Have you ever encountered the term MLM or Multi-Level Marketing? If you have not read or heard about it, read this blog to discover more about it and how it works and all the things you really need to know.
What is MLM?
MLM is multi-level marketing, a kind of direct selling that can be done by individuals or representatives who sell products or services of a company to an end consumer.
Now, you must be wondering why we call it multi-level marketing? Here, the multi-level aspect is that every representative’s responsibility is to hire and train other representatives to set up their own business and earn a percentage on their reps’ sales.
Profit made in MLM comes from the commission earned on personal sales and a percentage of the sales made by other reps hired by you.
MLM Terms You Need To Aware OF
The Plan: Most of the MLMs representatives refer to their program as “the plan,” which plans the company’s marketing and compensation (how you will go to earn money).
Sponsor: A sponsor is a representative who directly enlists another person into this business. For instance, MLM member A hires member B into the business. Now Member A has become the sponsor of B and is responsible for training member B.
Recruit: A volunteer may also refer to a team member. It’s a person who brought into the business by a sponsor as a new member. Recruits are usually trained by their sponsor or “upline” (see below) reps.
Downline: Your downline includes the recruits who have brought in below you. It can consist of members you’ve recruited and those your recruits also brought into the business.
Upline: The upline includes all the representative sponsors who came in before you. For instance, if rep A recruited rep B, who recruited rep C, who recruited you, your upline is C, B, and A.
Compensation Plan: It is similar to the plan that outlines all the reps methods through which they earn money. To be legitimate and not a scam, the centre on making money requires it to be on the sales of products and services, not on the recruitment of new members. Along with commissions on sales made by you and your team, many companies reward bonuses and increase commission cuts based on sales volume.
Network Marketing: MLM is often referred to as network marketing as well.
But Some people often doubt that, is it legal or scam?
Is MLM Legal?
Several myths and misconceptions out there about Multi-Level Marketing, regarding its legitimacy. For an MLM to be legal, it requires three things:
1. An authentic product or service.
2. Revenue earned from the sales of products or services
3. The focus is on purchases, not recruitment alone.
A program or plan with no or a low-quality product or a focus on getting paid per recruit could be an unlawful pyramid scheme. It’s not the shape of the organization that makes it illegal. Most companies have a pyramid structure with a CEO at the top, VPs next, mid-level managers, etc. What makes an unlawful pyramid scheme is the lack of a quality product, or that income is earned on hiring, not commissions from sales.
Are MLM Businesses Successful?
People consider MLM businesses bad because they have a huge “failure” rate. However, there is considerable misinformation about these stats. First, the failure rate in the business, in general, is relatively high. Second, it’s easier to walk away from a company where you spent $50 versus one in which you spent $5,000. Finally, because of how MLMs are presented, many people sign up for the quick buck instead of giving attention to whether they like the product or are willing to follow the marketing plan. These issues are not MLM businesses’ fault. Like any business, success or failure depends on the owner/rep.
The fact is, an MLM business is similar to any other business. You can work with an MLM business if you do what it takes to earn money. While most MLM businesses have their marketing strategies, to be successful, you need to use the time tested business-building activities; find your targeted market, pull your market, and sell to your market.
How Word of Mouth expands Multi-Level marketing
Have you ever heard of Word of mouth marketing before? It means recommending people products and services they like and want others to use those products and services. In the same way, if you want people to join you in your MLM business, then Word of mouth is the best option for you.
Earlier people used to do it for free, but now people are busy in their lives, you have to push them to go further and support their favourite products.
Therefore referral programs that are an advanced version of Word of mouth marketing can expand your business to multi-folds.
How to Become Successful in MLM
Progress in MLM needs several things:
1) Get a company that is a member of the Direct Selling Association, which expects members to support a code of ethics.
2) Pick a product or service you like and can get enthused about it sharing with others. A consumable product is often the most reliable bet so you can get regular re-sales to repeat customers.
3) Analyze the company’s history and compensation plan. Learn how the money is made and recommendations for marketing your business.
4) Handle your MLM business like a business. Despite what you might hear, MLM isn’t a wealthy scheme. Like any other business, it needs you to determine your target market, reach out to your market, and make sales. You have a sponsor to help you, but isn’t going to do the job for you. Your achievement in MLM or any business is based on the quality of work you do.
In this blog, we have seen how multi-level marketing works, the misconceptions, and how to succeed in MLM. We learned from this blog how referral marketing helps you expand your business just like any other business.