Multi Level Marketing Basics – The MLM Business Model
April 29, 2009 by Answer Provider
MLM, or Multi Level Marketing, when combined with the Internet, creates a powerful formula for creating a successful home business and achieving financial freedom.
This business model is used by hundreds of companies to move their goods and services to the end consumer. In this article, my goal is to provide you with information on what this industry is and what it is not.
You can only make an informed educated decision as to whether or not this business concept if right for you if you have the required information upon which to make that decision. I hope to provide some of that information in this article.
Multi Level Marketing is simply a business model for moving products and services from production to the consumer using independent distributors with a multi level commission payout plan. Since distributors can recruit other distributors and establish teams that work together, this business model is often also called Network Marketing.
There are many myths about MLM companies, including that they are illegal pyramid schemes or scams. For true Multi Level Marketing companies, nothing could be further from the truth. Unfortunately, those who believe these myths, simply do not understand how MLM companies work.
The first thing that you need to know is that MLM is not illegal and it is not a pyramid scheme. While the organizational structure resembles a pyramid in shape, this is true of almost all businesses. There are far more workers in the lower ranks of any business then at the top, if not, the business would collapse. Not everyone in the company can be CEO or Vice President. If fact, Multi Level Marketing companies are one hundred percent legal and many multi-million dollar companies use this business model to market their products.
Some well known Multi Level Marketing companies include Herbalife, Mary Kay Cosmetics, Shaklee, Amway, Tupperware, Princess house (a subsidiary of Colgate Palmolive), A. L. Williams (Insurance), Melaleuca, U.S. Sprint, MCI, and NSA. Companies such as these have been around for decades.
There are hundreds more MLM companies and just like other companies, some are good and some are not so good. But MLM is certainly here to stay and it is an explosive growth field! In fact, increasingly you will find more and more Fortune 500 companies employing the Network Marketing business model for some portion of their marketing portfolio!
So why are MLM companies and programs becoming so popular? Well, the business model offers a wonderful opportunity for the “little guy” to start his own business on a part time basis with very little investment money upfront, but with a large income potential if she or he is willing to put in some work! Contrary to what some people would want you to believe, MLM is certainly not a get rich quick scheme and requires effort to grow your business.
John Paul Getty is often quoted as having said that he would always prefer earning 1% of a hundred peoples efforts than 100% of his own efforts. And that is precisely what Multi Level Marketing is all about. The Multi Level Marketing sales force members are not actually employees of the company, but instead they are independent distributors who are compensated for their efforts by commission based on the amount of product moved by not only themselves, but also by those whom they recruit as distributors.
As each distributor recruits others to become distributors, they create what is known as a downline and in addition to their own retail sales commissions, they earn a wholesale commission on the amount of products their downline distributors move to consumers. This process goes on for some designated number of levels and is where the term “multi level” originates.
The more people a distributor can recruit for his downline, the larger will be their total commissions. The number of levels that a distributor will earn override commissions on will depend upon the company’s compensation plan but five to seven or more levels is not unusual. These wholesale override commissions can quickly add up for distributors with a large downline.
A strong incentive is thus created not only for a distributor to recruit more distributors for their downline, but also to train them to move products as well. Thus a successful distributor will want to duplicate their success by teaching their downline members how to be successful. By making their downline members successful, they make themselves more successful.
Building large stable residual income is therefore the result of successfully recruiting, training, and retaining others. The better one is at doing these things, the larger their income will become. While it is not necessarily easy, it can be very rewarding.
Want to be your own boss? Millions of people are earning a solid income using this business model working from home. A telephone, basic computer, fax machine, a HUGE ambition, and the knowledge of how to proceed to grow your business are all it really takes! Are you ready to explore the opportunities that Multi Level Marketing offers?
If so, did you know that sponsoring people into your MLM opportunity is completely irrelevant to making money in network marketing? (And no, I’m not talking about retailing your company’s products). Find out how you can get people to PAY YOU to prospect them… rather than you having to pay for your prospects. Click here to learn more at => The Renegade Network Marketer