Multilevel Marketing: The Good and The Bad

The concept of mlm, (multi-level marketing) though not documented, is said to have originated in the early 1940’s from an American vitamin company – Nurtralite. The company back then had started realizing more profit from its distributors’ efforts of making sales by referring their associates and friends to the business and its products. With this progression, the management decided to award a slight bonus of 2 percent to distributors for sales made and for customers willing to join the company as sponsored distributors. Eventually, this system of marketing aligned into a structure and transformed into what modern day multilevel marketing is.

What is multi-level marketing?

 Many people have various definitions to the meaning , but with any definition there has to be the general concept of direct sale to people and building networks of distributors.

Typically, distributors working for mlm companies carry out the role of sales people, but unlike traditional ways, the recruitment of a new distributor and product sales is what is quantified as sales. Ironically, the sales people who are distributors are also buyers of the company’s products. Thus the company’s sales are comprised of enrolled distributors and products bought by its initial distributors. As a rule, the initial distributors have to buy and use the company products.

In multilevel marketing, a distributor is expected to build a network of new distributors so as to leverage on their active role to sell and recruit. Hence from purchases and recruitment, a distributor gets to earn commissions and rebates depending on size of distributor network as well as number of products sold. In this case, distributors who manage to form a ‘chain’ network become upstream distributors and get to earn commissions and rebates from recruited customers who are newly signing up. 

Should I try multilevel marketing?

Mlm companies are now reaching out to countries around the world in a bid to promote multilevel marketing. And truth be told, their pitches are very enticing. People learning about mlm for the first time get overwhelmed with excitement and get out of mlm introductory meetings with a buzz of questions. 

At the end of the day it all goes down to a personal decision. The pros and cons have to be evaluated, one has to pick out the good points and understand the pitfalls that may be a deterrent to good income.

Here are the good points and pitfalls that involve multi-level marketing:

The Advantages  

Training on sale distributorship, how to pitch, as well as managing and building relationships is all taught freely by companies. Training and product information resources such as books and multimedia content are also freely available thus making the activities of sale and recruitment easier to implement.

There is no barrier in joining the company as a new distributor. Meaning, there is no need to invest financially in the business since all that is required is to put in time and effort which can eventually translate to millions in earnings. This factor in the mlm scheme has made a very attractive and lucrative activity available for anyone to pursue.

Anybody can join as long as they are sane and not minors. All other factors such as qualifications or salesmanship experience are not required. In this respect, students, pensioners or disabled people who are dependants are able to make money and become financially independent.

The Disadvantages

Reliance on other network marketers to earn more income in terms of commissions and rebates. Giving it a numeric explanation, a distributor or sponsor distributor could be earning 10% profit off a sale of product. Lower down the chain he or she is supposed to earn 1% from members of the network. That means, he or she can only get an equal percentage of income if network members work ten times harder. Most members cannot keep up while some of them even resign from the business.

Most mlm companies encourage the concept of recruitment as opposed to sale of products. Eventually this translates to unfair advantage on the upstream distributor who gets paid for work done by members under him or her. 

How to pick a good MLM

If certain of your decision to sign up for network marketing, it is best to make sure that your choice of firm has the following factors in place:

1. It is a member of the Direct Selling Association and is bound to comply with its rules and regulations. 
2. It is aligned to your passion, interests and what you deeply care about.
3. And lastly, it is well established and not a start-up company. Most start-ups are prone to failure within the first five years, hence to be on the safe side, sign up with established companies.