How MLM works? – What MLM is all about? Is MLM legitimate or scam? Can MLM Business help you escape the Rat Race and achieve Financial Success?
How MLM works?
The History of MLM
The MLM system has come a long way since decades ago. When the internet is not so common then, companies created the MLM system to sell the product directly to a consumer without going through a middleman such as a retail store or supermarkets.
They want to leverage the power of “Word of Mouth“. When someone uses a product and find it useful, he/she will recommend to their family or friends. In appreciation of helping the company to spread the good words, he/she is paid a commission from any product sales through him/her.
One of the most prominent and long-standing MLM companies is AMWAY. It deals with daily products that we use, such as beauty, nutrition, and home etc. Other big MLM companies include NuSkin (beauty products) and Herbalife (nutrition products).
The Evolution of MLM
With the invention of Internet and its popularity, many MLM companies began to bring their system online. They became very successful because they can tap on anyone not just locally but anyone around the world where there is the Internet instantly.
Seeing this as great opportunities, tons and tons of companies begin to appear Online to create MLM systems that entice visitor of opportunities to earn big money fast. Each company has their own unique “product” and compensation rules.
As a result, many online MLM companies are selling training courses, electronic books, and memberships as their “product”.
How MLM works? – Sponsor and Downline.
MLM works by Sponsor and Downline concept. A Sponsor is a recruiter. A Downline is someone recruited by the Sponsor to follow him/her in the MLM system.
The incentive for a Sponsor to recruit as many downlines as possible because if the Downline makes sales, a portion of the commission will flow up to the Sponsor.
Depending on the system, the Sponsor can tap on the commission of multi-level of downline tiers. Hence the term Multi-Level Marketing (MLM) comes about.
Sometimes, people refer it as a Pyramid Scheme. As you can see from the picture, it starts from 1 person and branch down to many.
Each and every MLM companies will have their own unique compensation rules. Usually, they require one to sign up a membership/license before they can start selling their products.
Different Membership Levels
Most of the time, membership / license come in different levels.
There is a clever reason behind this.
The lowest level of entry is cheap, but the commission you can earn is little. The highest level of entry is the most expensive and you can earn a bigger pie of the commission.
The companies will invite you to join them from lowest level first to try out. Most people are less resistance when the initial start-up cost is low. But after you are in, they will start to up-sell you the most expensive membership.
Most people would be tempted or be convinced to go for the highest or most expensive membership to earn as much as possible. They are more willing to pay big money first then losing out on peanut commission.
How MLM works? – Is MLM legitimate?
I would say that MLM companies that provide a physical product or service are legitimate companies. They are using this MLM system to distribute their product to the public in the shortest time.
For example, AMWAY is legit because its marketer sells physical products that are useful to consumers.
People are not scammed of their money when a physical product is exchanged for the money. (The only downside is that you may pay a little bit more than off the shelf products similar to AMWAY’s products because of the commission structure)
The real consumers
Do you know who are the real consumers in the MLM companies such as AMWAY?
Example, AMWAY comes out with a new product ‘X’ today and tells their huge community of MLM marketer that if they sell this product ‘X’, they are going to earn 50% commission.
Can you guess how long will it take for product ‘X’ to reach the general consumers?
Yes, you are right! The whole community of AMWAY MLM marketers is their own consumers!
The MLM marketers have to purchase the product ‘X’ to try first, then they order in bulk to sell to their downlines or customers.
How MLM works? – The illegal ones.
However, there are many illegitimate MLM companies selling paper certificates of some commodities of no values, membership of no values, license of no values etc.
Their main aim is to recruit and get your money. Once the system is saturated or there are lesser and lesser people willing to come into the system, the companies close shop and disappear.
This is the infamous Pyramid Scheme!
MLM becomes a SCAM when companies sell something that is plucked from thin air. Scam MLM companies usually promise fast big money if you join them. However, many would also tell you to pay them big money first before they teach you how to make big money.
How MLM works? – Success 3% vs Failure 97%.
An MLM system can be 100% legitimate, but why only 3% of the MLM marketers can be successful and the rest of 97% failed?
Let’s take a look at two most common reasons.
Most MLM companies will train the sponsor to prospect your family, friends, acquaintance and strangers eventually, to try to recruit them as down lines.
After which the sponsor will have conduct products training or organize product parties to attract new members.
Many people failed because they fear facing rejections or they hate cold calling on strangers.
Online MLM companies embark on these fears and dislikes to invent systems where they focus on selling their “product” using social media, emails solicitation, and building micro websites to attract visitors.
That is very clever of them! Because by going Online, you do not need to face rejections or need cold calling because you are behind the scene. Some companies even set up a professional sales team to help you close sales. Your job is to build your sales site to attract traffic to click on your referral links.
Why Online MLM Marketer will fail then, you asked?
Well, any Tom, Dick or Harry can join the Online MLM system.
- First, it may be difficult to get support Online from your Sponsor because he/she is behind the scene and could reside anywhere around the Whole World!
- Second, the low entry point allows people to give up easily because they did not see the big money coming in as fast as they would imagine.
It requires hard work to build Online MLM business, it is not as simple as ABC. Some online MLM companies provide one-to-one coaching system where your sponsor or some professional coach will guide and motive your downlines. Of course, this will come at a very high price.
How MLM works? – How to be the Successful 3%?
To be successful in MLM, you have to be
- Independent and Hungry for Success.
- Positive and Self-Motivated.
- Honest and Genuinely have the heart to help your downlines to be as successful as yourself.
There is a very good book on The Ultimate Guide to Network Marketing by Nathan Sloan.
In this book he talks about:
- How to use the Internet to get people calling you…this alone is worth 100x the price of this book
- Learn the 3 biggest mistakes new network marketers make…and how to safely avoid them
- A simple trick to “Re-Program your Brain” to let go of all the negative thoughts that are holding you back
- Learn the 6 lead generation strategies that will give you more enquiries than you can handle to help get your team in place in the shortest time possible
- Learn the 7 simple ways to instantly double your conversion rate…meaning getting more people saying YES! and chasing you to get started
- Learn the ‘one sales technique’ that instantly cuts out 90% of the rejection that most other network marketers face each day
I recommend you to grab a copy of the book that is taking the network marketing industry by storm if you are looking to be successful with your MLM business.
How MLM works? – Alternate Passive Income.
I was an MLM Marketer for a nutrition company for about 2 years and thus I know how the ins and outs of MLM.
I made some money, but I did not pursue it further because I got more and more uncomfortable selling over priced products to my family and friends.
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