Multi-Level Marketing (MLM) Explained With Examples

Multi-Level Marketing

If you want to be a big marketer then you also heard the term MLM (Multi-Level Marketing).

If not then don’t worried about it.

Because today I discuss the common term MLM (Multi-Level Marketing). It is related to a term from Network Marketing.

So let’s drive in.

What is Multi-Level Marketing?

Multi-level Marketing
Multi-level marketing

Multi-Level Marketing is a type of business form or a marketing strategy of the MLM companies in which the distributors are inspired to recruit new distributors who are given a percentage of the recruiting sales.

The recruits of the distributors are generally acknowledged as their ‘downlineʼ.In this form of marketing, consumers can also join as distributors to help to sell the company’s products.

In different words, the MLM Company maintains its sales by adding new distributors. Hearing from a report is that we have studied the business function of 350 MLM companies, tells that at least 99% of people who have joined the MLM Company have lost their time and money.

The other names of Multi-Level Marketing are Network marketing, pyramid selling.

History of Multi-Level Marketing:

The introduction of Multi-Level Marketing is often a subject of dispute but the style like Multi-Level Marketing exists in the 1920s. A vitamin company that existed in California in the 1930s used the style like it.

The key terms of MLM you should know:

(1)The Plan: Most of the MLM companies acknowledge their marketing strategies as their plan. This shows the company’s marketing program on how they can earn money.

(2)Sponsor: The sponsor is actually the distributor. They recruit new distributors into the business and give a percentage of their recruiting sales.

(3)Recruit: The word recruit is generally referred to a distributor of the company.

(4)Downline: Downline refers to those who work under you. When distributors recruit new distributors in a company, they can be called as ‘Downlinesʼ.

(5)Upline: Upline refers to the distributors or sponsors who recruit new distributors in the company.

(6) Compensation Plan: The competition plan must be focused on the selling of products not in the recruitment of new members to be legal. Many companies offer vouchers trips, bonuses based on selling performance.

(6)Network Marketing: People sometimes refer to Network marketing as Multi-Level Marketing.

Difference between traditional marketing and MLM:

Traditional marketing is not the same as MLM. Traditional marketing follows a chain.

At first, after manufacturing it will go to distributors then it will go to wholesalers then retailers and finally it will reach the consumer’s hand. But MLM Is about direct supply.

After manufacturing, the products will go to distributors and then consumers.

Is Multi-Level Marketing legal?

There are many questions about MLMs legality. If an MLM company directly sells its product primarily to its consumers then it is a legitimate MLM company.

In 1979 the FTC (Federal Trade Commission) gave a declaration that MLM was not illegal in the United States.

In April 2006 the Federal Trade commission sensation a business rule including MLM companies that they have to provide appropriate information to the willing participants so that they can make a decision about their joining into the business venture.

‘The World Federation’ of Direct Selling associate that there were 116 million independent distributors in the world working under the MLM companies as of 2017 report.

If you are interested in joining an MLM company you have to carefully examine its product quality, whether the income is basically earned from the sales of products or services.

The lacking quality of the products and if the income is earned by services then it like an illegal pyramid scheme.

Why is MLM so popular in marketing industry?

Most MLM companies promise that their distributors will receive much money if they work hard a little bit.

And by adding new distributors, they will earn money by doing nothing. Joining an MLM company is very inexpensive.

So it is very easy for one to join an MLM company rather than starting a business. Many MLM companies gave their distributors attractive products like,

(1) Amway: Amway gave extra cash bounce to their distributors according to their selling of products every month.

(2) Avon: Avon gave their distributors vacation trips on their fulfillment of targets.

Is MLM business model successful?

The MLM business has a bad reputation as the rate of failure is very high. There is a misconception regarding this fact.

Firstly, the failure rate of any type of business is generally very high.

Secondly, what is easier for one to leave a business in which he invested 5000₹ or in which he invested 500000₹.

Thirdly, people went into the MLM business for free registration.

They didn’t give attention to the quality of the products if people like the products or not.

These are not the faults of the MLM companies. It is like any other type of business. If you work hard and stay focused you can also be successful in it.

How to become successful in MLM:

It is not very hard for one to be successful in MLM.one needs to look upon the below-mentioned facts before joining an MLM company,

  • Join a company that follows the direct selling method and in which the company requires distributors to maintain its code of ethics.
  • Select a product or service that you like and you will love to share it with others. A profitable product will help to increase your sales and you can get regular customers for your product.
  • One should have to study a company’s old records and payment method. You have to understand how money is made and then you have to make your own marketing strategies.
  • You have to consider the MLM business like your own business. Like any other marketing field, you have to work hard passionately to become successful in MLM. You have to complete your specified targets.

Examples of MLM:

There are some examples of MLM is given below.

(1) Avon: Avon was established in 1980 making a turnover of 11.3 billion dollars per year follows the style of MLM.

(2) Amway: Amway can be the biggest example of Multi-Level Marketing. It was established in1959 making a turnover of 10.9 billion per year.

(3) Herbalife: Herbalife is one bigger example of MLM containing more than 500000 distributors. In 2018 William Ackman accused the company withdraw his words and in 2019 the company’s stock price touch the sky (40$ for just one share).

Conclusion:

Hope this helps you understand that MLM.

What did you think of this? Do I miss something? Let us know if you want to add something to the list then comment in the comments section.

Multi-Level Marketing FAQ:

What is Multi-Level Marketing?

Multi-Level Marketing is a type of business form or a marketing strategy of the MLM companies in which the distributors are inspired to recruit new distributors who are given a percentage of the recruiting sales.

Is multi level marketing a pyramid scheme?

If you are interested in joining an MLM company you have to carefully examine its product quality, whether the income is basically earned from the sales of products or services.
The lacking quality of the products and if the income is earned by services then it like an illegal pyramid scheme.

Why is MLM illegal?

There are many questions about MLMs legality. If an MLM company directly sells its product primarily to its consumers then it is a legitimate MLM company.
In 1979 the FTC (Federal Trade Commission) gave a declaration that MLM was not illegal in the United States.

What is the best MLM company?

The best three MLM companies,
(1) Avon
(2) Amway
(3) Herbalife, and many more.

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