Have you ever been invited by someone for a coffee or a catch up or a free business seminar? Then he suddenly introduces a product or a business to you which model is too good to be true?
If you have not, for sure, you have seen social media posts from relatives and friends discussing about business opportunities by selling various products and inviting people to join them as they grow the business.
We call this a multi-level marketing (MLM) which is often referred to as network marketing, referral marketing and sometimes pyramid marketing.
MLM involves a pyramid structured network of people who sell the company’s products. It can be done in a variety of ways, such as presentations, online stores, catalogs, etc. Income is earned through commission on sales, the sales made by other members of the team and recruitment. To simplify, participants in this model are non-salaried and get paid whenever people below them make a sale. The tendency is people will invite their friends, relatives and acquaintances, and the cycle continues.
In 2018, 69 percent of MLM companies were from the United States followed by China at 9.3% and Japan at 5.2 percent. The top three companies are Amway, Avon and Herbalife.
How to Recognize an MLM Business?
You will know that the business is an MLM with these characteristics.
MLM does not require a well-defined channel of distribution. The independent distributor sells directly to the end consumer. Products are not available in the market. Independent distributors are, most of the time, non-employed individuals. MLM is commission-based. There are no fixed salaries for the independent distributors.
In an MLM, hierarchy exists. Your recruits and their recruits are called downlines. You will make profits from their sales. Since MLM is more about direct selling, there is less to no need for advertisement which means that selling will be highly dependent on your personal contacts. You have to sell and recruit more in order to be successful.
Why Is MLM Controversial?
Recruitment in MLM is difficult because there is a high startup cost and stock-piling requirements. The business practice of getting percentage from the downlines is also questionable.
The Federal Trade Commission (FTC) reported that 99 percent of MLM participants lose money. Only one percent benefit from the MLM system and these are the people who are at the top of the structure.
95 percent quit within ten years. 30 percent of the MLM companies have ten years longevity. Also, half of the participants quit after a year.
What Makes MLM Popular?
They say, it’s easy money. Your downline will make you earn with you doing not much. MLM is also prudently designed with attractive rewards.
Do Independent Distributors Benefit from MLM?
Aside from the commissions, participants are also entitled to discounts and other special offers. This type of model can allow you to work from home and manage your own schedule.
How Can You Succeed in MLM?
There are three strategies on how you can take advantage of the MLM—effective lead generation, recruitment of new salespeople and training and motivating new recruits to grow their own downlines.
Lead generation and recruitment for MLM may be difficult, especially if you do not have much experience in selling. There are tools to get leads which you may turn into a consumer and eventually an individual distributor under your team.
Blogging is considered by many as a powerful passive lead generation strategy. You can write something about your products or its nature, success MLM stories, tips on how to win the business, etc. The disadvantage of blogging is that it will take so much of your time and you have to make it reputable so the search engines will rank your blog posts. Do not forget to write down your contact information. You may also indicate that you have plenty of articles available for free download.
YouTube, Facebook and other social media videos are more attractive compared to blogs because most people love watching videos. Try to create a high quality video designed around the benefits of your company’s products. You may also give out samples to vlog personalities. In exchange, they should come up with a video which they will also release on their channels. Request people to like, share or subscribe.
If you think you have acquired enough knowledge in the field, you may also write an eBook.
Other lead generation strategies are leaving blog comments, podcasting, article marketing, website creation, events, LinkedIn searches, home parties, creating a course on MLM, email blasts to your list and attractive referral program.
You can keep your downlines or teams motivated by giving them incentives, including them in planning, providing trainings like weekly training calls, encouraging self-promotion, recognizing their efforts and having not just work but personal connections.
Multi-Level Marketing Lies
Be cautious of these ten MLM lies:
- Lie no. 1: People said that MLM is a profitable business compared to the traditional ones. This can be true for those people at the top of the scheme who joined in the beginning, but painful for those who just started and do not have downlines yet.
- Lie no. 2: Independent distributors own the business. This can be partly true since distributor can get a certain percentage from what their downlines are earning. A number of recruits will also make an income. But these do not mean that they will be able to claim company’s shares, dividends and profits. Thus, they do not own the business.
- Lie no. 3: They also say that anybody can succeed in the multi-level marketing. It is not anybody. It will require various skills such as communication and leadership. You will devote time explaining the products to consumers and guiding your team towards your goal. You have to be strategic.
- Lie no. 4: MLM companies make people believe that MLM is the best channel in selling products and services. Is it? There are online marketplaces, local and foreign distributors, value-added resellers and many more.
- Lie no. 5: MLM is the best way to reach out to your customer. Only few products are being offered in an MLM. This means that not all the consumer needs and wants are catered. When you are starting, you may be required by the MLM company to list down the people you know and get in touch with them. You may be able to encourage some to join, but surely, some will also estrange you.
- Lie no. 6: MLM point and reward systems are attractive. They merely talk about success stories and exaggeration of the revenue flows but never did they mention failed businesses especially of the new distributors.
- Lie no. 7: MLM promotes healthy relationships. Good relationships may not last when targets are not met and promised enrollments did not push through.
- Lie no. 8: MLM is legal. Not all MLMs are legal. It is important to ask for business registration, tax compliance and other regulations.
- Line no. 9: MLM is a spiritual movement. Some people claim that MLM is promoting a spiritual movement, but sometimes, they just tell this to deceive their prospects.
- Line no. 10: MLM products are superior. Again, some are just overstated claims.
Everyone loves large incomes and incomes on the side. But is MLM worth it? Is it good for you? It totally depends. If you are willing to do what needs to be done in order for it to work, this can be an opportunity for you. Just make sure you do research on the company you are planning to join — business plan, culture, vision, profits etc., and look out for scams.
Do not expect to make a lot of money at first. Some people may alienate you. Some companies are not comfortable seeing MLM background in an applicant’s resume. Accept that this will eat up your time and will be difficult during the initial stage.
Is There a Better Way of Making Money Than Multi-Level Marketing?
There are better ways of making money than MLM. In MLM, if you aren’t at the top, you’re making money for the people above you.
Why don’t be your own boss, without any people above you? You must work very hard to be successful in MLM business. Why not use the same energy to create an honest business online, which you own and you don’t have to work for any uplines?
If you learn how to make money with affiliate marketing, you don’t need to own your own product to make money, but you can make honest money recommending good products to others.
You can do it online. There’s no need to nag your family members or friends to become your downline or to buy something from you.
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Hello! What I found to be a real life experience from your post is that sometime we are said that “anyone can make a lot of money”. This obviously sounds too good to be true. Only people who are on the high side of money, who are able to invest in something are able to get something in return.
The ones who have started this whole thing at the beginning are the ones who are making the money not the ones that are at the beginner level. Maybe, people will come to see that Wealthy Affiliate is one of those platforms that truly want to help people.
Sid
Hello Sid,
You’re right, in MLM people at the top make a lot of money. But from Wealthy Affiliate anybody can learn how to make money online from affiliate marketing, where you don’t have any uplines and don’t need to build any downlines.
Thank you for the comment.
Thank you for this detailed article explaining what multi-level marketing is. I thought I knew what it was but when I read your article it helped me clarify even further. There is actually a really funny CollegeHumor video where someone pretends to be in a network marketing company and tries to sell the products to her friends. On the other hand I’ve had one friend who did fairly well in a company called Primerica.
Now I am trying affiliate marketing with wealthy affiliate. It seems more of my thing, to do stuff online and make a website, instead of the phone calls. I think you made a good article and I understand multi-level marketing even better now. Thanks! And I hope when people look up multi-level marketing they find your article to explain it to them.
Thank you for the comment and for sharing your experience with MLM.
Hello
I agree with you that Wealthy Affiliate is the most reliable way to earn a passive income. The list with the ten MLM lies is an eye-opener. Sure there are scams and we have to be careful but WA is a sincere community and the successful experience of many is a testimony. Thank you for the informative and enlightening post.
Hello,
Thank you for the comment.
Before plunging into affiliate marketing, I used to think mlm was a pyramid scheme but even when I finally learnt about how it works, I didn’t like it. There are so many false claims by the company’s. And you have listed all of them. One cannot make good income from it. You are under the company and both the upliners and downliners are both subject to the company. I have an aunt who ventured into mlm and lost a lot of her friends. That’s not good business.
Thank you for sharing your opinion and experience with MLM.
I totally agree with your post, I was once recruited on an MLM business. I did join but quit later on because I have to either continuously sell or recruit. Which is of course not my expertise. I did find out about Wealthy affiliate few years back and it has been my foundation on affiliate marketing. My domains are bought and hosted by WA but I have since diversify as I grew my online business because I have to use funnels and other tools that WA don’t have. But yes, Wealthy affiliate is the best platform to start. Am still a paying member because I love the WA community and so far have not any issues with my domains on WA.
Thank you for sharing your experience about MLM and WA with us.