People are lured into engaging in hundreds of Multi-Level Marketing companies every single day. This compels other people to examine the truth about what is multi-level marketing.
I can pretty much guess that this is also your main reason for coming to this page. To learn more about the business platform that has been the subject of the many controversies in the past decades.
Chances are, someone has already invited you into their MLM company, and now you wanted to make sure if this is indeed a direction that you should take.
Is the MLM business model worth the risks or should you stay away from it?
On top of the things I’ve listed above, we are also going to discuss the different telltale signs of the MLM companies that you should avoid and if MLM For You.
What is Multi-Level Marketing?
In layman’s term, Multi-Level Marketing (MLM) is a business model that is usually used by Direct-Sales companies to encourage their members (or distributors) to recruit new people into joining the company.
This strategy provides an additional source of income to the existing distributors whenever they recruit new people to become new distributors too.
The additional payment rewarded to the recruiting distributor is derived from a percentage of their recruit's sales.
Multi-Level Marketing although highly controversial, is a legitimate business model.
Difference Between MLM and Network Marketing
A vast number of people uses the term MLM and network marketing interchangeably.
However, there is a distinct difference between network marketing to multi-level marketing.
Network marketing is a general term that applies to any business model that uses the direct-selling strategy, where goods are sold directly to consumers without advertising and hiring employees to sell the products.
Okay, let me try and simplify it a little bit.
Network marketing is the process of moving or selling products and services from the producers (could be the manufacturers themselves or independent investors) directly into the end users (the consumers) by using an “unpaid” sales force of independent distributors.
You might be wondering, why would anyone want to be a distributor if they are unpaid? Excellent question!
In Network Marketing...
Although the distributors are not paid in terms of “salary,” they get their source of income from “profits.”
As a distributor, you will be entitled to buy the company products at a very low price.
You just need to put up a minimal investment which is commonly called as the membership fee to be recognized as the company distributor.
You will then have the right to sell the company products directly to a friend, a family and other personal contacts - at a much higher price.
At this stage, a distributor’s income is solely based on his performance and the profits he makes whenever he sells a product.
Meanwhile, Multi-Level Marketing...
MLM is a business model which is a pay-grade above the traditional network
In the MLM business model, you as an independent distributor will have a chance to create additional income streams through recruitment.
Whenever you recruit new people to join the company under your own network or team, an agreed commission will be paid to you by the company.
You will also be rewarded with a percentage of your recruits’ total sales income.
Instead of having a single source of income thru your personal sales, you can get passive income leveraging the efforts of your fellow distributors under your team.
Most MLM companies do not limit the number of people you can recruit under your team. In fact, they even encourage you to recruit as many as you can so you can generate a more substantial income.
While network marketing is heavily focused on direct selling,
Multi-level marketing is more inclined to recruitment and pays a better commission.
Advantages of Multi-Level Marketing
Multi-Level Marketing offers many benefits for both company owners and average people.
In multi-level marketing...
- Owners will not need to worry about the advertising cost because it relies on its distributors to sell the products for them.
- The cost of setting up is much cheaper considering little to no advertising cost, and the elimination of shelving cost (cost of having their products on the shelves of supermarkets, etc.)
- No physical store required
- Any average Jane and Joe who has a couple of hundreds or less can become a “business owner.”
MLM companies offer a unique opportunity to average people to have their own “business” without putting up with huge investments.
It also provides a win-win situation for the company owners as well.
The Cold Hard Truth About
#1 What are MLM Company Products
There are 2 types of Multi-Level Marketing companies:
- Companies that produce their own products
- Companies that buy rights to royalty-free products
Of course, the cost of creating company type 1 is super expensive.
More MLM companies turn to number 2 because they want to cut cost and be able to compensate their distributors more - Like Vasayo.
However, the absolute truth about MLM companies is...
You would think that by saving on the advertising cost, shelving cost and the physical presence, MLM products will be much cheaper as compared to those on the shelves.
In reality, given that the cost of production (for the products) are similar across the industry, most MLM products tend to be more expensive as compared to those on the shelves of supermarkets.
#2 MLM Business Model
Multi-Level marketing is a legitimate business model.
However, only a thin line exists for a legit MLM company to be branded as a pyramid scheme.
Multi-level Marketing vs. Pyramid Scheme
The FTC has drawn a clear line to identify a legit MLM company from a pyramid scheme.
Once again, although multi-level marketing is legitimate, not all MLM compensation plans offered by MLM companies are legal. Some of them fall under the pyramid scheme and should be avoided.
Here’s how it goes as long as the FTC is concerned:
“If the money you make is based on your sales to the public, it may be a legitimate multilevel marketing plan. If the money you make is based on the number of people you recruit and your sales to them, it’s probably not. It could be a pyramid scheme. Pyramid schemes are illegal, and the vast majority of participants lose money.”
Taking these things into consideration, the following are the things you need to watch out for when joining an MLM company...
Things You To Watch Out For
#1 Membership Fees and other Expenses
- How much will it cost you to join
- What is your ROI
- What other expenses are there
- Does the company have a tangible product line
- What is the quality of said products
- Do these products backed up by Science
- Is it safe to consume/use
- Is it too cheap or too expensive compared to other products of the same niche
#3 Company Background
- When was the company established
- Is there transparency regarding the company's ownership
- What do other people say about the company
- Are there any legal issues about the company
#4 MLM Compensation Plan
- What are the primary sources of your income
- Can you earn money thru selling alone or is it heavily focused on recruitment
- You can learn more about the different MLM compensation plans on
- Does the company provide free training tools and resources
- How often does this occur
- Is there a regular training session you can attend
- Are there coaches and mentors to guide you
In addition, below is a 2-minute video that further explains that difference between a legit MLM company to a pyramid scheme:
#3 MLM - A legalized pyramiding scheme?
This is a bitter subject. While most people are strongly against the idea of joining this kind of business platform...
There are still many who views MLM as an excellent business opportunity. I mean who can blame them.
MLM companies (legit ones) can provide you with a unique opportunity to earn a substantial passive income with only little investment.
And taking into consideration that 95% of all the people who engage joins an MLM company end up making little to no money at all, maybe it really is a legalized pyramid scheme.
However, the real question is...
- Why are millions of people still remain optimistic about multi-level marketing?
- What’s something about MLM that people, especially entrepreneurs can’t seem to resist?
#4 Is MLM a Bad Thing?
In my honest opinion, I don't think MLM is a bad thing. In the consumers' point of view, some MLM products are highly regarded. And the business model is legitimate.
Many sponsors promote MLM companies as a home-based business or a prestigious career, however it should'nt be that way.
MLM companies shouldn’t be promoted as a primary business in the first place unless a customer feels that he or she is compelled to promote the products.
Product-centric is what makes an MLM company legit. However, it has already become a typical scenario where a group of distributors or sponsors turns a legitimate MLM company into a pyramid scheme.
The FTC has caught on to quite many MLM companies where their distributors focus on the recruitment rather than the product promotion, and that cause these MLM companies to face penalties or even shut down.
So beware whenever you are about to join an MLM company.
Think about how you were introduced to the company and what makes you want to join. Be wary on how your sponsor present his or her MLM company to you.
If it is not product related, then there is a good chance that you are getting into a pyramid scheme.
I was once caught in a pyramid scheme and lost all of my investment. The company was shut down, and my money was gone down the drain.
I do believe that Most MLM companies are legit.
It is just how the members and independent distributors perform their roles that makes the difference.
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#5 Why More than 95% of People Fail in MLM?
There are many reasons why the vast majority of distributors fail on their respective MLM business. These are the 5 most common reasons why.
- Targeting the wrong people - Your friends and family may buy a product to support you, but most of the time, they are not entrepreneurial. You need like-minded people to join your team for your business to grow.
- Wrong Mindset - MLM opportunities are hyped up so that people will take action. So most people will have the “get rich quick” or “easy money” mindset. But when they realize how tough it is to earn money from MLM opportunities, they backed out.
- Lack of sales skills - Sales skills is probably the hardest skill to learn. You can’t learn it. Theoretically, you need a lot of practice. And that comes with a lot of rejection. Most people I know do not have the will to stomach rejections. That’s why they give up. If you wish to maximize your chance of success with MLM, this one skill will take you to the top.
- Lack of prospects - Because the turnover rate for MLM distributors is so high, you need a constant flow of prospects to prosper. As you know by now your friends and family members are not the best prospects, so who and where do you find high-quality prospects?
- Don’t have a success formula - Almost everyone is using the traditional method of marketing; they need to learn how to find prospects online. I discussed this matter intensively on this article.
- Getting Involved in a Pyramid Scheme - Sometimes, people in the MLM industry fails not entirely because of their shortcomings but because they have been lured into joining a pyramid scheme. It is important that you examine carefully the MLM company you are planning into joining. Here's how you do it.
#6 Should You Stay Away from MLM?
That depends. Again, the fact that many people are turning into MLM is proof that something in this industry is worth taking the risk.
MLM can offer you a unique opportunity to get financially free and to live the life that you have been dreaming for.
One advice I can give you which has helped me a lot in my entire network marketing career is, before joining any MLM company, ask yourself these questions:
- Why are you doing this
- Is multi-level marketing something you are passionate about
- Can you see yourself doing this for a long time
- Is the company you are joining in a legit MLM company
- Are you willing to do whatever it takes to succeed
On the other hand, one cannot deny that there also exist many pyramid schemes among lurking among legit MLM companies.
So if at this point you are confident that you wanted to give network marketing a shot, then these are the type of MLM companies that you should stay away from.
#7 Types of MLM that You Should Avoid
MLM companies with no tangible products. Like Cryptocurrency related MLM companies.
The reason is that they are almost like a pyramid scheme. There are 2 types of Cryptocurrency related MLM companies: (1) Cryptocurrency Mining Company; (2) Cryptocurrency Trading Company.
- Mining Company - A legit mining company will have a crypto farm that house thousands of supercomputers, and will usually need a big space with an excellent cooling system to operate. It is costly to set up a company like this, but some “Crypto MLM companies - Like USI Tech just pop out of nowhere. Without declaring who are the creators/founders and their background.
- The second type is a crypto trading company. They merely create their Cryptocurrency and make a promise to their investors (people like you and me) that the price of the currency will skyrocket once it gets listed on a Cryptocurrency exchange - Like Global Coin Reserve. The problem is, most of the time, the Cryptocurrency do not get listed (investors lose all of their investment), or Cryptocurrency gets listed, but the price of the currency is far from what was promised (investors loses a lot of money).
In fact, any business platform that claims to be an MLM company but fails to present any tangible product that their members can generate income is most probably a scam and a pyramiding scheme.
How to Succeed in Network Marketing?
There are many fantastic training and coaching programs designed explicitly for network marketing within your reach.
Here are some tips that I can give you as well.
To be honest, I was lucky enough to stumble upon this program that has been the instrument for my success in network marketing. It covers everything you need to know about MLM, including the specified skill set on how to succeed in the industry. A success formula if you will.
This program is also among the Best Network Marketing Courses available for aspiring network marketers today.
Before I end, these are some related articles that you might be interested to read.
Home-Based Business Alternatives to Network Marketing
With all that is said...
These home-based business opportunities can provide you good chance to make money at home, even better than multi-level marketing.
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Thank you for taking the time to read this article. If you have more questions regarding what is multi-level marketing and this topic, leave it on the comment section below.
Remember, whichever opportunity you choose towards your dream of financial independence, make sure that it is something you are passionate about.
PS. If you are still confused about the path you should take to succeed online, then feel free to chat with me...
Jack is an experienced online marketer who has a passion to help beginners succeed online.