Updated: Aug 31, 2020
Perhaps many of you reading this article have an experience or have heard about multi-level marketing (MLM), a.k.a network marketing. Maybe you have been recently approached or recruited by a friend and now you're investigating on how to grow your business; or maybe you are a student researching for your essay. Well, I'm glad you have taken time to click this post.
My personal experience with MLM assisted me to synthesize these good and bad truths about MLM; and I hope these can help you make informed decision regarding on how to grow your network marketing business. In this article, you will also learn why so many people have negative attitude towards network marketing.
The basic goal of MLM, just like any other sales company, is to profit from selling or distributing products or services. Most MLM companies that I know focus on offering health or beauty products targeting the baby boomers and the millenials. These two groups comprise the largest generations in our society and both are more likely inclined to keep a healthy lifestyle and to have longevity. In addition, people, especially women have the natural instinct of wanting to look and feel good. Cosmetics; perfumes; weight reduction products in the form of coffee, chocolate shakes, creams, or pills; healthy cookwares; and alkaline water machines are just some of the most hot products in the market right now.
MLM aims to reduce the cost of human resources by hiring distributors instead of permanent sales staff. Regular recruitment of trustworthy, diligent, and effective distributors is needed for business survival. New blood becomes the life blood of all network marketing businesses.
The strategy also eliminates the need for retail stores, reducing leasing expenses of the company. Distributors usually buy products from the main or satellite office whenever they have new orders. Oftentimes, distributors purchase the products ahead of time and stock them in their homes. MLM is also highly capable of expanding overseas primarily because product promotion can be done online. This is one of the main reasons why international MLM has been mushrooming around the world at a high rate.
Distributors enjoy the flexible work schedule. They can share product information and compensation plan even during casual conversation with people they know. This is a great opportunity for those looking for side hustles. Online marketing has also given way for stay-at-home moms (SAHM) to invest in an MLM business. Moms who want to contribute to the family's finance, but cannot do so because they have to take care of the kids, can earn extra income by selling network marketing products even within the comfort of their home.
Distributors earn commission proportionate to their sales. If you work harder, you get larger income. I have known people who made MLM their full-time job because they have made much more than their regular office work. Others have even become millionaires (I've met several who attended the same school where I went in college and they are younger than me)-- after years of hard work of course.
Distributors also earn incentives when they introduce new distributors who are expected to replicate the work by selling products or services. This is the recruitment process involved in all MLM. The up-line usually earns commission from his down-lines' sales and recruits. Hence, collective incentives increase a distributor's profitability.
It may be easier to find connection since MLM works with the word-of-mouth. A distributor can easily approach a personal contact. Good interpersonal relationship must be maintained between the up-line and the down-line. The up-line must be consistent in guiding and supporting his down-line. You'll be able to motivate your down-lines to work harder if they feel you are working together in achieving the same goal towards financial freedom. If you are serious about the business, do not abandon a recruit after you have received your commission. It will cause the person ill-feelings towards you and the system as well. Engage him/her in regular meetings, training, and mentoring sessions so s/he can build the necessary direct selling skills and attitude.
Like any pursuit in life, MLM use dream-building psychology, to encourage their distributors to work harder. Building a nice comfy home, travelling to different countries, driving a luxury car, having a lot of money, securing our children's future, spending more quality time with our loved ones, being able to give financial help to our parents or siblings, and retiring early-- these are our dreams. Believe it or not, there are people working in a network marketing business who have achieved all of these. But of course, years of persistence; hard work; and trustworthiness cannot be overemphasized as contributors to such success.
Success in MLM is regardless of one's educational background, social status, or work experiences. I've seen MLM success stories of young and old; undergraduates and graduate professionals; heterosexuals and homosexuals; and rich and poor. It is their passion and determination that brought them to their pedestal of success.
Development programs in the form regular training and mentoring sessions are provided. These programs generally enhance selling and recruitment skills; develop people skills; and make connections or relationship stronger among the distributors, thereby fostering self-efficacy. Oftentimes, the top performing distributors share their experiences, including frustrations and success stories, to motivate the rest.
Purchasing the product or services is a must before an individual can become a distributor; and that is even if you don't need it. It is also undeniable that most MLM products are more expensive compared to similar items sold in retail stores.
I think the most common frustration among network marketing distributors is the fact that not all distributors are good recruiters. Although one can earn by direct selling, the largest commission comes from recruiting another person. I have experienced approaching some friends and promoting the products and the company, but in most cases they only purchased a few items without signing up. I felt like they only did it because we're friends. Many of the people I've met also claimed that they stopped working as a distributor because they couldn't get anybody to join. MLM success has a persuasion component, and not all are just good at that.
Another downfall in any MLM business is that there is no fixed remuneration one can expect. This is especially true when the market has already been saturated and you couldn't get any person you know to buy what you're selling. Furthermore, when your customers didn't get the product/ service satisfaction they expected, you will not be able to get them to repurchase.
The business can easily lose distributors. Members can quit even without formal or advance notice because they are freelancers. Managing turnover among freelancers maybe more difficult than managing turnover among salaried employees because of MLM's work nature's tenure. Moreover, companies cannot force their distributors to reach target sales volume or fire them when they cannot even make a single sale for a certain period.
The MLM business model can easily be abused by fraudulent companies who don't have products or services to sell. Even if they do have something to offer to the people, the quality is often poor. Rants by dissatisfied customers have caused consumers to just buy from retail stores. The mass population then eventually develops negative mindset against MLM.
Ponzi schemes can easily penetrate and sabotage network marketing. In the early phase of a fraudulent transaction, the early investors are paid off with the later investors' money. They are then lured to make bigger risks to get larger payouts. Once a huge amount of money is already collected, that is the time when the poor investors get swindled. Numerous uninformed investors have already been victimized by fly-by-night business enterprises because they have inadequate knowledge on how legitimate network marketing businesses work. Remember, fraudulent distributors often do not emphasize the value of hard work and trustworthiness to become successful in MLM.
Distributors, even from legitimate companies, are tempted to depict the system as a get-rich-quick scheme. They do this to boost up their sales and number of recruits. When the company is unable to control this unethical practice, they suffer the consequences. Company credibility is lost, sales plummet, and recruitment efforts become ineffective.
Distributors have the tendency to just focus on recruiting to gain more incentives-- abandoning and not mentoring or supporting his/her previous recruits. Lack of peer support can result to disrupted relationship among friends who became distributors.
Differentiating between a legitimate MLM business and an illegal pyramiding scheme has become confusing. The general population is now skeptical even if legitimate MLM companies offer real and high rewards.
In conclusion, the MLM or network marketing business is inherently legitimate based on its business model. It aims to profit from the distribution of products or services. Distributors gain incentives based on their effort to sell and recruit new distributors. Recruitment, usually through casual word-of-mouth, is necessary since MLM does not necessarily need physical retail stores and they rely on freelancers to keep the business thriving. Like any other business, MLM intends to manage their overhead expenses while remaining profitable; hence they established the system.
However, no matter how good its business model's intention is, it still remains vulnerable to unethical companies who take advantage of the system and recruit uninformed individuals who have strong desire to gain income and independence. This leads to fraudulent transactions and claims such as in the form of get-rich-quick and Ponzi schemes. People are then victimized, swindled.
With these in mind, I hope you will be able to distinguish what makes a network marketing business legitimate or scam. Also try to weigh if MLM's business model suits your needs and goals of achieving financial freedom.
You may also want to read my article on 'What Owning a Business Could Do To Your Life'.
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