A company can promote their product or services by
Multi Level Marketing (MLM) using MLM as a marketing tool other than traditional marketing. In traditional marketing style more commission distribution at different stage is directly impose on to the end user of product/services. In the case of
MLM as a marketing tool company directly distribute the commission to the distributor only using a compensation plan. What some people don’t realize that a compensation plan in MLM companies is that there has to be a balance in MLM between company profit and
Network Marketing Compensation pay plans. There also has to be a fair share for the new person starting out and a fair share of MLM compensation for the recruiter and a fair share for the top end manager. MLM Compensation should be simple in presentation but engineering behind the designing of compensation plan is not so simple. Too many companies start out by copying another company’s plan in their search for MLM compensation. What they don’t know is the top leaders of that company have already left.... the marketing director for the company has been told to hit the road and the CEO is about to be fired. All of a sudden people look at that MLM compensation pay plan they worked so hard on and they are dead in the water.
Company with the promise of easy money by compensating them from the investments of additional participants rather than from legitimate product sales, these programs have been called "
Ponzi schemes”, "
pyramids", "
airplane plans", "
chain letters" and many other names. It can be in multiple ways, including the use of anti-pyramid, mail fraud, business opportunity, franchise, lottery, and securities laws.
Joining Fee - An Investment of Money:
The fact that an application fee must be paid lends itself to an argument that "an investment" is required to become a Distributor. Indeed, if the fee is excessive, it will be classified as "an investment." However, if the application fee is low and only covers the company's cost of producing sales and training literature and materials necessary for a person to become a distributor, a company may avoid having its application fee categorized as an investment. For this reason, and to avoid the purview of many business opportunity and anti-pyramiding statutes, to the extent companies require distributors to purchase starter kits, they should sell them to new distributors at the company's cost. It is also helpful in avoiding classification as an investment for companies to refund application fees to Distributors who elect to terminate their relationship with the company. With such a policy in place, payment of the fee presents minimal risk of loss to a Distributor, and therefore mitigates the potential that it will be deemed an investment. Consequently, multilevel marketing companies should ensure that their Policies and Procedures provide that application fees will be refunded if a Distributor terminates his agreement with the Company within a finite time (e.g., 30 days, 6 months, or 1 year). Companies are further urged to sell their enrollment kits at cost to keep the initial charge as low as possible.
What is Multi Level?
Georgia's- United States, statute provides a typical definition of a multilevel marketing company:
"Multilevel distribution company" means any person, firm, corporation, or other business entity which sells, distributes, or supplies for a valuable consideration goods or services through independent agents, contractors, or distributors at different levels wherein such participants may recruit other participants and wherein commissions, cross-commissions, bonuses, refunds, discounts, dividends, or other considerations in the program are or may be paid as a result of the sale of such goods or services or the recruitment, actions, or performances of additional participants
What is MLM Pyramid Scheme?
Whether a program is a legitimate multilevel marketing plan or an illegal pyramid depends principally on:
(1) the method by which the products or services are sold; and
(2) the manner in which participants are compensated.
Essentially, if a marketing plan compensates participants for
sales by their ""enrollees," "recruits," and/or their downline enrollees and recruits, that plan is multilevel. If a program compensates participants, directly or indirectly, merely for the introduction or enrollment of other participants into the program, it is a pyramid.
North Carolina defines a "pyramid" as:
Any program utilizing a pyramid or chain process by which a participant gives a valuable consideration for the opportunity to receive compensation or things of value in return for inducing other persons to become participants in the program.
The laws of Texas, United States contain a similar definition for "
endless chain" schemes.
"
Endless chain" means any scheme for the disposal or distribution of property whereby a participant pays a valuable consideration for the chance to receive compensation for introducing one or more additional persons into participation in the scheme or for the chance to receive compensation when a person introduced by the participant introduces a new participant.
Myths about MLM:
When a business model or trend is as popular as
MLM, Multi-Level Marketing, there tend to be a lot of rumors, myths and misinformation. Much of this may be simply because MLM is misunderstood. However, some of it may be deliberate. Some marketers may have a scarcity mentality and want to keep all of the potential profits for themselves. People fall for the same old myths about how these programs work. And these end up costing them hundreds or thousands of dollars a year in wasted time and effort. Acquaint yourself with these for myths, and protect yourself from the online hype and misconceptions.
Myth #1: MLM is a Scam.
Fact: There are scammers in every single business model. So some MLM opportunities might be scams. However, the majority of MLM opportunities are exactly what they appear to be. They’re real opportunities to get involved with great companies and make good money. If you don’t want to be scammed (and who does?) then do your research. Find out what a particular company is about, how long they’ve been in business and talk to real people who work for the company.
Myth #2: MLM Can Be Instantly Profitable in 20-30 Days or Less.
The most unfortunate and damaging myth about online home business is that the income can come quickly.
It *may* be possible for a "big dog" with an established network of partners, to create a residual income of $1000 in one month. But this will never happen for the average person building from scratch.
Consider this:
The average internet MLM pays $2 to $7 per person in an organization. To earn $2000 - $7000 per month, you need 1000 people in your organization.
Fact: This is very possible to achieve. But it takes time. You can make good money with MLM and you can make it quickly. That being said, it is not a get rich quick scheme. It takes work, planning and dedication.
Myth #3: "It’s A Ground Floor Opportunity - You Must Join Today"
When someone says: "Ground Floor Opportunity - Join Today" what are they really saying?
Is it:
(1) "People who join after me have less chance of making money than I do"? OR
(2) "The company will be useless in two years time"?
Would you want to take a year or two to build a good residual income, only to have that income disappear? And what would happen to the suckers who join in six or seven month time?
Fact: A good business opportunity should actually improve with time and exposure. It’ll be based on products (or services) - and delivering more in the product value than the dollar amount people are paying for it. (Yes it is possible to find such companies on the internet. I know a few).
Myth #4: Buying Leads is the Best Way to Profit.
Fact: Buying MLM leads is generally a fast way to lose money. You may find a few recruits that work out this way. However, you’re generally better off building a good reputation and attracting leads to you.
Myth #5: Make a Ton of Sales and You Make a Ton of Cash.
The way MLM (truly) works best is if a large number of people each help each other to make a small numbers of sales. Let me show you what I mean: In an offline business we were in, a guy joined who was an awesome direct mail marketer. Soon he put together a masterly direct mail campaign to promote this opportunity. He invested a lot of money then unleashed his packages. In five weeks he had several hundred people in his downline, and was earning several thousand dollars per month. But within two years he had dropped out of that company.
Why is this?
It’s because almost none of the people he brought in were able to do what he was able to. So he wasn’t able to help them grow their businesses. (He possibly didn’t have time to help 500 newbies). And since the monthly purchase requirement was $130 in this particular company they soon started dropping out.
The point you really ought to understand is this:
Fact: The key to substantial and consistent profits with MLM lies with your recruits and the team you build. The more skilled and motivated people you recruit, the more money you make. "In MLM, you don’t make much money from making sales - You make much money from building an organization!"
Myth #6: Some People Are Natural MLM Superstars.
Fact: You’ll find that the people who succeed, in the long term (meaning they don’t burn out in a few months), are those that have the patience and the fortitude to perfect their systems. We’re talking about recruiting and training. It doesn’t take a “superstar” to accomplish that. Anyone can do it if they have the motivation.
Myth #7: MLM Training Teaches You All You Need to Succeed.
Truth be told, many MLM companies don’t provide enough tools or training. To succeed you’ll want to continue to learn and educate yourself. MLM is a lifelong education
Myth #8: You Need to Recruit Friends and Family
Fact: In most cases it’s a huge mistake to recruit friends and family. The only time this ever works out is if your friends and family are already genuinely interested in MLM as a career path. If they’re not, then they’re not going to be motivated to recruit and sell. You’re better off focusing your efforts on recruiting motivated people.
Myth #9: You Build From the Top Downwards
Many people feel that you "come in at the top", then bring people in "under you". They reflect this in their attitude to the job. If you’re smart, you’ll know better. You build from the bottom. At the start, there’s no one else in your business. You just have a dream, and help from your company and upline. You find three bricks and place them in your foundation. Then you physically support them from below. Yes, they’re a bit heavy at first, but you do the job - you continue to support them.
One morning you wake up and there are nine bricks in your structure. From the three you started with.
You’re supporting the nine brick structure now, and because you do, it continues to grow. Eventually, when you look up, you find that you have a solid building, based on "below support".
Can you see it?
The bottom "bricks" are people you recruit and assist to take their first steps as marketers of your opportunity. When they help other people, your organization expands. The point is that the engine that drives lasting MLM growth is people helping other people, in small numbers, and everybody doing their share. At the beginning your job is to sponsor a small number of people and support them, and encourage them to make sales... encourage them to encourage other people in the same way. Once you build a small group of people and the helping culture takes hold, you’ll start to develop a rapidly growing organization... that grows rapidly and wildly with a momentum you couldn’t stop, even if you tried to.
There you have it. Some most perpetuated myths about MLM marketing. If you’re interested in pursuing an MLM career it can be a very rewarding way to make good money. Find a company you love, build your team (aka “downline”), and lead them to success and profits.
In summary, the emphasis of any multilevel program must be on product sales rather than the enrollment of new distributors. To exist in the 90s and beyond, companies and distributors must make a paradigm shift from business based primarily upon recruitment of downline distributors and internal consumption. Distributors should be taught that their primary function is to gather customers. Their second priority is to build a downline and to teach it about the first priority.
