical location from which to sell them.
Essential multi-level marketing terminology
There’s an awful lot that any good network marketing company will have to know if they want to successfully implement a good strategy. As such, it is helpful to have in mind examples of multi-level marketing terminology.
- Plans: Plans in multi-level marketing make up the MLM program as a whole. These overarching plans will usually include wider strategies as well as smaller compensation plans.
- Recruits: Multi-level marketing recruits are sometimes referred to as sales representatives or distributors, and these are the people responsible for selling the products.
- Sponsors: A sponsor (also known as a mentor) is a company recruit who goes on to directly recruit another person to the business. In other words, they are the new recruit’s sponsor.
- Downlines and uplines: Downlines are new sellers who were recruited after you, while uplines are those that have been there longer than you have.
How does multi-level marketing work?
Now that you know the basics, it’s time to learn a little more about how multi-level marketing actually works.
However, if you’re after a more thorough, detailed overview of exactly what multi-level marketing is and how it can help your product sales, it is advised that you take an online short course that will teach you everything you need to know about multi-level marketing companies.
Multi-level marketing is about two primary things: the product and the people. So, let’s start with what’s actually being sold before we move onto who’s selling it.
You see, a good MLM scheme is really only as good as a company’s product. If what your recruits are trying to sell doesn’t appeal to any sort of audience or have a real purpose, consumers won’t want to buy products from you. It’s as simple as that.
Plus, the reason that so many people decide to come on board as recruits in multi-level marketing companies is that they earn commission from products sold. So, a product that doesn’t sell well won’t be worth the recruit’s time, either.
Your network of recruits
In this commission based model, most recruits will come on board through existing distributors, who will put the time into recruiting new distributors as a means of increasing their earnings. However, your company will also have a part to play in finding new MLM participants.
Beyond just family and friends of current representatives, it will be necessary for you to regularly give marketing presentations as a means of growing your network. From there, each recruit will have to be properly trained in a number of different areas, to ensure that they act as a functioning team member. These include, but are not limited to:
- Product training.
- Marketing presentation training.
- Social media training.
- Recruitment training.
- Ethics training.
Ethics isn’t just something your recruits will need to be trained up on. If you’re serious about being seen as a legitimate business, it will be important for you to put ethical practice at the very center of what you do.
This could entail, for example, being completely transparent with potential recruits about the startup cost of joining the program, or providing a regular disclosure statement about the real earnings of your average distributor.
How is multi-level marketing different from a pyramid scheme?
It is important that you make it clear your company’s scheme MLM strategy is not an unlawful pyramid scheme or in any way like infamous, fraudulent Ponzi schemes. This is because, in illegal pyramid schemes, the money made from people lower down the scheme is funneled to the people at the top. So, people who join lose money.
Further, in a pyramid scheme, there very often isn’t an actual product that recruits are trying to sell. Instead, the business model revolves around a focus on recruiting in mass numbers, in order to swell the number of participants at the bottom of the pyramid and make more money for those at the apex.
So, if we’re differentiating multi-level marketing from a pyramid scheme, key things a potential recruit is likely to look out for include the number of independent distributors a company has already, how readily available their income disclosure statement is, and whether they are listed with the Direct Selling Association. This is an official body that represents direct selling companies.
For more information on MLM businesses and pyramid schemes, you can check out the Federal Trade Commission website.
How to get into multi-level marketing?
Marketing organizations and product-centric businesses could really stand to benefit from implementing multi-level marketing as a business strategy. But, to do so, you’ll need to have some crucial knowledge at your disposal. Clearly, the line between multi-level marketing vs pyramid scheme can be fairly fine.
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