MULTI LEVEL MARKETING

                   MULTI LEVEL BUSINESS 

                            MLM SUCCESS 

     1 THE MULTILEVEL MARKETING CONCEPT

What is Multi-Level Marketing?

     MULTI-LEVEL MARKETING, or MLM, is a marketing strategy which

creates a down line of distributors and a hierarchy of multiple 

levels of compensation. The sales force is compensated not only 

for their own sales but also for the sales of the people they help 

recruit. Firms, having a large product base, often cannot employ 

equivalent sales force; and believe they would be better off 

without the traditional approach. Hence, they implement MLM to 

survive competition from multi-nationals.

MLM is also known as Network Marketing because it utilizes 

a network of individual customers to hit other potential 

customers. In other words, every individual customer serves as 

a sales repre-sentative.

Multi-Level Marketing Vs. Pyramid Marketing

People often confuse MLM with pyramid marketing; however 

there is very clear distinction between the two approaches: 

pyramid marketing is about getting your money and then using 

you to recruit other distributors; MLM, on the other hand, is 

about moving the product through a larger network of 

distributors so that the business can increase sales volume.

Another difference between MLM and pyramid marketing is 

that Pyramid marketing requires each level to DOUBLE before a 

new level is created so it isn't fair to people lower down in the 

levels and also unethical. MLM, however, awards a commission 

based upon the volume of product sold through own sales 

efforts as well as that of the down line organization.

Since MLM faces the risks of initiating a business that has 

not been tested by the customers is not recognized, people 

prefer to wait a coupe of years before joining. Hence, they also

witness the compa-ny’s track-record and reliability.

STRUCTURE OF MULTI-LEVEL Marketing

Multi-level Marketing follows a significantly different structure 

than Pyramid marketing: the network is divided into parts 

comprising of different number of people. Some parts of the 

network may comprise of lesser people because the initiator 

might not have been able to sign-up more people; however, 

other parts may have flourished due to a hard-working marketing 

genius have good resources. Hence, MLM turns out to be a

fairer approach to income generation.

GROWTH WITHIN MULTI-LEVEL Marketing Firms

An MLM opportunity, having a wide-spread network, brings 

greater growth prospects as members become eager to introduce 

more people. Furthermore, those present higher up in the network 

are encouraged to share their experiences with those subordinating

them. This is because improvements in the performance of new 

entrants and subordinates will result in higher profits for the seniors.

HENCE, great income-earning opportunities can be availed out of Multi-

level Marketing firms. The only key is to select one with a successful 

product or service; such that you would prefer for yourself.

 

  2 UNDERSTANDING THE MLM SITUATION AND 

OPPORTUNITIES

Multi-level Marketing is in fact a Distribution Revolution. The 

evolution of multi-level marketing has fostered a business 

paradigm shift that has changed remarkably

the traditional ways through which a product was marketed and 

distributed to the end users. Multi-level marketing has eliminated 

the need of requiring additional warehouses, wholesalers, and 

retailers and advertising budgets making it as one of the lowest 

cost marketing methods. Hence this new mode of marketing has 

freed up a lot of money that was previously being eaten up by 

huge advertising budgets and these funds can now be utilized 

by developing better and innovative products.

SCOPE OF MULTI-LEVEL Marketing

The multi-level marketing technique incorporates multiple levels of 

marketing spreading to masses of potential customers and this is what 

actually all companies desire that is to reach to maximum number of 

prospects. Especially with the advent of internet market-ing, the scope 

of MLM or Network Marketing has reached the apex. Companies in 

various industries like the health care products, beauty

and skin care lines, cosmetics, and various others cannot actually 

survive in the long run without actually implementing Multi-level 

marketing strategies especially amid the course of their business.

Highlighting the scope of Multi-Level Marketing, Michael L. 

Sheffield, the CEO of Sheffield Research Network, a Direct selling 

and MLM consulting firm, in his Direct Sales Journal, issue of Feb / 

Mar 1999, wrote an article titled "Comp Plan Conversion: Direct 

Sales to MLM Compensation Plans" in which he maintained that 

MLM has introduced a paradigm shift in the traditional direct selling 

business and with the internet revolution the success of MLM 

companies has raised many folds. He further cited the statement 

produced by Neil Offen, president of the Direct Selling Association 

that MLM had gone from 25 percent of Direct Selling Association 

membership in 1990 to 77.3 percent in 1999.

MULTI-LEVEL MARKETING OPPORTUNITIES

Multi-level Marketing is a career of uncountable opportunities 

and growth prospects in the economy. Today multi-level marketing 

is not only viewed as one of the most cost effective and efficient 

sources of marketing and distributing your products and enhance 

your sales, profits and business leads but also it is considered to be 

a source of employment generation in the economy. 

As more and more people are moving towards e-marketing and e-selling, MLM is 

creating a buddle of employment opportunities and is considered to 

be a source of residual income for a number of people around the 

world including students, unemployed, and the women especially 

the house wives. 

Not only has this, MLM offers a variety of benefits 

to the companies to achieve maximum profits.

3    UNDERSTANDING THE MLM MODEL

As we have discussed earlier that MLM marketing is also

referred to as Network Marketing and as the name implies it 

has multiple number of people (and/ or networks)

marketing a product to the consumers. In very simple words 

under multiple-level marketing a company employees a sales 

representative (sometimes referred to as a distributor, an affiliate 

or an associate) who performs the following basic tasks,

Firstly getting customers and generating sales.

Secondly generating, recruiting and training other people 

as sales reps to get customers or generate sales.

Let’s discuss in detail how the Multi-Level marketing model 

works?

MULTI-LEVEL MARKETING MODEL

The following four step model wil demonstrate how a multi-

level marketing model works:

• 

• STEP I: Sales Representatives gets the customers

Initially the MLM Company appoints a sales representative and / 

or distributor whose primary motive is to sell the product or service 

to the prospective customers.

 The initial number of customers he 

has to get varies with the company’s plan and commission structure. 

But it is usually better to get as many customers as the 

person can retain effectively and can make repeat sales to them.

 

Also if your company’s payment structure is more rewarding 

towards training people to get more customers than as a MLM 

marketer you should limit your efforts towards getting a few 

customers first at this stage and than focus on next stage that is 

getting them trained to promote sales.

 This strategy is well appropriate for companies who pay you to “duplicate your self”.

• STEP II: Train and recruit a person as a sales representative:

After generating a few customers and making sales to them as 

done by normal direct marketing or direct sales, a multi-level 

marketer next job is to train a person to act as sales representative 

and to convince him to bring more prospects and generate more sales for the company. 

This person would be called your downline. 

Here your role is of a recruiter rather than a retailer or distributor.

• STEP III: You teach the rep to train and recruit another person as sales rep:

Once your sales rep get enough number of customers at will 

and generates sufficient sales, it is time for you to train them to get a sales re.

 Your job as a leader has now multiple 

dimensions such as gener-ating further sales, training people to 

become sales rep and training the sales rep to train future people as sales rep. 

The focus of your efforts will again depends 

on your commission plan, you as a marketer would off course 

concentrate your efforts where you can get higher commissions.

• STEP IV: Repeat the above steps to generate a chain:

Once you recruit and train your sales rep to train further 

people and generate more customers, now you can recruit 

another sales rep and follow the same procedure making a 

network of distributors within you downline.

 This is the reason why it is called multi-level or network marketing and hence 

companies through MLM tactics cannot only generate reliable 

customers but also can get its products and/ or services to 

masses of people with minimal costs and in a rela-tively shorter 

period of time as compared to the tradition marketing methods.

The above procedure well explains the MLM model but is it 

always that easier to get as it appears? Or how is it possible for 

a company to promote MLM marketing? A well-designed 

compensa-tion plan is the only answer to the above questions. 

In our next chapter we will discuss guidelines to develop an 

effective compensa-tion plan.

4 TIPS TO DEVELOP APPROPRIATE
COMPENSATION PLAN

As we have discussed earlier that Multi Level Marketing is simply 

a business model for moving products and services from 

production to the consumer using a network of inde-

pendent distributors with a multi level commission payout plan. 

Since distributors can recruit other distributors and establish 

teams that work together, the pay out plan is a bit complex too. 

In any MLM company the basic key to drive the MLM marketing 

force in the required direction to produce the best results is the 

compensation plan. 

Commission plans or compensation plans 

are how MLM companies reward a distributor’s production that 

drives the distribu-tion channel to maximize profits.

BASIC COMPENSATION STRATEGY

It is essential to highlight that every company is different and 

each has different commission plans, some of which appear 

complex or complicated too.

 However the underlying compensation strategy has the following basic components.

Retail Commission: As the name implies retail commission

is the commission allocated to motivate the marketer to 

generate sales. It is the commission that a marketer will be 

paid on the number of sales he makes to his customers. 

Sponsor Commission:

 The next component of an MLM compensation plan is the commission that is paid to a 

marketer for the sales generated by its downline hence it 

requires the marketer to focus on persuading and generating other sales rep for sales promotion.

 Companies who want to expand their marketing and distribution efforts 

usually pay better commissions to motivate their marketer 

to bring more sales reps to the company.

 Training Commission: Few companies also pay their marketers to 

train the sales reps down the line. 

These marketers basically act as leaders and have adequate experience, 

knowledge and skills to train the new staff.

                In addition to the above components it is also important to 

mention that MLM is all about leveraged income that is a sales 

repre-sentative not only earn commissions on his own sales but 

he also earns commission on the sales generated by the people 

he has intro-duced, trained and recruit as sales rep.

 Also it is imperative for marketers to beware of the tactics some times 

unethically used by a few MLM companies by developing 

complex compensation plans.

 In the up coming chapters we will 

discuss MLM scams and frauds and means to avoid them.

Although Multi-Level Marketing business has very sound

opportunities and prospects of growth and success, however 

statics reveals that most of the people who enter

this endeavor face though hurdle. 

A study reveals that almost 

eighty-five percent of the MLM companies fail within the first 

eighteen months. 

Hence for a person it is essentially vital to start 

this business prudently.

 Listed below are some guidelines to follow:

STEP I: INVESTIGATE THE COMPANY

It is critical for the success of a marketer to join a company 

that is sound and is viable to enter as a Multi-level marketer. 

Here are few points to consider:

• Start with a well experienced company:

In order to enter into Multi-level marketing, it is usually wise to start 

with a well experienced company that has been in the business at least 

for three years or more.

 The reason behind is the company itself has 

surpassed the initial survival phase and now must be in the growth 

stage increasing your chances of success as a marketer.

• Opt for a Public Limited Company:

Well known and well established public limited companies are not 

only safer to enter but also you have high and easy access to the 

information regarding the company’s background, its people and its 

business and financial strength. It is also recommended to compare 

the salary or commission with the average sales of the company that 

will indicate you whether it is a good place to start with.

• Select a member of a business bureau:

It is always ideal to join a company that is a member of a 

business bureau or registered with the Direct Selling Association.

 This will not only ensures the company’s reliability 

but also you can make your complains to these organizations 

regarding any misconduct by the company.

• Investigate company’s track record:

Essentially important is to look at the company, see how it does 

business. Is it on ethical grounds? Check out its track record. Find 

out whether it has a stable track record and identify whether the 

compa-ny’s values match up with yours. It is essentially important 

for long term presence in the Multi-level marketing industry.

Along with identifying a sound company it is also highly impor-tant 

to know about the product you have to market. Remember your 

success as a Multi-level marketer ultimately depends on the sales of 

the product you are offering. Here are few questions to investigate:

• Is the product marketable?

As a marketer it is important to pick up a product that is highly 

marketable and has sound qualities and features through which you 

can promote sales. Also in order to sell products you need to know 

their features. Sometimes it is essentially important to research and 

have sufficient knowledge in order to market your self. For example 

if you are selling some computer software you should have sound 

knowledge of the technology. Hence before picking up a company 

a marketer must evaluate these issues.

• Do you your self like the product?

If you like the product your self, it will be easier for you to market it 

and hence you can also convince others to become sales represen

tative. Remember multi-level marketing is more of word of mouth 

marketing, when you like it your self you feel more confident as you 

know the product is good and you are no making fake promises.

    • Is it reasonably priced?

Naïve marketers often ignore the importance of price which 

is one of the reasons of their failure in the field. It is essentially 

impor-tant to ensure that your product is well priced and either it 

has got excessive qualities or is comparatively cheaper to other 

brands avail-able in the market, otherwise it will be next to 

impossible for a marketer to generate enough.sales. 

Also some 

companies do offer discounts on certain number of sales, you 

must identify the discounts associated to improve your profits.

   • Is the product consumable?

In order to generate more commission, try to select consumable 

products, as it raises the chances of repeat sales. In addition to that 

if your customer likes the product than you can retain him for long 

term and hence finally can convince him to act as a sale rep, which 

will ultimately increase our future earnings.

• Is there a demand of the product?

Never select products that are obsolete, or are excessively 

avail-able at retail outlets. If your products do not have enough 

demand you would be wasting your time and efforts for nothing.

STEP III: INVESTIGATE THE COMPENSATION PLAN:

The next crucial step is to well understand the compensation 

plan. As most of the times a multilevel marketer is providing dual 

service; one as a seller and the other as a recruiter, hence his 

commis-sion and compensation depends on both. This is why it 

is important to well understand the company’s compensation 

policies before hand. Here are a few tips:

• Is your compensation based on sales or recruits?

Remember that it is an illegal practice to pay commission on 

the number of recruits. So you must identify the compensation 

plan. This will help you focus your efforts.

• Identify the hidden costs:

Some companies do require paying some initial money or 

membership fee to get your self registered as a marketer or sales rep 

on companies’ behalf. Identify whether you will generate enough 

commissions to cover your initial money paid. Also if the investment is 

relatively high be careful as some fraudulent companies do ask for 

paying huge some initially. Always refrain from joining them.

         • Do you have to achieve any targets?

You must find your targets for example how many members 

do you have to recruit. Some companies require that you sign up 

a certain amount of people in a given period of time before you 

will receive payment. Not only that few companies require you to 

cross target level of sales first before paying you. This may 

cause problems for new and naïve marketers.

In addition to above there are also few other important points 

that guarantees your success as a multi- level marketer. These are:

        • Training the sales person:

Some companies do provide training to their sales rep and 

MLM marketers about the product features and company’s 

profile. Also good companies do train their staff to improve their 

marketing skills. It is better to select such company especially if 

you are new in the multi-level marketing industry.

       • Active involvement:

Some companies also offer a discussion forum where you 

can interact with the other members. It is good for you as during 

the course of your work a few questions may arise that you need 

answers to and you want to get suggestions from other people in 

the same company who can help you resolve your queries and 

can give you the correct answers you need.

      • Take recommendation from the current member:

Always get in touch with someone who is already a member 

of the MLM. Ask them their recommendations about the 

company and their views regarding the way the MLM system 

works in the company.

• Beware of Scams:

There are number of fake companies and fake claims. 

Beware of them.

 In the upcoming chapters we will discuss in 

detail about MLM scams, which will help you to protect your self 

from entering fake companies.

In a nut shell a good company comprises of people who are 

committed to products that actually help make people’s lives better, 

which see their distributors as their assets and have promising 

compensation plans that pay well in return of efforts, that train their 

people and are always there to help their people. 

Hence if you follow 

the above important steps, you will be able to select a good MLM 

company that will guarantee your success as a multi-level marketer..................

All syllabus purchase this book

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