What is multi level marketing- A complete guide

UX Intro : Avon, Amway, Tupperware, Herbalife, Forever Living, are global brands, so what is common among them? All these companies operate under the MLM business model or multi-level marketing. Read more about this business model which has employed over 95 million people across the world.

In our day to day life, we come across a number of people selling us “Get rich schemes”, “Be your own boss” business models and more recently “Work from Home”. What actually are these schemes? Do they actually work? Many join them without actually knowing, what they are getting themselves into! Some get impatient and are out of them before they have a chance to even fathom what is going on. Basically all the above schemes are network marketing opportunities or multi-level marketing. An industry which has a sales force of around 16 million people in U.S alone and the estimated sales through multi-level marketing grossed USD 32.67 billion. What is this billion dollar industry? And what drives it? This article will not only provide you with details about multi-level marketing but also a sneak peek in what you need to know, to get started.


The Concept of MLM

Multi-Level marketing, is also known as MLM or network marketing or direct selling. MLM is not really an industry as manufacturing or construction, but a business opportunity as well as a marketing strategy adopted by many companies. In MLM the sales force of the company is compensated, but not only for sales generated by them but also for the sales generated by other salespeople that they recruit. The level of compensation is multiple as is basically dependent on the recruited sales force and the number of people they recruit as salesforce.

The MLM strategy

The MLM strategy basically involves three main aspects, prospecting, selling and recruiting, get them right and you are well on the road to success.

What does Prospecting Involve?

All top network marketers endorse prospecting as the key to success in network marketing. Prospecting is sharing your business idea with people. It is the means you use to find people who want, what your multilevel marketing company has to offer. Your main goal is to find people who want to become consumers of your mlm company’s product or service, and prospecting is a means of going about it. You need to employ a strong prospecting system so that you are never out of prospects. The lesser number of prospects you have, the lesser you can recruit.

Selling and Recruiting

The second core aspect of an MLM is selling the product as well as recruiting additional distributors for the product. As the level of compensation is also dependent on the sales generated by the salespeople or distributors recruited by you, it is very important to choose wisely. It is very important that while recruiting, the distributors are under no misconceptions. People who join MLM companies believing in “get rich” schemes, lose patience when things don’t run smoothly. MLM Companies which concentrate on only recruiting additional distributors, could be categorized as pyramid schemes, which is not legal in many parts across the globe. Most MLM companies concentrate on selling their products as well appointing additional distributors. Mostly when people join a MLM they have to also buy the products so that they can experience it first-hand, before they actually try to sell it. It is very essential to provide full training and support to the person who have recruited as a distributor, because they may carry that support and guidance to the next level of distribution, which in turn will benefit you.

Compensation Plan

Besides the strategy, the compensation plans too can make or break a company. People need to know the schedule i.e. at which point of time, they are going to get paid. At times even reward programs are integrated into the compensation plans, which works as a carrot stick for the distributors. Below listed are the different compensation plans which are prevalent in MLM companies across the world.

The Binary Plan

The Binary plan a commonly used compensation plan by MLM companies is plan wherein new members are introduced into a Binary Tree structure, or a left and a right sub tree.

The Board Plan

The Board plan function on a box type structure whereby after all the places are filled the board splits and two new boards are created. The Board is independent of the network.

The Matrix Plan

The Matrix Plan is mainly popular for the limited width it offers, wherein you can recruit only a limited number of distributors in your direct frontline, additional distributors are shifted to the downline of existing frontline members.

The Differential Plan

This plan is suited to MLM companies who are mainly into product selling and re-purchase from existing distributors.

The Unilevel Plan

As the name suggests, only one line of distributors can be appointed and it has got unlimited width, however commission is paid only up to a defined level.

The Generation Plan

A MLM plan which basically runs on the generation levels. In this plan a number of directs are not defined.

Each plan has its fair share of advantages and disadvantages. Many MLM companies, however, choose to use a compensation plan, which is a combination of two or more plans. Before joining any MLM company it is very essential to study as well as understand the compensation plan, so you can plan and work accordingly, else you would only have disappointments ahead.

Why join an MLM?

So what good it is to join an mlm business? The Direct Selling Association (www.dsa.org) statistics state that “the size of the direct selling sales force had increased 5.7% to 16.8 million in 2013, a record high”. So why do people join a MLM business?

  • Most network marketers claim financial freedom, and a chance to earn a regular income as being the main reason for joining.
  • However many people go into network marketing because of the flexibility of working hours that it offers. As long as you put in a fair amount of work, you can choose the hours you work.
  • Thirdly the risk factor is at its minimal. In order to start any business, a fair amount of risk is involved, however in MLM it is negligible.
  • Last but not the least is the initial investment and operating costs involved. The initial investment is either done away with or is very low. Further the operating costs too is not much.

In today’s world of uncertain financial climates, MLM is considered the business model of the future. It has been around for more than 50 years and is only likely to boom in the future. The Direct Selling Association of U.S. predicts that marketers will recruit over 200 new people into the mlm business. Global Markets like Asia have been expanding and even during recession it has proved to be resilient. So now it is up to you, do you want in?

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