What is MLM?
Multilevel Marketing, or MLM, is a system for selling goods or services
through a network of distributors. Multilevel marketing plans, also
known as "network" or "matrix" marketing, are a way of selling goods
or services through distributors. Various hierarchical systems of downline
sales commissions, motivated by the hope for exponential feedback. Recruitment
of sellers is more emphasized than sales. Developed in the late 1930's,
influenced by pyramid sales schemes and money chain letters.
The actual Multilevel Marketing program works through recruitment. You
are invited to become a distributor, sometimes through another distributor
of the Multilevel Marketing company's products and sometimes through
a generally advertised meeting. Multilevel marketing plans usually promise
to pay commissions through two or more levels of recruits, known as
your "downline."
The idea behind MLM is simple. If you choose to become a distributor
with the Multilevel Marketing company, you'll earn money both through
the sales of the MLM's products and through recruiting other distributors,
by receiving a portion of the income these distributors generate.
Multi-level marketing is system
of marketing which puts more emphasis upon the recruiting of distributors
than on the selling of products. MLM is very attractive, however, because
it sells hope and appears to be outside the mainstream of business as
usual. It promises wealth and independence to all. While direct selling
can be a rewarding and enjoyable experience for the budding entrepreneur,
it is also a great deal of work, especially if your objective is to
sell products rather than "opportunities".
It promises wealth and
independence to all. Unfortunately, no matter what the product, MLM
is doomed to produce more failures than successes. The most successful
MLM scheme is Amway.
It has millions of distributors worldwide with sales in the billions.
The reason why MLM marketing cannot succeed because, it has legal pyramid
scheme. A
pyramid scheme is a fraudulent system of making money which requires
an endless stream of recruits for success. Recruits (a) give money to
recruiters and (b) enlist fresh recruits to give them money.
This scheme is called a pyramid scheme because of the shape of a pyramid:
a three dimensional triangle. If a pyramid were started by a human being
at the top with just 10 people beneath him, and 100 beneath them, and
1000 beneath them, etc., the pyramid would involve everyone on earth
in just ten layers of people with one man on top. The basic idea is
for a sales person to recruit more sales persons. This is very advantageous
to those who own the company and supply the products, especially since
the sales persons in MLMs are also customers.
Benefits of Multi Level Marketing:
Like all forms of direct selling, it brings
significant substantive benefits to the marketplace. It affords opportunities
to countless individuals who might be ignored or under-utilized in the
employment market. It is a fairly simple and inexpensive way for individuals
to learn basic business and management skills. It offers practically
any individual a flexible means to supplement one's income.
Additionally, it allows businesses with unique or innovative products
or services to bring them to the market without the enormous expense
of mass media advertising, and without having to compete for shelf space
in retail stores. It is a popular method of retail distribution that
has a vibrant presence in virtually every region of the world.
FTC suggests seven points to consider before making a decision
in Multi Level Marketing :
- Avoid any plan that includes commissions
for recruiting additional distributors. It may be an illegal pyramid.
- Beware of plans that ask new distributors
to purchase expensive inventory. These plans can collapse quickly
-- and also may be thinly-disguised pyramids.
- Be cautious of plans that claim you
will make money through continued growth of your "downline" -- the commissions on sales made by new distributors
you recruit -- rather than through sales of products you make yourself.
- Beware of plans that claim to sell
miracle products or promise enormous earnings. Just because a promoter
of a plan makes a claim doesn't mean it's true! Ask the promoter
of the plan to substantiate claims with hard evidence.
- Beware of shills -- "decoy" references
paid by a plan's promoter to describe their fictional success in
earning money through the plan.
- Don't pay or sign any contracts in
an "opportunity meeting" or any other high-pressure situation. Insist
on taking your time to think over a decision to join. Talk it over
with your spouse, a knowledgeable friend, an accountant or lawyer.
- Do your homework! Check with your
local Better Business Bureau and state Attorney General about any
plan you're considering especially when the claims about the product
or your potential earnings seem too good to be true.
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