Multi-level marketing (MLM) is a strategy used by the some direct sales companies to improve their business by encouraging their sales persons to recruit new distributors and paying them a percentage of the recruits’ sales.
Amway is an example of a well-known direct-sales company that uses this kind of business strategy.
This recruited people for sales are referred to as the participants and the new recruits are known as a distributor’s “downline.” There are other terms when defining MLM like pyramid selling, network marketing, etc.
It can be called as direct type of selling in which the sales people need to sell the products directly to consumers by means of talking to them and marketing about the products, they also give their reference to the consumers and encourage them to join as distributors for their Company’s products. All distributors also make money through direct sales of products to customers.
This business strategy seems to be having both its own advantages as well as disadvantages.
The benefits of MLM – Multi-level marketing is mentioned below:
- You can easily introduce the products to your friends and relatives and hope that they will support your business by buying the products and becoming your lifetime customers.
- You can do this business at you free time as it gives flexibility working hours. A few hours of work in a week can earn a significant extra income and may gradually grow to a very large income as the network of people increase. Your earning potential in this business could become limit less.
- The investment Risk is minimal: In this business you don’t have to invest huge amount to start and so people who want to do business and avoid huge loss may adopt this business
- Quality Products: Companies involved in this type of business strategies usually want their customers to buy their products again and again, so they would strive in giving quality products.
- You will not be required to sell the same products every day. There are different products and services which can be promoted through this business and you can choose the products and services which you like to sell.
- The rate of growth in this business can be exponential if you are able to manage you business smartly.
- The chances of earning Continuous income are more by means of the incomes generated by your distributors whom you only introduce.
- The operating cost in this business is less compared to various other businesses; the main investment is your time and effort only.
- You can reach out to a wide number of people in this business and there are no constrains of any regional and language differences as far as this form of marketing business is concerned.
This business also has its own controversies. One reason could be the Pyramid schemes; it is easy to fall under the spell of these misleading pyramid schemes. The promises made for earning huge sums of cash with a minimum effort of work could be the tempting aspects of pyramid schemes. Knowing the difference between these multi-level marketing strategies and the pyramid schemes can help you make the safe decision when considering these kinds of jobs.
Other disadvantages/concerns of MLM – Multi-level marketing are mentioned below.
- Since this business concept is based on the idea of getting paid for someone else’s work also. There are chances of people getting disappointed for the end results achieved.
- If one wishes to join the companies involved in these business strategy, then he/she needs to do know all the details about the company,
- regarding the promises they make about the income generated in this business,
- the type of products that needs to be sold and the guarantees for these products,
- The customer support and the services that they are going to provide for their products etc.
- People involved in this business try to concentrate more on getting large number of distributor’s into this business rather than doing the actual sales. Because of this, the percentage of sales made by them is not much as expected. The same method seems to be followed at the distributor’s level also and so the overall sales percentage may not be as expected.
- This business requires great inter personal and communication skills and not everyone is good in that and so ultimately this may lead to loss in business.
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