MLM – What It Is, What It Isn’t

MLM – What It Is, What It Isn’t

Ever hear someone talk about their “latest and greatest” MLM project? What is “MLM”? Multi-level marketing is a term used to describe a particular sales model that pervades home-based businesses that are sponsored by large corporations. The premise is to not only invest in a company to sell their product line, but to “recruit” other people to invest in the company as well and get them selling, too. There are two major reasons why this type of business is fast becoming a behemoth in the retail sector.

Corporations can move products from their warehouses, and thus increase their sales volume. By enlisting the help of “distributors”, companies can reduce overhead and get products to the end user faster, with a leaner sales chain. Products don’t sit on store shelves, returns are usually substantially lower, allowing the corporation to run in a “leaner” state. The original premise was to shift buying power of the consumers and share products and services with others. Distributors were rewarded with incentives to do that. It created a loyal product-using customer base.

With “an army” of commission-only sales people, the company doesn’t pay out until you make a sale. Make no mistake about it! The bottom line remains the same – you make money from commissions allowed from the sale of products. Regardless of the product line, or distribution methods, you get paid on what you, and your sales team (also called a downline) actually sell (minus returns).

Generally speaking, very few people believe they have any “real” sales experience, and thus, if offered the opportunity to take a job as a commission-only sales person, they’d run from it like the devil. In reality, all of us are in sales, in one form or another. Whether we’re trying to convince our significant other about dinner plans for the evening, or something more obviously sales related, we’re all selling people at some point most every day of our lives.

At the same time, most commission-only sales positions are “direct selling” opportunities. And, most people think the definition of direct selling begins with a door-to-door sales person. Think again.

Don’t get me wrong, many personal fortunes have been amassed by commission-only sales people! For sure, mail order is almost always involved in commission selling, and direct selling. But some people are “duped” into joining multi-level marketing programs without understanding that it is commission sales and, in most cases a form of door-to-door selling. But times are changing, and now you’re not always “door-to-door” with your potential customer/recruit. Let’s be clear. All companies have a pyramid-type income structure. Microsoft has a few people at the top making a TON of money, and a heap of employees at the bottom of the pay scale. That’s the nature of business. But a pyramid type income structure is not the same as a Pyramid/Ponzi scheme. Sadly, many legitimate MLM/Direct Sales type businesses have been slapped with this unfortunate label because some companies subtly encourage you to break the law, and run the risk of huge monetary fines, long terms in prison, or both!

A Ponzi Scheme (named for the man responsible for the first one) is any kind of money-making opportunity SOLELY where you get paid by recruiting, enlisting or soliciting other people to follow your lead and continue a chain of events. In other words, you’ll be paid a commission for each person you recruit, and each person they recruit, and so on into infinity. If you find yourself in a situation like this – RUN!

Now if your MLM company pay plan has a recruiting ELEMENT to it, that’s not the same thing. This is desirable. Think about it – wouldn’t you want a sales bonus for each sales person you bring into the company? You’re getting paid a performance bonus when YOUR TEAM is selling and hitting performance goals. This is no different than many major Fortune 500 companies that offer incentives to sales teams – except you’re not working for the Fortune 500′s, you’re working for yourself.

To make any money selling a product or service on a commission-only basis, you have to have a viable product to sell. The business opportunity is NOT the product. There are a plethora of direct sales product lines out there, and you can sell anything from soup to nuts, but you need a product that meets several marketability guidelines. If the product’s not marketable (there aren’t a lot of Direct Sales companies selling air!), you’ll be hard pressed to be successful. Anyone who has ever attempted to succeed in commission sales, knows that it takes a product in great demand – a great deal of persistence – at least a little bit of failure to make any money at it. There’s nothing wrong with commission selling – and if you’re good at it, the potential exists to make a lot of money.

Keep a clear head. Ask lots of questions, and don’t get dollar signs in your eyes when reviewing a business opportunity. MLM businesses can be extremely lucrative if the product mix, brand recognition and quality are top notch. If you have questions about the legality of the business, check with your local postmaster as well as an attorney. The time spent is well worth the cost, compared to the start up fees for most businesses.

Lisa Young researches marketing trends and tactics for the home party plan industry, particularly internet-based marketing strategies. Lisa has over 10 years in the Direct Sales field both as an independent consultant and trainer. Her FREE business boosting newsletter, “PartyOn!” is filled with tips, tricks and tactics for increasing booking and recruit leads. You can sign up or learn more at http://www.homepartysolution.com .