What is the real MLM business

What is the real MLM business? MLM Multilevel Network Marketing Questions and Answers 1. What is multi-level marketing? 2. Is MLM a scam, legal, moral, ethical, etc? 3. Is recruiting wrong versus just selling product? 4. How do pyramids differ from legitimate MLM? 5. Are MLM and Network Marketing the same? 6. How can you succeed in MLM? 7. How can you identify a good MLM? 8. Can you really "Earn $50,000 in 90 days?" 9. Can you recruit or advertise products on the Net?10. What about compensation plans? (matrix, etc.) 11. What MLMs operate in what countries? What is multi-level marketing?Multi-level marketing, also known as MLM or Network Marketing, is an alternative channel for a manufacturer to deliver its products to market. (Other channels include retail storefronts, catalog shopping, and door-to-door sales.) Depending on the particular company, the MLM channel may provide both word-of-mouth advertising and distribution. Why would a company choose the MLM route to product distribution? There are several good reasons: • Low overhead. There are virtually no up-front advertising costs. Unlike a typical retail company, the MLM company doesn't have to spend massive amounts of money to "pull" customers in. Instead, it pays distributors to "push" the product out into the marketplace. In addition, the company only has to pay the distributors for *results* - that is, a percentage of products actually sold. Ordinarily an MLM company will use the money that *would* have gone into advertising to pay its distributors. (Consider a major manufacturer of consumer products. With sales of say $25 billion with an advertising budget of $10 billion, they would spend 40% of their sales on ads. MLM companies typically pay 40-80% of their sales volume to their distributors.) • Low distribution overhead. Typical retail companies generally use a series of national, regional, state, and local warehousers to distribute their product to the retail stores. Each of these intermediaries wants to make a living, and marks up the cost of the product. Using the traditional major manufacturer, typically, a tube of toothpaste that sells for $2-$3 in a store costs the manufacturer roughly 13 cents to manufacture. If it sold for $2, 40% (80 cents) would go to advertising, leaving $2.00 - $0.80 - $0.13 = $1.07 for distribution costs and the company's profit. • Rapid growth. A well-managed MLM company can grow at an amazing rate - as much as 20%, 50%, even 100% per MONTH. (In fact one of the biggest reasons for MLM company failure is inability to keep up with explosive growth.) It would be difficult or impossible to generate this kind of growth in an overcrowded retail market. • Specialized and motivated "sales force." There are hundreds of thousands of products cramming the shelves of retail stores. It's almost impossible for a new product to make a dent in the market, unless the company spends megabucks on advertising. Also, many MLM products need more explanation than can be done in a 30-second TV spot. A person-to-person, word-of-mouth campaign can solve both of these problems. That's the company's perspective. For the individual, MLM can offer an opportunity to build a part-time income source that can, with enough effort, grow into a significant income. With hard work (and a little luck) you can earn incredible incomes. How? MLM is all about "a lot of people doing a little bit." In an MLM you are rewarded for the sales you create - not only directly, but indirectly as well. You get profit for any retail sales you make, plus you get a bonus on the sales made by people you enrolled into the company, and people they enrolled, and people THEY enrolled, and... By getting a small percentage of many people, your income can grow to a very large number. For example: let's say your company sells widgets, and the average person in the company buys $100 in widgets each month. (This might be for resale or for personal use, depending on the company.) Now let's say you get 5% override bonuses, and your plan pays 7 "levels" deep. Watch what happens if you find 5 hard workers, who each find 5 hard workers, who each find... Level #people 1 5 500 25 2 25 2500 125 3 125 12500 625 4 625 62500 3125 5 3125 312500 15625 6 15625 1562500 78125 7 78125 7812500 390625 So, if each person found 5 people, and each bought $100 each month, you would earn almost $500,000 per MONTH! Great stuff, hey? Let's all go out and get rich! But wait. It's not that simple. It takes a lot of time and work to build up a group (called a "downline") in any MLM. What's more, even if you're a real hard-working go-getter, YOU can't do all of it. You can't enroll the 90,000+ people in this group by yourself. Each person has to find 5 of his own - and the sad truth is, most people are not that ambitious. It's hard to find the ones that will work. So it's almost unheard-of for someone to actually build an idealized group like this. Some "legs" in the downline will build faster than others, and some will grow slower. If you don't work hard yourself, you might never start ANY legs that go anywhere. But that's the concept: a whole lot of people doing a little bit each, and you getting a small reward on each one. If you have the initiative and work ethic to build that group, you can make a very nice income in MLM - maybe even get rich. But MLM **IS NOT** a get-rich-quick deal. It DOES take a lot of work, and most people won't put in the work it takes. The large majority of people will never get rich; quite a few hardly make a dime. But the beauty of it is, as long as you pick a good company with a good product or service, the size of your success is up to YOU. Back to Top Is MLM a scam, legal, moral, ethical, etc?The short answer is: maybe.This is the cause of 99% of the flamefests, arguments, and general disagreements about MLM. Many people contend MLM is immoral or unethical. Many Attorneys General (who ought to know what they're talking about) say a properly-run MLM is perfectly legitimate and ethical. Who's right? The truth is, MLM is not inherently good or evil any more than capitalism is good or evil. Both can be done ethically, and both can be done unethically. It depends on how a particular company is designed and managed. Since the MLM industry is very young (about 40 years old), the law is still in flux. There are admittedly many MLM companies that are nothing more than scams, get-rich deals for the owners and their cronies, glorified chain letters, etc. Some of them even manage to skirt around the legal issues and avoid prosecution. There are other companies that have legitimate products, and may have been in business for many years, but which are run in such a way that many people get burned - elderly ladies investing their retirement funds to buy a garage full of products, and so on. Most people would agree these companies, or at least the distributors that do the questionable practices, are not very ethical. On the other hand, there ARE companies that are run legitimately, legally, and ethically. They produce good products that are valued by customers, and give many people the opportunity to improve their financial situation. The anti-MLM people will often assert that MLM companies and people sell unrealistic fantasies of income potential, recruiting "cannon fodder" to fatten their upline's bonus checks. This view is understandable, but misses one critical point: in general, the new person has the SAME OPPORTUNITY to build a group as the fat-cat upline guy. The upline has worked hard, maybe for years, to build the downline that is now rewarding him so richly. The new person has invested maybe a couple of hundred bucks and a few hours. It's only fair that everyone starts out in the same place - AT THE BOTTOM - and everyone has the SAME chance to build a downline of their own. The major exception to this is in the theoretical case of "saturation." In this situation the company has grown so much that a large percentage of people who would be interested in enrolling have already enrolled. (NOTE that this does NOT mean "EVERY person is enrolled"!) The new person has a much harder time finding new recruits than the upline person did N years ago. The new person has several choices: go with the established company, and live with the saturation; go with another company that has no saturation problems; or give up. On the other hand, while it may be a bit harder to find new prospects when a company is mature, the new person who joins the mature company has MANY more tools and support mechanisms available to him/her than the "old hands" did back at the start of the company. There are probably also many more products, more professional literature, etc. While those pioneers may have had wide-open spaces to settle, they also got more arrows in their backs. It works out pretty evenly. In actual practice, saturation is very seldom a problem. It may be easier or harder to find new prospects for a particular company in a particular location, but there are very few cases that are actually "saturated." The thing to understand is that saturation is not a clear-cut, yes-or-no situation; one company may be CLOSER to saturation than another, but neither might be actually "saturated." The anti-MLM argument often runs calculations of exponential growth, and demonstrates that the entire population of the planet will be enrolled within a short period. This is an intellectual exercise rather like the example of "one pregnant mosquito could carpet the earth in mosquitoes by the end of the summer." In other words, in actual reality, it doesn't happen that way. The growth rate is normally much slower than people realize (especially once a company gets larger), and slows down as a company approaches saturation. It may get harder to enroll new people in a large and near-saturated company, but NO company in the history of MLM has ever grown fast enough to exhaust its potential marketplace. More people turn 18 every year in the United States than are enrolled in all MLM companies combined. So far, at least, the growth of MLMs hasn't kept up with the growth of population. So, bottom line: In the opinion of many people, MLM *can* be done legally, morally, and ethically. It can also be done unethically and illegally. Choose your company carefully. Back to Top Is recruiting wrong versus just selling product?This is a common opinion with MLM detractors. In one sense they are right; if the only driving force behind an MLM is to bring in new people, for example if new-member fees are the only thing that pays bonuses, then that's definitely not OK. But many anti-MLM folks think that the only purpose of ANY MLM is to enroll new people, instead of selling a product. What they don't understand is that ENROLLING NEW PEOPLE *IS* HOW YOU SELL THE PRODUCT IN MLM. If you focus only on selling, it isn't MLM - it's plain old sales. Nothing wrong with that; it's just not MLM. MLM works with a DIFFERENT PROCESS than typical sales. Rather than finding a few people who sell a ton, you find a bunch of people who sell a little. (And, since each sells so little, self-consumption can account for a significant portion of those sales.) Enrolling new people and building downlines is how you find the people who each do the small amount of sales. (Note: EACH do a small amount of sales. NOT just the "suckers on the bottom." In any legitimately-run MLM, ALL people, from top to bottom, contribute to the sales effort.) Product still gets moved - that's how bonuses get paid in a legitimate MLM - it's just done in a different manner than in traditional sales or retail. MLM works differently than traditional methods, but just because it's different doesn't make it bad. It's just DIFFERENT. Just like franchising was different from traditional retailing, and was considered to be a scam for many years. But when properly implemented, franchising is not a scam; it's a very effective way to do business. Similarly, when properly implemented, MLM is different from traditional retailing AND franchising, but can be a very effective way to do business. Back to Top Is recruiting wrong versus just selling product?This is a common opinion with MLM detractors. In one sense they are right; if the only driving force behind an MLM is to bring in new people, for example if new-member fees are the only thing that pays bonuses, then that's definitely not OK. But many anti-MLM folks think that the only purpose of ANY MLM is to enroll new people, instead of selling a product. What they don't understand is that ENROLLING NEW PEOPLE *IS* HOW YOU SELL THE PRODUCT IN MLM. If you focus only on selling, it isn't MLM - it's plain old sales. Nothing wrong with that; it's just not MLM. MLM works with a DIFFERENT PROCESS than typical sales. Rather than finding a few people who sell a ton, you find a bunch of people who sell a little. (And, since each sells so little, self-consumption can account for a significant portion of those sales.) Enrolling new people and building downlines is how you find the people who each do the small amount of sales. (Note: EACH do a small amount of sales. NOT just the "suckers on the bottom." In any legitimately-run MLM, ALL people, from top to bottom, contribute to the sales effort.) Product still gets moved - that's how bonuses get paid in a legitimate MLM - it's just done in a different manner than in traditional sales or retail. MLM works differently than traditional methods, but just because it's different doesn't make it bad. It's just DIFFERENT. Just like franchising was different from traditional retailing, and was considered to be a scam for many years. But when properly implemented, franchising is not a scam; it's a very effective way to do business. Similarly, when properly implemented, MLM is different from traditional retailing AND franchising, but can be a very effective way to do business. Back to Top How do pyramids differ from legitimate MLM?This answer is only for the US, since that's familiar territory. Some other countries, such as the UK, legally define *any* MLM to be a "pyramid sales scheme." That's not the case in the US. In the US, a "pyramid," as usually defined by the FTC and state Attorneys General, is an illegal, multi-level scheme wherein people pay an "entrance fee" for the opportunity to recruit others to do the same. Sounds like MLM so far? The primary differences between a pyramid and an MLM are: • Product. A legitimate MLM has a legitimate product that would be purchased by customers *even if they were not in the company*. Pyramids have no product (the typical chain letter is a classic example) or a "sham" product." In a pyramid, the pyramid *itself* is the real "product." • Headhunting fees. Pyramids often have large entry fees that drive the bonus structures for the "upline." The Attorneys General often consider nearly-mandatory inventory purchases (the infamous garages full of product) to be "entrance fees" and have shut down several companies as a result. Most legal MLMs have only a small registration/membership fee (usually in the $10-$50 range) that pays for a starter kit, manual, newsletter subscription, etc. No bonuses can be paid on the registration fee. • Income promises. Pyramids often make claims of huge incomes with little or no effort. "Earn $50,000 in 90 days!!!" or similar chain-letter claims are a good example. Real MLMs will make it clear that you build an income by hard work and dedication. Basically, if a company is based on a solid product or service, and bonuses flow from regular purchases of those products (either repeat purchases or sales to new customers), you can be fairly certain it's not a pyramid. Back to Top How can you succeed in MLM?Here's the short, bulleted answer: • believe in the product • join the program early • work diligently • work consistently • don't give up Here's the long answer. All companies are different, and what works in one company might not work in another. You should learn from your upline - ask them what works and what you should do to succeed. Draw on them for help. They've found out from experience what works and what doesn't, and they're interested in your success. The fundamental ideas, though, are the same in any company. Do what a distributor/associate/whatever is supposed to do in your company - retail products, sell services, consume products, whatever - and find others to do the same. Teach them to do what you do. *Duplication* is the key to success in MLM. You're not supposed to go out and enroll the world, or sell something to everybody on the planet. You're supposed to find a FEW people who want to build a business, and help them do it. More importantly, teach THEM to do what a distributor does, AND go out and find a few people to work with, AND teach those new people. Until you have "taught your people to teach their people to teach," you have not really duplicated yourself. Keep plugging away. Unless you're incredibly good at this, it will take time to build a group. It takes time to find good people and teach them what they need to know. Sometimes your best people will give up and drop out. Sometimes it can be very discouraging. Sometimes you may be tempted to give up. (And if your company isn't working very well, maybe you should. But if the company's working well, and others are succeeding, you need to take a look at what YOU'RE doing that isn't working. It may be that you wouldn't do any better in another company, even if the grass looks greener, because you're doing the wrong things.) It is a sad fact that a very small percentage of people who enroll in any particular MLM will succeed big. This is NOT, however, a fatal flaw of MLM; it's a reflection of real life. 90%+ of small businesses fail within 1-5 years - and the owners lose a whole lot more than the few hundred dollars an MLM person typically invests. 98%+ of corporate employees will never achieve executive levels. 95% of 65-year-old retirees in the US (according to insurance & Social Security statistics) are dead or broke. The sad fact is, very few people succeed big in ANY endeavor. Most people simply will not do what it takes to succeed. MLM is no different in this regard. However, many people get into an MLM with the idea that it's some kind of "easy road to riches." It's not. It takes work. It takes time and dedication. But most people don't see that, either because their sponsor misled them with rosy predictions of instant wealth, or because they chose to hear the easy story. People like this enroll and don't do anything, or give it a try but give up after a few months. This is where the vast majority of "MLM failures" comes from. The biggest problem with MLM is that it's "too easy" to get into it (usually no more than a few hundred dollars), so it's "too easy" to get out. With only a few hundred bucks committed, it's easy for someone to say "Ah, heck, I talked to four people and none of them were interested. This doesn't work! Guess I wasted $200." (And, often, "So MLM is a scam!") You should approach your business as if it was a "real" business, one that you had invested your life savings into. If you had sunk $200,000 into your MLM business, would you let 4 "nos" stop you? Hell no!! You'd get back OUT there and KEEP working until you MADE it work, because you had too darn much money in it to give up! Well, guess what? That's what makes MLM work too - that dedication to keep working until you make it work. If you work consistently, and effectively, and build your group faster than the faint-hearted people drop out, your group will slowly but steadily build. And if you've taught your people the correct ideas of "work consistently, work effectively, and teach your people how to duplicate your efforts," you should see a consistent rate of growth. It will probably take long