A pure ‘pyramid scheme’ is one where money is transferred from one level of the pyramid to another with no products or services involved, ultimately that means a lot of people losing money and a very few people making a lot of money, from anyone duped into parting with their cash for nothing in return, and then disappearing into the ether.
MLM on the other hand, full name multi-level marketing, is completely legitimate and is simply a process or business model through which products and or services are offered via a network marketing structure. That may sound a little bit like jargon, but don’t worry all will be explained.
What we need to do first is put the ‘pyramid selling’ ghost to rest and explain how it can be completely disassociated from a legitimate MLM business model.
Anyone involved in pyramid selling will be very aware that the practice is illegal and will often try and disguise the fact that it is actually pyramid selling by offering some sort of product or service, and they will be happy to describe it as multi-level marketing in order to give it some sort of legitimacy. This is where true multi-level marketing can be affected and viewed in a negative light. Quite simply put, if there are products and services involved how do you know whether it is legitimate or not.
The answer comes in two parts:
- Do the products and or services offered represent true value for money and could they compete in the real world against similar products and or services available on the open market
- Does everyone involved at every level of the organization receive reasonable remuneration for their efforts and is the mechanism for that remuneration clearly illustrated
In other words do you know if the products and or services are worth the price being asked and do you know how you will be paid and how much if you meet the qualifying criteria for payments. If you can’t answer these questions then perhaps it would be better left alone. Also remember that we are talking completely disproportionate levels here or in fact whether you will actually receive a payment at all, not slight competitive edges where you may be thinking it may or may not be reasonable costs and payments.
Now that is out of the way lets discuss how MLM works and whether it a business model you may be interested in.
MLM actually involves personal endorsement or recommendation i.e. you buy and use a product and or service personally and then you recommend it to others and if they make a purchase and or join the network you receive a commission. So you are rewarded for both selling the products and finding other people who are interested in marketing the products, these people are called the down line and the people above you are called the up line.
When your down line makes a sale or recruits someone into the network, as their sponsor, you receive a commission on their sales as well as your own. Your up line to a certain number of levels will also receive a commission from your down line. So there is clearly an incentive to help your down line recruit other marketers and to make sales of the products or services, also from your own perspective, an incentive to introduce more people to the business.
This is another aspect of MLM that can sometimes be viewed in a negative light, i.e. the natural instinct of many people new to an MLM business is to offer the opportunity to family, friends and acquaintances. This can cause a level of alienation, partly for the reasons already discussed and the misconceptions that surround MLM, but also because not everyone will be interested and some may actually feel affronted by being contacted on the subject. If you decide that MLM is for you and you take this approach, then this is a factor you will need to be prepared to deal with.
Since the advent of the Internet however, another approach is to use Internet marketing to promote and build a multi-level marketing business. In other words you use the power of the Internet to find other people interested not only in the products and services but also in recruiting people into the network. This means you can potentially avoid what is often seen as one of the biggest problems associated with MLM.
What are the Positive Aspects of MLM
- Pretty much anyone, old, young, qualified or unqualified can start a MLM business
- Costs for a start up are comparatively small for a MLM business
- You don’t need to identify a niche, that has already been done, you just need to believe in the products
- A marketing plan and materials are usually supplied as part of the business
- Its very flexible and can be done on a part time basis or to work around other commitments
- It is a home based business opportunity, that often only requires a PC and telephone
- Once qualified there is the potential to build a residual income i.e. if you cannot put time into the business for any reason there is still the potential to receive an income from the down line you have put in place
What you need to know about MLM
- There is normally an upfront payment (you need to know how much) when you want to get involved in an MLM business
- There is normally an ongoing monthly financial commitment, be sure you know exactly how much this is
- You will need to be self motivated and understand that it is down to you to build the business, you can’t rely on your up line to do everything for you
- There is no shop front where you can buy the specific products or services on offer through a network marketing business
- You need to believe in the products or services that you are offering, remember this is a personal endorsement business and you are potentially putting your reputation on the line
You can find out about a legitimate home business opportunity that uses the MLM business model via this link.