Multi-Level Marketing Business Model

Multi-level marketing (MLM) is a powerful business model for marketing products and services. Multi-level marketing is is a structure in which the business not only compensates the individual marketing the product for their direct sales but also compensates the individual for the direct sales of the people they have introduced to the company. The name multi-level marketing has a fairly literal meaning in that every marketer or distributor is at a level. There are marketers above them and marketers below them. Therefore anybody that you as the marketer have introduced to the company, is at a lower level than you. At this point you would make commissions from your sales as well as the sales of the people below you. Sounds like a pretty powerful structure to making money and being successful right? You not only make money from your sales, but also make money from the sales of the people underneath you.

There are hundreds of business opportunities that take advantage of the multi-level marketing business model. The majority of these MLM opportunities offer great products. Products that serve a propose, and products that have a definitive market to sell to. The idea behind these companies is to try to increase customer activity by creating a vast sales force or a large number of promoters. As a promoter your goal is to recruit more promoters like yourself who will sell the product. You then get commissions for your efforts. You will get commissions if you sell the product or if you recruit and add a new promoter. From the manufacturers point of view this business model is a considerable benefit. Multi-level marketing offers them the opportunity to increase product visibility through a network of highly motivated distributors at a very low cost. Assuming the the product that is being marketed is a good product and has a big market, the manufacturer of the product makes a considerable profit.

The questions is, however, can the individual promoter or distributor make money from Multi-level marketing. The quick answer is yes they can. But answers like these are never quick. The Direct Selling Association (DSA) states that the average annual income for promoters involved in multi-level marketing is just $2,400, and that only 10% of the people involved in multi-level marketing make any profit at all. That doesn’t sound like a very good track record for an MLM businesses does it? The main reason for this is that 90% of the people are not going to be able to hire enough distributors underneath them to generate substantial commissions. This means that they themselves need to continue to add people trying to generate wealth. It could take two to five years or more to establish yourself at a level to where MLM would offer an advantage to you. What does this mean and what happens in that time frame?

Multi-level marketing relies heavily on word of mouth. What this means is that a promoter involved in multi-level marketing sells to family and friends, assuming that they will then turn around and sell to their family and friends and so on. What happens when you have talked to all your family and friends about the business? You then resort to hotel meetings and conferences to try and get more visibility of the product and hopefully word of mouth takes you to your goals. Chances are this will not work because its not very effective and this is why only 10% can make a profit. Think of spending five or more years conducting sales presentations and putting out ads and cold calling customers. Either your expenses are high, you have no customers to show for it, or the compensation you are receiving is not what you originally thought and you are not meeting your goals. The manufactures are making plenty of money because their sales force is vast and even if no single promoter is selling at high levels the group as a whole is selling at a very high level. The 10% that does make money, well they were in at the beginning so they are near the top level or they possess skills that many of the promoters in the multi-level marketing structure do not possess.

Not everyone makes money when they are involved with MLM and not everyone reaches their goals by marketing a great product. If you have a great product with a large market to sell to and a highly motivated sales force promoting and selling the opportunity, why is it that the majority of the people involved with multi-level marketing see no profits at all? Is it the Multi-level marketing business model in general?