Posts Tagged ‘MLM’

E-Commerce – Multi Level Marketing/Direct Marketing making an impact!

Multi-level marketing (MLM) , network marketing, direct marketing, direct selling, affiliate marketing and network selling pretty much sum up the same business model.  This business model was perfected by Amway (Quixtar) over a few decades and is model referenced by the Federal Trade Commission as model all MLM companies should follow. This is not to say that Amway did not have problems perfecting its system over the years because they did. 

MLM businesses offer the opportunity for people to own their own business (for a small start up fee of usually several hundred dollars or less) by selling products or services and/or referring other sales people into the business.  A commission is paid on the sale of the product or service and usually a referral fee is paid for introducing new members into the business. The referral of other sales people into the business is known as building a downline . Downlines allow the original referrer to earn commissions on all activities of the people they referred and the business they have developed.  The growth of theses independent businesses is generally formed through the network of clients and sales people they have each cultivated similar to a franchised business owner that pays the  franchiser and the area or regional manager. These independent members of the organization are usually referred to as distributors (associates, brokers, independent agents, dealers, agents, etc.).  In many cases a new member must pay for training or a portion of the sign-up fee goes towards their continued training on product features, services and sales techniques.  This fee is often given to the referrer (sponsor) since it is their responsibility to help the people in their downline prosper through mentoring and training. Remember, the referrer benefits from the people below them doing well. 

Many companies do require a certain amount of inventory be purchased per month. In many cases the members are buying the products themselves. A good MLM will have a buy back option in the event the inventory cannot be sold.  Some companies have products in which the member does not have to inventory……ask for theses details and be sure they are clear and explicit. 

Many business professionals and “self help” gurus recommend this type of business for the average person since they do not require a large start up expense and training is provided by the company through meetings, conference calls, literature, training videos and so on. Also, the person above has the responsibility to help you. Here you will see President Bill Clinton’s endorsement for MLM businesses.

httpv://www.youtube.com/watch?v=X_eGbfTPbGY 

Another endorsement for MLM business opportunities is from Robert Kiyosaki, best selling author (Rich Dad Poor Dad series) and successful entrepreneur.

httpv://www.youtube.com/watch?v=Sz1SLOkIg0Q

Please note that this video is provided for informational purposes only and the author is not affiliated with the people and or organization which posted it.

Also, a great article recently published in USA Today discusses the business opportunity that MLMs provide for people in this tough economic landscape

Pyramid schemes  try to disguise themselves as legitimate MLM businesses. Often times these pyramid schemes or Ponzi schemes require an up front “entry fee” and do not offer any tangible product or service; only a promise of being paid their “entrance fee” plus a large return at some point later in time. 

The monetary payout of each company varies. Below you will find a summary of what you can find on Wikipedia

Binary plans: Allows members to have only two direct referrals. If a member sponsors more than two referrals, the additional referrals are placed below the sponsoring member and the sponsoring member begins to financially benefit from the activities of the people below him/her . The primary limitation is that members must “balance” their two downline legs to receive compensation. Balancing legs requires that a set percentage of sales MUST come from the weaker side. Each company sets the minimum percentage. 

Stairstep Breakaway plans: This plan involves having members who are responsible for both personal and group sales. Volume is created by referring and selling product. Compensation may be paid to group leaders and a group leader can be any representative with one or more downline recruits. Once predefined personal and/or group goals are achieved, a representative moves up a compensation bracket. This continues until the representative’s sales volume reaches the top compensation bracket and “breaks away” from their upline.  The original upline usually continues to be compensated through overrides.

Unilevel plans: Uni-Level plans are simple in structure and pay commissions primarily based on the number of levels a referral is from the original member who is purchasing the product.  A minimum volume of sales is required to earn commissions on a limited number of downline members.

Matrix plans: Similar to Uni-Level plans.  The exception is limited number of members who can be placed on the top bracket. Once the first level is filled, new members are placed in other further downline positions. When all brackets in a member’s downline are filled, a new group (matrix) can be started.

In the past MLMs have relied upon the person to person relationships that it’s members developed.  Today most companies are taking advantage of the Internet and social media outlets.  Many MLM companies are now paperless and completely reliant upon online sales/orders.  Each member is usually given their own site in which they can promote and refer people to.  The site usually has a product/service listing and description as well as overviews and related company information as referral tools.  This has really increased the potential for any MLM business. Knowing how to drive traffic to your site is the challenge but that is another article!

There are many options out there. Choose carefully, be aware of all of the details and be sure you either have a relationship with your referrer/sponsor and if you don’t be sure to develop one. Your success depends on each other.

Note: The author is a Broker in a MLM based business. Blog info www.ecommerce-earningings.com/wordpress

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