Is Multi Level Marketing Right For You?
Multi-level marketing or MLM is a type of marketing venture that is full of pros and cons. Various negative assumptions have sprung up for this type of business.
Some consider MLM as an illegal form of marketing and only benefits members who are at the top level.
However, some people think that MLM is legal and very profitable. What is MLM and how does it actually work?
Definition of Multi-Level Marketing
Have you ever been suddenly contacted by an old friend and asked to do some business? Generally, the business that he describes is not like a business in general. He said, you can reap many benefits if you invite others to join this business. Perhaps you are being invited to run a multi-level marketing or MLM business. (investopedia.com)
MLM is a strategy used by some direct sales companies. Under this strategy, the company encourages existing distributors to recruit new distributors.
Later, distributors will earn profits based on their sales percentage and the sales of the distributors they recruit.
New people recruited by distributors are called downlines. The more downlines recruited by the distributor, the greater the profit for the distributor.
Usually companies that implement multi-level marketing do not have a physical store.
So, if you want to buy their products or services, you have to contact the company's distributors.
In the practice of multi-level marketing, a company can have hundreds to thousands of distributors spread throughout the world.
However, not all distributors managed to achieve the promised profit. This often makes people hesitate to run an MLM business.
Types of Multi Level Marketing
The following are three types of MLM based on the main source of revenue.
MLM selling products
In this MLM practice, the sale of the product is the main source of income.
Either by producing their own products or asking for help from a third party, then the MLM label is attached.
Some examples of products sold are aimed at generating repeat purchases, such as vitamins, supplements, and beauty products.
MLM that sells membership
The practice of this multi-level marketing business is what people often call a pyramid scheme.
This multi-level marketing only focuses on recruiting new people into it by putting aside the sale of products or services.
This MLM practice offers a large commission for its associates based on each new person joining.
Multi Level Marketing business that sells services
This practice is almost the same as MLM selling products.
The difference is that a distributor will sell membership for the services of the MLM company.
Even so, if there is a membership renewal, the commissions that distributors get are relatively small.
So that requires distributors to continue to add new clients.
How Multi Level Marketing Work?
Someone who participates in multi-level marketing is usually recruited by a distributor who is already in the business.
Usually, distributors or companies hold a particular event. During the event, you will be asked to enjoy the company's products.
If you are interested, you will be invited to attend a meeting which contains an explanation of the product, business, scheme, and MLM process. Companies will then try to convince you to join their business.
If you agree, you will be asked to sign a contract and purchase inventory.
Inventory that is meant by each company can be different. However, most companies will ask you to buy some of their products.
The purchase is considered as your initial fee to join.
After that, you can start doing MLM by doing the same thing as what the distributors who recruited you did.
Is MLM Illegal?
Many people think multi-level marketing or MLM is an illegal strategy, because it uses pyramid schemes.
In this scheme, someone will promise you a variety of interesting things that you will get if you join their business.
They will tell you that their MLM business can change your life.
In fact, later on most of your income depends on how many people you manage to recruit, not how many products you sell.
This scheme is implemented to continuously recruit new distributors. Then, the distributor's money will flow to the business.
So is multi level marketing illegal? The answer is, no.
Multi-level marketing can be said to be legal if more distributor profits are obtained from the sale of the product.
However, if the profit is more focused on recruiting new distributors, the business is more accurately called a pyramid scheme.
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