What is M.L.M. and Why Should You Care?

M.L.M. is an acronym for Multi-Level Marketing, sometimes called Network Marketing. As the name suggests, multi-level marketing is basically multiple levels of people marketing a product to consumers. Have you ever heard a similar offer, “Refer a friend and you’ll receive $100?” This, by definition, is a form of multi-level marketing. , , telecommunication companies, and countless others use this technique to gain customers and clients. All of these businesses are trying to get current customers to advertise and market their products or services to potential customers.

The Traditional Company

In a non-M.L.M. company, a sales manager and salespeople are hired by the company. The company is limited to the number of salespeople it can hire based on the limits of its financial resources to train and pay salaries, and on the amount of salespeople the sales manager can handle. Once a sales manager is overwhelmed, the company must hire another manager to reduce the load. This increases the company’s width and creates extra expenses that add to the cost of the product or service.

The Multi-Level Marketing Company

A Multi-Level Marketing company grows by recruiting salespeople who become customers, and then those salespeople find others to become customers and so on. But unlike most traditional companies, each salesperson is also given the option to become a sales manager who can also recruit other salespeople. M.L.M. companies only pay commissions, not salaries, and expect the sales manager to be responsible for training their salespeople. Generally in an M.L.M. structure, the sales manager will also receive a certain percentage of all product sales made by their new salesperson. This simply means that when you recruit other people who want to become sales managers, you will earn money not just from their product purchases but also from the product purchases of their salespeople. Under this model, the more people you recruit, the more money you can earn.

5 Basic Methods of Distribution

Once a company has a product or service, they need to make it widely available and known. They do this by distributing it. Distributing a product involves finding customers and getting the product in their hands. When you look at sales and distribution, there are five primary ways to distribute a product or service:

1. Retail Sales: (Drug stores, department stores, supermarkets, gas stations, etc.) You go into a physical location and walk out with a product that has been shipped to the store and sometimes placed on the shelves by a distribution company (think Pepsi or Coca-Cola rep).
2. Direct Sales: (Tupperware, Avon, Amway, etc.) You purchase a product or service directly from the company, bypassing the traditional distribution chain. Purchases are typically made directly through a representative, over the phone, or through an internet website.
3. Telemarketing or Mail Order: Many times this method is used for direct sales, though sometimes retailers will use mail order for special non-stock items.
4. Pyramid Sales: (Ponzi scheme) Charles Ponzi was a con artist and became known as a swindler for his money making scheme named after him. A Ponzi scheme is a fraudulent investment that pays returns to its investors from money paid by subsequent investors, rather than from actual profits. The system is destined to collapse because the earnings, if any, are less than the payments made to investors, and eventually the money runs out and no subsequent earnings can be paid. The fact is—Pyramid selling or Ponzi schemes are now illegal and have been for many years. The main reason they are illegal is their failure to move a product or to provide a valid service. Many times you’ll hear people mistakenly refer to M.L.M. as a pyramid, but this is incorrect because the whole point of M.L.M. is to sell a product or service.
5. Multi-level Marketing: (Network Marketing) The company recruits a distributor (salesperson) to sell products directly to consumers or through a website and grants the salesperson the right to recruit other salespeople to sell products. M.L.M. is a viable solution to the increased distribution costs incurred by most companies because it allows them to reduce the amount of channels (middle-men) between the company and the consumer. This “savings” is part of where the commissions paid to the salespeople and sales manager comes from.

Why Should You Care About M.L.M.?

If you’ve ever dreamed of running your own business from home, whether on a full or part-time basis; are good with people; have very little business knowledge or a lot of knowledge; then M.L.M. may be for you. This is especially true if you have a minimal amount of start-up cash. Reputable M.L.M. companies provide a low start-up cost, all the training you need, advertising in one form or another, and supply you with a product line-up or service to sell.

We’ve discussed the benefit of M.L.M. companies allowing you to recruit other salespeople and earn commissions from their total sales. However, the United States Federal Trade Commission cautions anyone from joining a M.L.M. company that pays you for each salesperson you recruit, as opposed to only paying a commission on the total sales they generate. This is called a Pyramid and, like I mentioned earlier, is illegal.

Below are a few benefits to joining a M.L.M. company:

1. Small amount of risk: There is a certain amount of inherited risk involved when you become an entrepreneur. You are confronted with losing money, wasting time, not being profitable right away, etc. The advantage of starting an M.L.M. business is that there is a small risk to get started. With a couple of hundred dollars, it is possible to get started with a company marketing products that you consume already. The amount of financial commitment is insignificant compared to that of traditional businesses.
2. A demand for quality products: There are a myriad of M.L.M. companies that promote very good products. Before getting involved with a M.L.M. company, ask yourself:
   • Would you still consume these products/services if there were no opportunity to market them?
   • Do these products bring any benefits to a consumer besides the opportunity to make money?
   • Would you bring “value” to your customers if they consume these products?
3. Residual income: The greatest advantage of a M.L.M. program is that it gives you an opportunity to enjoy residual income just like big companies do. We are so used to trading our time for wages that we often-times don't see the potential benefit of residual income—that basically means being paid over and over for something you’ve done once.
4. Unlimited income potential: There is no cap on how much money you can generate. It is up to you to decide how much you want to earn. M.L.M. companies do not hold you back in the same way the corporate environment does. As long as you have the required skill-set, you’ll make whatever income based on your stamina, dedication, and your willingness to help others.
5. No employees to hire: By far, this is a clear advantage over traditional businesses. M.L.M. programs are independent entrepreneurs working together towards a common goal. Without employees, it’s possible to build a business right from home.
6. Low operating costs: The M.L.M. model makes it possible to run a business at lower costs compared to any other business model. However, you must capitalize on technology and tools to be successful:
   • Laptop or desktop PC’s
   • High Speed Internet Access
   • Cell phones
   • Video Web Conferencing
   • Telephone Conference Lines
   • Company Website          
7. Mentorship: A good sales manager/mentor should allow you to piggyback on his or her expertise and knowledge, and help you generate the funds to pay off your initial investment and become profitable early in the life of your business.
8. Attainable freedom: Imagine having a productive business that provides you with a lifestyle that only the rich and famous enjoy. When all the pieces are in place, the life of a network marketer can be very fulfilling indeed.

Most business entrepreneurs face the question, “How much am I able and willing to lose if it doesn’t work?” That is the question you have to ask yourself before you get into M.L.M. You must also decide what you want from life and what you are willing to do to get it?

If you enjoy helping others succeed so that you can succeed; are willing to take the risks associated with being in business for yourself, even on a part-time basis; and are willing to put in long days, then M.L.M. may just be the tool you are looking for to achieve your business and life goals.