What are MLM Business Opportunities?
Multi-level marketing (MLM) is a marketing strategy a bit different from the conventional marketing strategy in a number of ways. Companies using the conventional marketing strategy distribute their products through a chain comprising a wholesaler, a retailer and then finally to the consumer. The distribution and marketing chain can be longer than this depending on the types of products being sold. Companies using the conventional marketing will advertise their products to create awareness so that the customers can pick them up in the retail stores. On the other hand multi-level marketing strategy eliminates the middlemen reducing the distribution chain to just the company manufacturing the products and the end consumer. The Multi level marketers usually send their products directly to their customers otherwise known as distributors. They rely on word of mouth advertising from satisfied customers, hence otherwise known as referral marketing or network marketing. Distributors/customers can refer other people to the company to earn a percentage of the sales value of the customer base in line of sponsorship. This normally results in a residual income as the distributor also earns on the future sales of the group. Depending on the company, this can be several levels deep.
Is this Legal?
Absolutely! Just because it’s different, it does not mean its illegal. There are a few Fortune 500 companies operating in this way. Amway, Herbal Life are the two that comes to mind.
What are the Pro’s of MLM Business Opportunities?
Examples of industries that have adopted the MLM strategy include health and nutrition, beauty and tourism to name a few.
Multi-level marketing strategy is a noble and simple idea and yet so powerful for both the distributor and the company. Companies choosing this marketing strategy save on their distribution and marketing costs significantly. They usually pass this saving onto their distributor chain.
They also enjoy high penetration rates to different regions or countries due to the power of word of mouth advertising and expansiveness of the distributors. For example, you may know of an aunt or uncle living in another country thousands of miles away, who you can recruit as a distributor. They in turn may recruit a few people and very soon, you will have a network in different parts of the world.
Distributors/customers are assured of value for their money whilst at the same time presented with a business opportunity where they can make an honest income by referring people to the company. Mlms will have a starter pack for people wishing to join the business. The starter park comprises a representative sample of the company products, product manuals, order forms and application forms to sign up new distributors. Most starter kits fall in the price range of about $15-$200 depending on the products. Usually, this is the only startup costs and so provides a serious risk free business opportunity.
More to that, they offer flexibility as one can work from home or work part-time. Some people refer to the opportunity as business in a box.
Customers are also given huge discounts on their purchases and rewarded for their loyalty unlike with the high street retailers.
What are the Con’s of MLM Business Opportunities?
However good MLM or Network Marketing seems in theory, when it comes to starting up as a distributor, it’s a different story altogether. Fact is that only about 10% of the people who join MLM achieve success.
This could be attributed to inexperienced people being immersed to the world of sales and marketing with little or no knowledge or experience.
A distributor needs to be able to meet and talk to strangers about the opportunity. Not many people can do this and often times the distributor can come across as pushy. Most MLM companies offer training courses to their distributors but this has done little to sway the damning statistics.
Owing to this MLM has been a subject of critics with some people going as far to label them as pyramid schemes. I do not buy into this thinking but would advise anyone joining a multi level marketing company to make sure they comprehend the compensation plan well before they commit to join so as nothing catches them by surprise.
Another little drawback is that even though you are running a business as though your own; most MLM companies reserve the rights to fire you. They have certain terms and conditions that you need to follow and if you don’t, you may find yourself without a possible income from the effort you have put in. So, read and adhere to the conditions of the company you join to be a distributor with. Usually, the person who referred you as a distributor will also act as your mentor and adviser.
A lot of companies are now embracing MLM strategy including some high street brands owing to the personal touch and the efficiency of word of mouth advertising. Probably better to become a distributor of a well known brand company. Read and understand the Terms and Conditions before joining up and ask all the questions you need to(even if you think its a silly question)the person who offered you the opportunity.
Enough for now. In future posts, I will write about some companies and the interview some distributors that have made a success of their business life.