Multi-Level Marketing

Network marketing || Referral marketing ||Pyramid selling

In this article, We are discussing Multi-Level Marketing(MLM), and how does work?

History of MLM

Multi-Level Marketing or Network Marketing as it is called the world over happens to be a fast-growing phenomenon. The fact that anyone, anywhere can become a distributor and earn income from building the network without having to sacrifice any other occupation or additional investment into this business makes it very attractive for people from all walks of life to attempt at joining the network. It is estimated that in the US alone over 70 percent of the Direct Selling Revenues come from Network Marketing. Though no figures are available to confirm the revenue figures at the national level, over 50 million people are estimated to be engaged in Multi-Level Marketing all over the world.

What is Multi-Level Marketing(MLM)?

Multi-level marketing is also known as Network Marketing or Pyramid selling. Multi-level marketing(MLM) is derived from an unsalaried, hierarchical sales, workforce selling the company’s products or services, the earnings of the participants are derived from a pyramid-shaped or binary compensation commission system.

MLM company sells and promotes the products to a community of potential customers. They are often expected to bring in new members to join the ever-expanding sales levels of the company. Within the structure of an MLM company, there is always play a hierarchy of roles, that can be ascended through successful sales or recruitment, which are tied to rewards and promotions for the associates.

How Does Multi-level Marketing Work?

MLM is a distribution-based marketing strategy that contains two or more tiers of commission overriding (depending on the company). It offers the opportunity to become involved in a system for distributing products to consumers.

In other words, With an MLM, you typically are recruited by someone who’s already in the business. You may have attended one of their sales events and enjoyed the products.

The overwhelming majority of MLM participants participate at either an insignificant or nil net profit. (A study of 27 MLM schemes found that on average, 99.6% of participants lost money.) Indeed, the largest proportion of participants must operate at a net loss (after expenses are deducted) so that the few individuals at the uppermost level of the MLM pyramid can derive their significant earnings. Said earnings are then emphasized by the MLM company to all other participants to encourage their continued participation at a continuing financial loss.

Examples of Multi-Level Marketing?

There are some examples of MLM i.e Tupperware, Avon, Amway, Amsoil..etc

Amway: Amway is a well-known direct sales company that uses MLM to generate revenue. The company was established in Michigan in 1959, its roughly 3 million representatives sell health, beauty, and home care products in more than 100 countries, reported almost $9 billion in sales conducted by its independent business owners in 2018.

Amsoil: Amsoil Inc is an American corporation based in Superior Wisconsin that primarily formulates and packages synthetic lubricants, fuel additives, and filters. Company founder Albert J. Amatuzio developed several synthetic motor oil formulations throughout the mid-to-late 1960s. He was commercially selling synthetic motor oil by 1968.

Tupperware: Tupperware is a home product that includes preparation, storage, and serving products for the kitchen and home. Founded in the USA in 1938, the company has become synonymous with its entire product category plastic food storage containers to a level rivaled only by companies with classic distribution channels like Scotch tape or Hoover vacuum cleaners. Worldwide, over 40 Tupperware parties are hosted every minute.

Differentiating Multi-level marketing from Affiliate Marketing

The main difference between affiliate marketing and multi-level marketing is the fact that you have complete control of what to sell with affiliate marketing, while with MLM you can only sell the products of the MLM program you’re involved with. Affiliate marketing, it’s much more comparable to owning your own business, where you are responsible for promoting the products and you receive the commissions without assistance from other people. With MLM, it’s more about how many people you can recruit to sell on your behalf.

Affiliate Marketing: An affiliate earns a commission for advertising another individual’s or business’s products. The affiliate only searches for a product they like, then boosts that merchandise and earns a bit of the profit from every sale they generate. The sales are monitored via affiliate links from 1 site to another.

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Conclusion: The findings on this website show that anywhere from 54% to 94% of people lose money when they join an MLM. Due to the relatively low income, high costs, and difficulty in actually selling products, it’s extremely difficult to make a substantial profit with these companies.

There is a lot of disparity between the failure rates of the companies, however. This all comes down to the payment and compensation structure of the individual firm. While some companies, like Usana, have extremely high monthly costs to qualify for commissions, others, like LifeVantage, have much lower costs, leading to a higher potential for profit. Before starting a business selling MLM products, it’s important to look closely at their compensation structure and requirements. While some companies advertise no sign-up fees, there may still be high monthly payments in order to get any commission at all.

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