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Writer's pictureThe Insider

"Multi-Level Marketing - MLM. What It Is And What It Is Not"

Updated: Oct 6

Introduction

With the current state of the economy, an increasing number of individuals are seeking home-based employment opportunities to boost their income, aiming for flexibility that fits in with their lifestyle and schedule.


Multi-level marketing (MLM) allows you to earn income flexibly and on your own terms, potentially leading to sustained earnings. It puts you in the driver's seat of your own success, offering the flexibility to work according to your schedule. With the proper mindset, dedication, and work ethic, MLM can be a pathway to building a business that leads to financial independence. This article delves into how MLM can be a means to enhance both lifestyle and financial well-being.


What is multi-level marketing?


MLM, also known as multi-level marketing, is currently in the spotlight due to its rising popularity. This business model involves selling products directly to generate income and encouraging others to join in for additional earnings, resembling the operation of a franchise.


Before diving into MLM, it's essential to understand that a small initial investment may be required. An example of this is Avon. You buy one of two starter kits, £10 or £39. Earnings are typically commission-based, and the lifestyle may not involve lounging in PJs all day. Activities such as work, social media, hosting events, or distributing catalogues could be part of the routine.


a sales network
A Sales Network

In MLM, products are distributed through a network of independent sales representatives. Each representative operates independently, purchasing goods at a discount and selling them to consumers. It is much easier to go with a company where you place customer orders, as opposed to having to purchase items and trying to sell them. Representatives earn through sales and can boost their income by recruiting new members and receiving a commission from the company on the sales of their recruits.


It must be said that in MLM, anyone at any level can earn more than the representative at the top. This is unlike regular business models, where a manager will not earn more than a chief executive in a business. The person at the top earns more than anybody else in the business.


Multi-level marketing and pyramid schemes


Pyramid Schemes


Pyramid schemes get their name from their shape - like an actual pyramid. Picture the original members at the very top, with new recruits added below them in a cascading structure.


If a company is more focused on selling guides on how to make big bucks through the scheme, rather than actual products or services, it's likely up to no good. The same goes for businesses peddling outrageously priced items that no one in their right mind would buy unless they were trying to rope others in.


Let's say there's a person at the top of the pyramid who kickstarts the scheme. They bring in 10 folks, promising them huge returns. These 10 become the first tier below the mastermind.


Each of these initial 10 recruits forks over cash to join the scheme. Then they each bring in 10 more folks, forming a third level of 100 members. The money from these newer recruits flows upwards, with a chunk siphoned off for the top honcho.


This cycle of recruiting and payments keeps chugging along, with money getting funnelled to the top. Pyramid schemes rely on recruiting new members to keep the cash flow going. And that's the shady lowdown on pyramid schemes.



a money pyramid scheme with rich man at top
An Illegal Pyramid Scheme

How Pyramid Schemes Collapse


Pyramid schemes thrive on continuously recruiting new members and collecting their payments to sustain the operation. The foundation of the pyramid must constantly expand, and failure to attract more participants will lead to its inevitable collapse.


Ultimately, pyramid schemes are doomed to fail, resulting in financial losses for all participants. Even the top-tier individuals are at risk of losing out when the scheme unravels, as the lower-level members may default on their payments.


Multi-Level Marketing/MLM


On the flip side, a legit multi-level marketing company sells top-notch products at better prices than regular stores. They offer good commissions to their distributors/representatives, which can be even higher than what you'd get elsewhere. This is because they save money on things like; staff, rent, and wholesale markups. You can spot a trustworthy MLM company by checking out their ads - if they focus on their products instead of just recruiting more people to join in for get-rich-quick money, then you're likely dealing with a good business.


Multi-level marketing (MLM) businesses operate by selling products or services through a network of distributors. These businesses are structured in such a way that representatives earn commissions not only for their own sales but also for the sales made by the reps they recruit.


However, despite being a legitimate business model, MLM companies often face scepticism and criticism due to their resemblance to pyramid schemes. Pyramid schemes, unlike MLMs, focus primarily on recruiting individuals rather than selling actual products or services. This key difference is crucial in distinguishing between the two.


Unfortunately, the confusion between MLMs and pyramid schemes leads to misconceptions and controversies. Many people jump to conclusions without fully understanding the intricacies of MLM operations. This lack of knowledge can perpetuate negative stereotypes and hinder the growth of legitimate MLM businesses.


Individuals need to educate themselves about the differences between MLMs and pyramid schemes before forming opinions. By doing so, they can make informed decisions and avoid unfairly labelling all MLM businesses as fraudulent. Clear communication and transparency from MLM companies can also help alleviate concerns and build trust among consumers and regulators.


Multi-level marketing businesses focus on product sales more than recruitment and allow representatives to buy as much or as little product as they like. Remember what I wrote previously


MLM tree
How an MLM business could look like

It is much easier to go with a company where you place customer orders, as opposed to having to purchase items and trying to sell them.

Sales representatives from these businesses earn the majority of their income from selling products. Almost all companies require some investment so before joining one it's important to consider how much you're willing to invest.

In MLM, anyone at any level can earn more than the representative at the top

Different MLM companies offer different investment levels, an example of this is Avon, you buy one of two starter kits, £10 or £39 which you don't pay for upfront, and check whether you have to pay upfront for the privilege of joining them.


Also, consider whether it's worth the additional income you're likely to make. This might be lower than the company advertises, especially when you start your business.


The structure of multi-level marketing companies


Whilst multi-level marketing companies vary in the products they sell, they typically have similar structures. There are some elements to the structure that you're likely to find in any company. These are:


  • The programme: Most companies have a set sales programme or plan that they encourage representatives to follow. This programme aims to increase product sales and the recruitment of new representatives.

  • Upliner: An upliner/team leader is a person who recruits others to become sales representatives. Once you've successfully recruited someone you become their upliner and receive a commission from the MLM company on their sales and the sales of anyone they become the upliner for.

  • Recruits: Recruits are new sales representatives that an upliner brings into the business.

  • Downline: In simple terms, this is about anyone in your downline - the people you bring in and the people they bring in.

  • Upline: Your upline is the person who introduced you to the business, and it also includes everyone above them, all the way up to the senior leadership level.

  • Commission: The commission plan outlines your potential earnings from product sales, recruitment, and downline commissions.


Things to think about before starting this kind of work


There are a few points to think about before you decide to join a multi-level marketing business. Working for this type of company can be appealing, especially if you want to be in control of your work schedule and earnings, but it requires a special set of skills to be successful. Thinking about the following points helps you to decide whether this kind of job is right for you:


Be comfortable approaching your loved ones

Most of your clients are likely people you know personally. This means you're required to be comfortable making sales to your friends and family if you want to grow your business. You may also recruit some of your loved ones and you need to feel comfortable doing this.


Enjoy sales

This type of work is usually sales-based. The MLM company you decide on should provide adequate training and provide you with the appropriate skills to grow your business. You do not need previous sales experience to join an MLM company, just the drive to succeed.


Understand the financial risks

This kind of job involves investing, Initially, time and money, as you launch your business so it's important that you understand the potential financial risks with your planned business before you commit. Whilst some companies might claim that representatives earn vast amounts in a short amount of time, Treat it with a touch of scepticism, this is not a get-rich-quick business. Ensure you know the risks investing involves and research what you are getting for your investment.


Be willing to invest your time

Working in this kind of business involves investing your time and money. To be successful you might be required to work full-time hours and devote time to building your customer base and recruits. If you would like to make this your main source of income, then prepare to spend the required amount of time growing your business initially.


Prepare to research the company

If you've found a company you're interested in, do some thorough research to decide if it's right for you. It's helpful to find out about the commission plan, company structure and business practices before you commit. Searching online for honest reviews can also help you to determine if the business is legitimate.


Find products you believe in

Being a successful representative requires you to believe in the products you're selling. With so many multi-level marketing companies out there, choose one that offers products you are confident in. If you use a product that you wholeheartedly believe in, then you're able to sell that product more effectively.


Ways to find a multi-level marketing job


If you think multi-level marketing is right for you, looking online is a great way to find a company to join. Various lists online of legitimate companies can help you make a decision. You might also notice companies that appeal to you on social media. If you know someone who works for a company that you're interested in, you could talk to them to find out more. Regardless of how you find a company, it's important to research the products and business thoroughly before deciding to join.


Tips for Success

Starting a career in multi-level marketing can be challenging, especially in the initial stages. Reputable companies offer valuable training, information, and strategies to support you in boosting sales and expanding your network. These recommendations can also assist you in advancing your business as a sales representative:


Embrace authenticity

Authenticity and honesty are more effective in generating sales than exaggerated claims. Ethical and genuine companies promote an authentic sales approach. If you are genuinely enthusiastic about the product, your passion can translate into successful sales.


Define your target audience

While some salespeople try to sell to anyone, identifying your target market is a more fruitful tactic. Once you pinpoint your sales and recruitment audience, you can focus on effectively reaching them, which is more successful than attempting to target a broad audience.


Consistently promote your product

Regularly sharing your product through various channels helps in expanding your customer base and boosting sales. Customers who genuinely appreciate the products are more likely to become representatives themselves in the future. Ways to promote your products include social media posts, hosting product parties, or creating a website.


Establish personal objectives

Setting personal sales goals, particularly for product presentations or parties, aids in business growth. With clear goals and an understanding of your compensation plan, you can make informed decisions about the number of events to organise and the required attendance for achieving the desired sales volume. As your business progresses, you can set more ambitious targets to drive further growth.


Differentiate yourself

When there are other representatives from the same company in your vicinity, finding a way to stand out is important. Your multi-level marketing venture can flourish if you offer customers a reason to choose you over other representatives. Consider initiating a personal rewards program, providing personalised service, or identifying other strategies to gain a competitive edge.


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Conclusion


So, in a nutshell, multi-level marketing can be a pretty good gig for you if you are ready to roll up your sleeves and work hard to make your business a success. By knowing the distinction between legit MLM companies and pyramid schemes, being ready for the financial ups and downs, and sticking to some key advice like staying true to yourself, figuring out your target audience, and setting clear goals, you can start on a path towards financial independence and personal development through MLM.



The Insider


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The "Insider"

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