Multilevel marketing, also known as network marketing, is a strategy for selling products and services. This marketing strategy grows its revenue from unsalaried workers who sell the company’s product or services.
The earnings of these workforces come from a pyramid-shaped commission system. The MLM company encourages its distributors to recruit more distributors by paying them a certain percentage of their recruits’ sales. The recruits are known as the distributors downline. The distributors also make sales from direct sales of the company’s products to consumers.
Is multi-level marketing (MLM) and network marketing legal?
MLM and Network marketing attract extreme views, making it a difficult topic to comprehend and discuss. Although it is controversial, MLM and network marketing is a legal business strategy when executed well and under the right regulations. Still, one of the most significant problems of MLM and network marketing companies is being intentionally complicated and unclear on important details. This makes it quite tricky to tell whether the business is based on selling an actual product (which is legal) or bringing in more people for you to succeed (illegal).
How does MLM and network marketing work?
MLMs are legitimate businesses that are based on providing consumers with real, legal products that they can use to solve a need at a fair price. They use un-hired consultants, distributors or contractors to make money for them by selling their products to another multilevel marketing participant.
Although there are people who make a lot of money through MLM, this financial benefit is usually the result of their hard work. They earn money from their sales and also get a percentage of the income generated by the distributors they have brought into the program (their recruits). They also get bonuses for hitting the target when selling a particular product, or from signing a certain number of new members. The earnings may be in terms of cash, trips and even cars.
When running in the hands of active, honest salespeople, and with appropriately run products, MLM and network marketing can produce some very successful companies. Some great examples of these companies include Mary Kay Cosmetics, Amway, Longaberger Baskets, and Pampered Chef.
While MLM is based on selling to and sponsoring people in your circle, today, distributors are using more sophisticated marketing techniques like the internet, conference calling among other long-distance sponsoring methods that help them extend their network across borders. MLM businesses appeal to people who need a flexible schedule such as women with young students and students. Distributors can go into an MLM business with as little capital as $100, and still feel like they are doing their own business.
How to succeed as an MLM and network marketing distributor
You need to believe in your ability and the product you are offering to succeed. When starting out as a distributor, everyone wants to be successful. However, very few are prepared to put themselves out and do everything they need to do to be successful. Just like any other business venture reaching high success an MLM and network marketing distributor requires a lot of selling and a little bit there. Very few people get into MLM make a decent living. The secret to achieving success as a network marketing distributor is your willingness to focus, dedicate and prepare.
Factors to consider when getting into MLM and network marketing
Although MLM and network marketing is legal, there are groups of people out there looking to scam unsuspecting citizens. Hence, you need to take the time to find out as much about the company and study its track record before committing. Search online using the company name and words like scam, complaint, and review to find out other people’s experience with the company. Look through newspapers, magazines and search engines for articles about the company. During your search, you want to find out;
- How long it has been in business
- What people think about their products
- If the company has been sued for deceptive business practices
- Whether it has a positive reputation for customer satisfaction
Finally, never pay or sign any contract during an “opportunity meeting.” You need to take your time to think everything through as well as conduct due diligence. This is an investment that requires real money. Therefore, do not rush into it before doing thorough research.