Mutli-Level Marketing (MLM): What Is It? , How ItWorks, Pros & Cons, Multilevel Marketing vs Pyramid Scheme , mlm companies , multi level marketing companies, mlm full form, network marketing

What MLM means?

multi-level marketing

Are you considering a business opportunity that involves selling products to family and friends and recruiting other people to do the same? That kind of business is called multi-level marketing (MLM) or network marketing. Some MLMs are illegal pyramid schemes. 

Multilevel Marketing (MLM Meaning)

Multilevel Marketing Is a Huge Business

Multilevel Marketing, or MLM, is a system for selling goods or services through a network of distributors. Multilevel marketing is also referred to as Network Marketing or Direct Sales.

How Does a Typical MLM Work?

The typical Multilevel Marketing program works through recruitment. You are invited to become a distributor (or contractor or consultant or associate), sometimes through another distributor of the company's products and sometimes through a generally advertised meeting.

If you choose to become a distributor with the direct selling company, you'll earn money both through the sales of the MLM's products and through recruiting other distributors, by receiving a portion of the income these distributors generate.

And when those distributors recruit distributors of their own, you'll earn money on the income they generate too.

The distributors that you sign up with your Multilevel Marketing plan and the ones they sign up in turn are called your downline. The distributor that originally recruited you and whoever is above him or her in the recruitment chain is called your upline. Often the distributor who recruits you will give you some help getting started, including training.

Interested in becoming a distributor? Read Is Direct Selling (MLM) a Good Business Opportunity?

How Big Is the MLM Market?

Big. The top 3 MLM business are:

Avon Products, Inc., founded in 1986. Avon has annual sales of $11.3 billion and over 6.5 million sales associates. Avon markets various beauty products, jewelry, and fashion apparel.

Amway, founded in 1959. Amway has annual sales of $10.9 billion and over 3 million sales associates selling cosmetic, wellness and food and beverage products.

Herbalife Ltd., founded in 1980. Herbalife has annual sales of $4.8 billion and has over 2.7 million sales associates. Products include cosmetics, personal care items and nutritional supplements. In 2016 Herbalife was cleared of allegations of having a fraudulent business model after an investigation by the FBI failed to find sufficient evidence.

Listing these three is talking about just the peak of a truly gigantic iceberg. According to the Direct Selling Association, in 2016 20.5 million people in the U.S. were involved in direct selling, with total sales of $35.54 billion. More than 74 percent of the American public has purchased goods or services through direct selling.

Worldwide multilevel marketing sales are also strong with $189,641 USD millions in sales in 2017 (World Federation of Direct Selling Associations). The United States and China are the top two global markets, with 18% market share each, followed by Germany and Korea, each with a market share of 9%, Japan with 8% and then Brazil with 6%.

Why Is Multilevel Marketing So Popular? 

Probably because most Multilevel Marketing programs operate on a "the sky's the limit" promise with a nice bit of "easy money" thrown in. If you work hard, the MLM sales pitch says, there's no limit to how much money you could make. And through your downline you will actually make money doing nothing.

The cherry on top is that MLMs are usually very inexpensive to join, so becoming a distributor is much cheaper than starting a business of your own in many cases or doing something like buying into a franchise.

Plus, many Multilevel Marketing programs are carefully constructed with attractive rewards. Avon representatives can earn trips to vacation destinations. Amway offers cash bonuses based on performance each month. And who doesn't remember the pink convertibles awarded to top selling Mary Kay consultants, for instance?

What Are the Odds of Making Money with MLM?

Poor, according to Jon Taylor, who runs the MLM-theTruth.com website. In his free e-book Multi-Level Marketing Unmasked, when operating expenses and other costs are included, 99.7% of people who join MLMs lose money. In other words, for every 1,000 people who join an MLM organization, only three will earn more money than they spend.

This is because of the "pay to play" feature built in to Multilevel Marketing programs. As a distributor, you have to buy x amount of products and services in order to qualify for commissions and bonuses, and to advance up the various levels in the pay plan (commonly referred to as “rank advancement". In addition to product purchases, TOPPs for many MLMs expect downline participants to pay for training, conferences, books, recordings, sales literature, and other “tools” needed to be successful.

Are MLMs Legal?

Multilevel Marketing plans are legal in the United States and regulated by the Federal Trade Commission (FTC). In Canada MLMs are legal as long as they do not contravene the Competition Act. MLM companies are, in general, largely unregulated and the existing laws regarding MLM practices are vague or poorly defined. As such, prosecutions of offending MLM companies are long, arduous and relatively rare. Larger MLMs can easily afford powerful legal representation to ward off prosecutors. 

If you are considering becoming part of an MLM company, you need to investigate the opportunity thoroughly, just as you would with any other proposed business venture. Not all Multilevel Marketing plans are created equal, and some may not be MLM at all, but pyramid schemes, which are illegal.

How To Start A New MLM Company All On Your Own

Candles. Cosmetics. Health Supplements. Jewelry. All of the above have been the base niches for multi-level marketing companies for years. From leggings to legal services, these businesses gain traction and pull in quite a profit for both distributors and owners alike. So why not start a new MLM of your own? It’s easier than you think. Instead of searching for the best MLM company to join, read on to learn about the logistics of starting your own direct sales adventure.

Find Your Niche

The MLM model can be lucrative in any niche. Whether you’re selling candles, makeup, or diet wraps, the product itself is secondary, but equally as important as your niche. First and foremost, you’re selling a lifestyle. As in every MLM’s your goal is to develop a network of independent distributors who then earn from welcoming more independent distributors as well as reselling your products. Your product and your niche are your vehicle, while your network of members provides fuel to the business.

Pick your niche carefully. Do some research on the latest trends, both in the direct marketing industry and otherwise. What do people like to buy these days? Also, who should be the target demographic for your MLM?

For instance, research shows that millennials cherish a healthy lifestyle. If they’re the demographic you want to cater to, stick to a health-related niche.

That being said, be careful not to enter an overly saturated market. There are already hundreds of health-related direct marketing companies doing business worldwide. That kind of competition makes a niche difficult to break into.

Figure out what can set your MLM apart from the rest. On the product and niche level of your business, try to offer something no one else does.

First, choose two or three niches you’re interested in. Then, study the most prominent network marketing companies across those niches.

Find out how you can stand out among your potential competition in terms of your product line. Ideally, you should zero in on a sub-niche when you’re just starting out.

Develop Your Products

Now that you’ve selected a niche to work with, it’s time to develop or source your products. Are you going to offer something entirely original, or are you going the wholesale route?

The type of products you choose will depend on your budget. How much do you want to invest in your new MLM company, and how much overhead can you work with?

Some companies manufacture their products from scratch. For example, the eco-friendly MLM called Melaleuca has a manufacturing plant on its own property. In fact, it claims to be the largest manufacturer of packaged consumer products in the Northwest.

That kind of dedication to a product line requires billions of dollars in overhead costs. It also calls for skilled product management. However, manufacturing your own products gives you an edge over other network marketing companies in your niche.

The easier and less expensive route is to purchase from a wholesale product supplier. If you choose the wholesale route, you can still build an outstanding direct marketing company. You may choose to buy from overseas buyer platforms such as Alibaba or Ali Express, where wholesalers offer private label products to US business owners.

Using online wholesale suppliers is low-risk, especially because you can select the perfect products by buying a few small test batches first. Once you find the ideal products, you can roll them out in your catalog without having spent tens of thousands of dollars on the manufacturing process.

Determining Your Compensation Plan

Now that you have something to sell, take time to create the meat of your company: the payment plan. How will you price your products, and what commissions should you offer to your members?

According to the nature of the MLM model, your company should thrive on both the sales of products and the building of an organization. So what kind of incentives will you offer to both your customers and distributors?

Typically, MLM businesses offer three or more tiers of membership. Each member earns a commission from the sale of products and services in their organization. Sometimes, members also earn commissions from product sales.

In place of product sale commissions, you can offer product discounts for members who make a certain sales quota. You can also offer special member-only pricing for the products. This serves as an incentive for both prospective and veteran members of an MLM.

The point is to come up with a structured pricing and incentives plan. You can figure out the percentages based on your product pricing and overhead costs.

Structure Your New MLM Online

Once you write out a payment plan, it’s time to put it all online. Use a dedicated MLM web design and software service to serve as your digital baseline.

With this kind of service, you can build the original website for your company, and then have it replicate member sites for all of your recruits. It’s important to use dedicated MLM software that can easily streamline the filing and payouts of commissions. If your payouts are delayed or disorganized, the organization as a whole will suffer.

Your members are counting on you in order to make their businesses work, so timeliness is an important factor. A smooth, easy-to-use website interface can make all the difference in the success of an MLM.

Advertise Your New MLM

Once you establish and incorporate your new company, it’s time to roll out the ads. Your prospective members are the bread and butter of your business, so drawing them in with a strong and friendly recruitment process is paramount.

Social networking platforms are the best friend of direct marketing organizations. Not only can you recruit your first members through social networks like Facebook, but your organization can thrive through your members’ own social media promotion.

Market your business as a life-changing opportunity for entrepreneurs. Your target market should ideally be comprised of people who are ready to make a living from home. These people should be motivated and coachable. This way, you can lead a team that follows your business model with enthusiasm.

Focus on spreading the word about your company through direct sales groups online. Many of them allow promotional posts for free. If you have the budget for it, you can also invest in paid social media ads.

Once you recruit some members, make it your priority to teach them how to do the same. When your company is trending in various direct sales and entrepreneurial circles, it’ll be a strong sign that your MLM is thriving.

Will Your MLM Be Lucrative?

The success of your new MLM depends on all of the points above. Every detail counts, from establishing a solid online platform to creating a detailed compensation plan to recruiting motivated members.

With that said, a well-designed organization website and payout service is the backbone of any MLM. To kickstart your direct marketing journey, contact us today to ensure that your MLM software stands out.

Why is MLM bad?

99% of People in an MLM Lose Money

After studying 350 MLMs, the FTC found that 99% of people who join multi-level marketing companies lose money. This statistic does not just apply to the worst MLM companies. ... If you join an MLM scheme then you only have a 1% chance of not losing money. Not a 1% chance of getting rich.

What is MLM and how does it work?

Multilevel marketing (MLM) is a strategy some direct sales companies use to encourage existing distributors to recruit new distributors who are paid a percentage of their recruits' sales. The recruits are the distributor's "downline." Distributors also make money through direct sales of products to customers.

Is MLM a pyramid scheme?

MLM businesses operate in all 50 U.S. states. ... Some sources say that all MLMs are essentially pyramid schemes, even if they are legal. The U.S. Federal Trade Commission (FTC) states: "Steer clear of multilevel marketing plans that pay commissions for recruiting new distributors. They're actually illegal pyramid schemes.

Who is the number 1 MLM company?

Amway

The 2020 List of Top 100 MLM Companies in the World

2020 Rank Company   2019 Revenue

1.                  Amway           US$ 8.8 Billion

2.           Market America    US$ 7.3 Billion

3.         Avon Products Inc.    US$ 5.5 Billion

4.               Herbalife            US$ 4.9 Billion

Can MLM make you rich?

Making Money in an MLM

Can you really make money in an MLM? The short answer is yes, but in reality, only a tiny percentage of representatives actually realize the high earnings advertised in MLM promotional materials and at meetings. Some people don't make any money at all, and some people actually lose money.

What percentage of MLM make money?

Sixty-three percent of participants join MLM companies to make money by selling the product or service to others. One-quarter (25 percent) made a profit. Of those that made money, more than half (53 percent) made less than $5,000.

What is the best MLM company to join?

Top 100 MLM Companies Ranked By Revenue (2021)

Rank Company Revenue

1. Amway (Review) $8.40 B

2. Herbalife $4.90 B

3. Avon Products, Inc. $4.76 B

4. Vorwerk $4.23 B

What companies are MLM?

The Top 25 Multi-Level Marketing Companies List

Amway: $8.8 billion. ...

Avon: $5.7 billion. ...

Herbalife: $4.5 billion. ...

Vorwerk: $4.2 billion. ...

Mary Kay: $3.5 billion. ...

Infinitus: $3.41 billion. ...

Perfect: $3.06 billion. ...

Quanjian: $2.89 billion.

What is the difference between an MLM and a pyramid scheme?

Multi-level Marketing (MLM) or network marketing, is individuals selling products to the public - often by word of mouth and direct sales. The difference between a pyramid scheme and a lawful MLM program is that there is no real product that is sold in a pyramid scheme....

Is Network Marketing the future?

Network Marketing is a business in which we don't invest money but we invest time. ... Network marketing is the future of business in the 21st century. In all good terms, it rightly has evolved over time. Beginning as a part-time job, direct selling has now a proper path in career building opportunities.

How do you succeed in MLM?

8 Tips to MLM Success

1. Brush Up on the Realities of MLMs.

2. Find a Product You Love.

3. Be Genuine and Ethical.

4. Don't Barrage Your Friends and Family.

5. Identify Your Target Market.

6. Share Your Product Everyday.

7. Sponsor, Don't Recruit.

8. Set a Goal. 

What is the success rate of MLM?

Failure and loss rates for MLMs are not comparable with legitimate small businesses, which have been found to be profitable for 39% over the lifetime of the business; whereas less than 1% of MLM participants profit. MLM makes even gambling look like a safe bet in comparison.