How does Multi-level Marketing work?

What does MLM mean?

Multi-level Marketing is a business model or marketing strategy in which the income of the distributor is determined through the sales he makes and by the sales that his ‘downline’ make. Their customers can also sign up as the distributor if they wish to. The signup process is simple and it includes no extra charges other than the price of the product that is used to purchase. With this, they form a chain for e.g. every distributor joins 2 people and then that 2 people will further join 2 people each and form their own downlines. In this way, it becomes a chain.

 

What makes MLM different from Traditional Marketing?

In traditional marketing, the supply chain is longer than multi-level marketing. It includes a whole hierarchy of people who are involved in the process.

The supply chain is as follows:

Manufactures – Distributor – Wholesaler – Retailer and finally the Consumer. It is a long chain of marketing processes.

Whereas, when we talk about Multi-Level Marketing, the supply chain is shorter.

The supply chain of MLM:

Manufacturer – Distributor and the Consumer.  This short-chain makes it reach the consumers easily and within a short duration.

This is the basic difference between Traditional Marketing and Multi-Level Marketing.

Moving on, we will discuss whether MLM is a pyramid scheme or not?

 

Is MLM a pyramid scheme?

In a pyramid structure, the member gives a fee to join and half of it will be remitted back when the new member joins. It does not involve products. You are just required to bring in more people for the profit which is never a profitable situation.

Whereas in MLM, the sale of the products can generate true revenue for the company. It will be beneficial for you and your downlines as well.

 

Advertising and Marketing – What is the difference?

Advertising is mostly done for Traditional companies through media outlets. Whereas, in MLM marketing is done through the distributors and the recruitment drives. No other form of advertising is used in MLM. So, the cost of advertising is saved. Like, traditional marketing where a huge amount of money is given only to advertising, this is not the case with the MLM. There is merely zero investment in advertising.

 

Conclusion

MLM is simply more cost-efficient and is easier to run. It is true that most people won’t make it through the profit and jackpot in one go and some will not make it. According to the reports, around 99% of people don’t make it in MLM. Also, it is seen that MLM brings you in the bad books of your friends and relatives. This is a stereotype being followed and there is no concrete consequence for this.

Having said this, MLM is not a bad option to invest in. You will enjoy flexible working hours and you can be your own boss.  Plus, you will get a chance to generate a healthy revenue system. Also, if you put in the right efforts, you can make it big.

You need to know about the company you are investing in and should have thorough research on the products and the company. So that you don’t fall into any trouble.

With this, we come to the end of this blog on How does MLM works.

Check out our other blogs on Network Marketing.

 

 

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