By Alan Cosens
It is amazing just how many folks do not know what MLM is.
Well, what is MLM?
MLM is an acronym for “Mulitlevel Marketing”.
Here’s two definitions to answer the question “What is MLM?”:
– MLM is a sales program within which the salesperson gets a commission on his or her own personal sales and a smaller commission on the sales from each person he has sponsored to also be a salesperson.
– It is a distribution technique where independent salespeople represent a parent company and earn commissions based on how much product they sell. Generally in an MLM structure the salespeople may also refer or “sponsor” other sales people into representing the parent company and so the “sponsor” then receives a percentage of all product sales volume of this new salesperson.
Multi-level marketing programs appeal to some people due to the potential for making money from “multiple levels” of salespeople enrolled beneath one in the MLM structure. This is why it’s called “Multi-level” marketing. Just that simple.
The variations on commission structures within the MLM industry are enormous however they all have common threads, and that is the fact that earnings are passed up and one can earn from the efforts of others whom he has sponsored into the program. In the course of diagramming out the pay structure for most MLM opportunities one ends up looking at a pyramid-like structure, which is where this phrase “pyramid scheme” comes from. It is based simply on the concept that you would refer, say, 4 new reps to the program and they would refer four, and they would refer four and so on. So you end up with a 1 x 4 x 16 pattern. The idea is that one would earn a percentage of the sales which occur below him in the “pyramid”.
Is MLM A Scam?
In the late 1970s through the late 1980s there were some very large companies who ran into legal trouble due to their compensation plans and the way in which they were administered. The government intervened and placed some regulations on the direct selling industry. Those who were forced to close shop were essentially those companies which did not even offer a product of any kind but were simply playing a money game using an MLM structure to pay out the people at the top of the pyramid based up the sign-up fees of the people joining below them. Some people felt that this was not an honest money game. This could be, and you may have your own opinion, but the fact is that now in the USA MLM companies are required to at least have a product or service to provide in exchange for the monies charged in order to be legal.
The only programs that I am aware of now that move money like this but have no product are commonly called “gifting programs”. As it is not illegal to simply give someone a gift, these programs can operate legally. This makes the idea of mandating a product a relatively moot point, since we are dealing strictly with semantics here.
Currently the MLM industry is growing rapidly. History has shown that this occurs when the economy and job market are doing poorly. As individuals look for ways to supplement their income many of them will come into contact with an MLM opportunity.
What Is MLM Today?
The big thing these days is in internet MLM, usually referred to as internet network marketing. The internet has proven to be much more effective as a communication tool as compared to the telephone, knocking on doors, hanging flyers, print media, group meetings and such things once thought of as typical in the MLM game.
It could be that the entire idea of MLM was contrived not by individual marketers, but by the company itself, who was looking to move more product. For many years there were very few people who made large incomes from doing MLM. It was a very small percentage. In most instances it was a question of a person purchasing the product and finding that they liked it or that the product helped them in some way, and then they developed an interest in the potential to sell the product themselves, or maybe even just to get the product at wholesale cost. This may be one reason why so many nutritional products are sold via an MLM model. These types are products are repeat business products and they are conducive to converting customers into reps.
This author started with MLM 13 years ago, and now offers two comprehensive training courses to educate people new to the industry to honestly build an MLM business. See the original posting of this What is MLM? article and there you will find an amazing free online DVD course to not only teach you all about What is MLM, but to show you step by step exactly how to build a profitable MLM business.