MLM is a difficult concept to understand as it’s really two businesses running parallel with each other, the first is the actual product (by law there has to be a product in a bid to stamp out the old concept of worthless pyramid schemes) that recruits are required to sell, the second is persuading others to sell the products and being rewarded for it by earning a commission on their sales (your down line).
MLM (multi-level marketing) is a term used to describe how product developers compensate individuals who recruit other individuals to promote sales on particular products. The recruiter is compensated on a certain percentage if the person recruited makes sales; in addition, there is also a percentage commission extended to the recruiter regarding product sold by recruited members. The chain is endless as the new recruits endeavor to recruit more sales people so that they can also take part in the compensation plan. Although this marketing strategy is still exercised in various companies, in others, it has been received negatively leading to claims of total scam.
MLM explained in this content will feature both negative and positive critics in relation to success and failures of the strategy. There have been claims that under multi-level marketing, where companies practice infinity level recruitment, that is they keep on recruiting over and over, recruited people aren’t able to tell what they would earn as the chain can be quite long. New recruits can sometimes be brought in on false pretence that they would be compensated in terms of sales and every member they bring in.
Note that multi-level marketing or MLM is practiced to aide in the movement of products from the manufacturers to the consumer at less marketing intricate procedures. Other MLM scams involve exaggerated incomes. As the process is based on bringing a new member and hence getting compensated on sales made by that member as well as compensation for bringing in the new member, income has been exaggerated a lot, for instance, there is no telling whether the new recruit will make any sales, therefore, those who sign up on the connotation that they would receive increased or better incomes, should be careful before they do so.
Does MLM work?
Due to increased negative reviews on MLM, FTC has taken the initiative to investigate multi-level marketing at greater lengths leaving few companies running legit MLM business, and the compensation procedure is also admirable.
I am a member of SFI – a free to join MLM network, and so far, yes it’s working and I haven’t invested any money in it at all. It is a 14 year old company with a great reputation. There are some good companies out there, but never invest until you have done some thorough research!
How does MLM compare with Pyramid schemes?
Pyramid schemes can be defined as companies that need a minimum purchase so that they can remain as active as possible. These companies also tend to receive commissions during recruitment.
Is pyramid selling a scam?
Consider a job offer that entitles you to pay a certain amount in order to get employed, pyramid schemes have been flagged as illegal since, unlike MLM, their structure is doomed to collapse and anyone who may have invested in that company would lose his or her investment.
How does MLM work?
Multi-level marketing is all about sales representatives. It can start with one, two or even three sales representatives, who train hard to better their product selling skills. After that, each sales representative can recruit one or two or even three new members to help move the same product to more consumers. The initial sales representative starts by training the new recruits on how they can move those products or services effectively to the consumer. Later on, whatever sales made by those recruits, a percentage commission is given to the initial recruit including an added compensation on behalf of each recruit brought in. Your new sales person can also recruit other sales people to aide in the movement, train them and get compensated. The chain continues downwards as product movement to customers gets better.
A guide to MLM can help you understand how to spot a scam as well as finding a reputable company on the same ground. MLM explained on the grounds of scam is not hard to come-by on internet’s search engines. MLM can also be called network marketing, although it is a procedure that has been received quite well, others have had their own say on the same practice. While most marketers are becoming interested in MLM others are voting it out as a complete scam.
One thing about network marketing is that, it is cheap. Unlike pyramid schemes where business operators grow rich by taking money from recruited distributors even without making any sales, the sales people trained in MLM or network marketing can really make money out of this practice. In order to understand MLM, there are two major roles that an MLM marketer is involved with, one of them is distribution. An MLM operator purchases a particular product from the parent company (these days the product is usually a download of some kind), then later sells them to friends, colleagues, family members or any other interested person. The other common role of this marketing agent is to recruit other distributors to aide in the same product movement to the final consumer.
Any sales made by recruits have profits, in those profits; the recruiter will take in some percentage. This is why this form of sales and marketing (multi-level marketing), has been accounted as legal if operated correctly. In order to spot a scam in MLM, you need to be able to know what it is and when it could be a scam. Before you take part in any form of MLM, you need to sit down and do some intensive research, when MLM companies or schemes that use creative terms such as “get rich quick”, it is necessary to be extra vigilant on such terms. For instance, there could be an online network marketing company, which may not have been listed as a member on direct selling association websites. If this is the case, you need to think twice before you make your move.
There are ways of differentiating a legitimate MLM scheme from a scam, for example, when a scheme or company is highly regulated, distributors will be forbidden from making large claims on the product sales, as they would be concerned about the stability and future of the company. You can take time to go through company’s regulations and see whether the government has been included. If it is, you can be certain that the MLM is really taking seriously your participation in the distribution. An MLM scam would care less about you; they also don’t regulate claims giving the distributor and recruiter an opportunity to make any wild claim!
More informative articles on Network Marketing and MLM business opportunities can be found at http://managedruntimeinitiative.com/