Some years ago, I partnered with my first multi-level marketing company or MLM, not knowing exactly what a MLM company was. I thought I was just selling makeup and getting others to join me. Once I got into the industry, my eyes opened up to the conglomerate of marketing direct sales companies and all the various types of direct sales companies. There is multi-level marketing, network marketing, affiliate marketing, internet marketing and whatever other phrase that is hot for the new year. In either case, I was confused. I am always coming across people who don’t understand the difference between the different types of companies so I figured I will break it down simply for you all. In today’s blog I will focus on multi-level marketing.
Marketing Direct Sales: Direct Sales is an industry in which companies sell their products or services directly to consumers through a distributorship.
Basically, think of the term “direct sales” as the broad category for multi-level marketing and affiliate marketing. Marketing direct sales also goes beyond these two types of companies. There are also single-level companies that typically include industries such as real-estate and financial services. Single-level in which distributors are just compensated for the work that they do.
Marketing Direct Sales: Multi-Level Marketing
Multi-Level Marketing (MLM) is an industry in which individuals or an individual entity, called distributors, sell a company’s products or services through a down-line of distributors.
In MLMs, individuals are able to purchase the right to sell a specific company’s products or services and are able to earn a commission on the items she or he sells. What makes multi-level marketing so attractive is that not only do you earn a commission on the products/services you sell, but you also earn a commission on sales when people join the business under you.
In product based companies, like Mary Kay, Amway, Organo Gold, etc., distributors are able to buy products at wholesale and sell them at retail, which is usually a 50% markup on the wholesale price.
In service based companies, like Legal Shield, ACN, etc. distributors are required to utilize the service to maintain their distributorship.
Additionally, as distributors bring more people into the company and sell more products they are able to achieve certain rankings.
MLMs are based around rankings that incentivize people to produce more. As you move up the ranks, you are able to earn higher commissions and earn additional bonuses.
Marketing Direct Sales: The Downside of Multi-Level Marketing
The multi-Level marketing industry is often associated with a lot of negativity. Typically, when you hear the words network marketing or MLM, you will hear the following: SCAM! Before there were concrete regulations in place, there were people marketing direct sales illegally. There were many fly-by-night companies that came on the scene that were doing illegal activities such as Ponzi schemes. The issue here is that the majority of commissions were made off of bringing people into the business instead of selling products or services.
However, the Fed shut down many of these companies years ago. However, be mindful there are still a few illegal companies lingering out there.