Understanding MLM And How It Differs From Pyramid Schemes And Traditional Marketing
Multi-Level Marketing (MLM) programs have been popular for decades now, but the internet helped to take them to another level. Unfortunately, the world of MLM is full of scams and pyramid schemes, but there are some genuine affiliate programs out there and plenty of people are able to earn a living off them. MLM companies grow their sales force by motivating independent distributors to sell.
A multi-level marketer’s income is comprised of commission from their own sales and a percentage of the commission from the sales generated by those in their downline — everyone that signed up to the MLM program thru the marketer’s referral link. The products sold via MLM can be services, digital products or physical products.
MLM itself is a completely legal business strategy, but some rogue companies turn a legitimate venture into a pyramid scheme. In a pyramid scheme, members usually have to pay a fee to become a member. A percentage of that joining fee will be paid back to them when they sign up new members into the scheme. With a pyramid structure, there are no products involved — people are basically just spending money for the opportunity to make more money continuing the scam.
There are some very clear differences between legitimate MLM schemes and pyramid scams. In a pyramid scheme, to generate an income, someone further down in the scheme has to lose money — a win-win scenario is not possible. In contrast, with an MLM program, revenue comes from the sale of products, so win-win situations are possible for marketers and their downlines.
Multi-Level Marketing differs from traditional marketing where the supply chain is typically much longer. The traditional distribution of goods involves a manufacturer, distributor, wholesales, retailer and consumer. Meanwhile, MLM companies shorten that supply chain by selling directly to consumers.
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The sales techniques used by MLM companies also differ from those used by traditional companies. Traditional companies will typically advertise their products and services using media outlets, whereas MLM companies use aggressive sales agents and recruitment drives to increase sales.
There are lots of negative stereotypes associated with the MLM industry and sometimes it can be hard to get friends and family onboard. However, there are some very lucrative opportunities in the industry and many people love the flexible working hours and the uncapped earning potential. It’s important to keep in mind that there is a lot of competition in the industry and less than 1% of people make profits large enough to support themselves and their families. Financial freedom is possible, but you need to have realistic expectations.
There are thousands of MLM companies registered around the world, so you will never be short of companies to work with. However, before beginning your venture into MLM, it’s important to research different companies thoroughly. It’s also a good idea to choose a company that distributes products or services that you are generally passionate about as you will have an easier time to generate sales and growing a sales team.