Multi Level Marketing (MLM)
Multi Level Marketing, known as MLM for short, is a common sales strategy used in direct sales. What exactly is Multi Level Marketing? Multi Level Marketing, sometimes called Network Marketing or Direct Selling, is a business model in which businesses sell their products and services directly to consumers via a network of independent contractors or distributors. These contractors earn income by recruiting other people to join their “team” and these new recruits then work to recruit their own recruits and a large network is formed. This network or layers of independent distributors is where the multiple levels of marketing come in. The independent distributor that makes a sale is compensated not only for the sale but also for the sales of those who they have recruited.
History Of MLM
The history of Multi Level Marketing began in the early 20th century during the 1920’s. The company now called Nutrilite (formerly known as the California Vitamin Company) used a direct selling model. As the company grew in its MLM efforts soon many other businesses began to follow suit and the MLM industry took off.
How MLM Works
The workings of MLM may seem complicated because of how large a network of direct salespeople can grow, but the concept is fairly simple. A company recruits direct sales people, contractors, or independent distributors, which could be any individual who wants to join. These individuals then begin selling the products the company is selling by their own sales efforts whether they are selling online or going door to door. Once a sale or sales are made this individual receives compensation from the company for selling their product or service.
But Multi Level Marketing does not stop there as these individuals are encouraged to recruit others to join the company as independent salesperson. This could include anyone interested in joining whether a family member, friend, coworker, acquaintance, or stranger, these people are then under the umbrella of their original recruiter. These new recruits are then encouraged and sometimes trained to make their own recruits. As the network grows, and the newest recruits make sales, everyone above them involved in the chain of recruiting also earns a commission.
MLM Examples
There are endless Multi Level Marketing companies around the world from Herbalife, Rodan and Fields, Beauty Counter, and recently exploding hair company Monat. Monat salespeople often try to sell their products on social media and turn into influencers on Instagram selling hair regrowth shampoo, hair strengthening products, and recently developed beauty products. These individuals recruit other interested men and women to join their team and they begin receiving revenue for the sales of their new recruits and the recruits that are acquired in the network. Those who are successful, can make an abundant commission from their network of recruits.
Advantages of MLM
Multi Level Marketing provides advantages for both the company and the consumer. The benefit of MLM for companies selling products is that they don’t need to rely heavily on other forms of marketing as their independent salespeople do most of the marketing for them. This means more money can be funneled into production and innovation. Multi-level Marketing strategies are also advantageous for companies big and small because their sellers typically become fans of the products and become loyal customers as well.
The other advantage of MLM for consumers is that they can purchase products that are high quality, and can be trusted to live up to that standard because they are purchasing them directly from the manufacturer. Buying the same or similar product in a retail store or online through a platform like Amazon can yield less than desirable products, fakes, and oftentimes higher prices. By purchasing through Multi Level Marketing companies, consumers can save money.
The other advantage for consumers buying from an MLM company is that they can become distributors for the company and earn a commission. From there, they can find recruits and build their own network thus making them even more commission. Although, it is important to note that it is not as easy as it sounds.
Disadvantages of MLM
It’s no secret that Multi Level Marketing is sometimes viewed through a negative lens and for some, retains a tarnished reputation. This is due to the various pyramid schemes that have evolved from the MLM approach. Pyramid Schemes are a fraudulent way to handle MLM. The delineation between Multi Level Marketing and Pyramid schemes is simple. MLM focuses on commission through sales, while pyramid schemes often focus on recruitment so the top tier can make the most money. Pyramid schemes are not always easy to spot, but if there is a strong push for recruitment rather than sales, then the business could be operating illegally. Pyramid schemes are illegal and because of its rampant spread worldwide, many consumers steer clear of MLM and are hesitant to join as a salesperson. The Federal Trade Commission (FTC) investigates potential pyramid schemes in order to spare consumers time and money.
Another criticism of Multi Level Marketing is that it is not a fast track to financial success. In fact, many recruits do not make any significant commissions, if any at all. It takes a lot of hard sales work around the clock to begin making an income. This requires being in the public eye almost daily, and constantly urging others to join. This persistent call to action can sometimes be viewed as an irritating approach for others and at times puts pressure on friends and family members to join.
MLM Outlook
Multi Level Marketing is undoubtedly going to stick around for a long time especially due to the rise of e-commerce and use of social media. The internet is a vast portal of endless sales opportunities in the world of MLM.
Multi Level Marketing is a proven business model of direct sales. The sales made, and networks that form, create revenue opportunities for those involved. There are downsides to any MLM venture, so it’s critical to ask questions and have answers before getting involved. The MLM business can be quite lucrative if someone is willing to put in a lot of work and dedication.
