July 27, 2011

Is multilevel marketing a good strategy for my small business?

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MLM Software

Multilevel Marketing or MLM is already making big waves since the time it penetrated the business world. It has become a very lucrative business tactic and up until now, it is helping small-scale entrepreneurs achieve their goals and dreams. Despite the many misconceptions attached, criticisms thrown at, and hoax connected to this strategy, Multilevel Marketing takes pride in its effectiveness and legitimacy (this refers to the many reputable multilevel marketing businesses today!!!!).

With the current economy, multilevel marketing is getting more popular among entrepreneurs. There are a number of MLM opportunities wherever you turn these days- not only online, but even in schools and in offices. Dedicated entrepreneurs lobby their small business through multilevel marketing. There are small businesses or enterprises (Avon, Tupperware, MaryKay, Amway, etc.) that have already proven the power of Multilevel Marketing. Many small business owners have taken the advantages of this compelling “marketing strategy” and incorporated it in their overall marketing plan. With MLM, they have relatively increased their brand recognition and ultimately their boost sales.

Yet, there are still a number of people in the corporate world that are asking questions like- How does Multilevel Marketing works? Does it actually work? Is MLM a scam? Is it for me?

Understanding MLM

Have you ever wonder why people are immediately turned off at the mention of Multilevel Marketing? Simple!!! These people have a negative mindset and are sceptical about MLM. Maybe because some of them just half-heartedly know about this strategy, have not even tried it, or most likely failed miserably. Let us get to know MLM and try to shed light on some misconceptions.

So what is Multilevel Marketing or MLM anyways? This question is the most commonly asked by people who are relatively new to the industry and the concept. And this question needs to have a direct and straight answer!!!

Multilevel Marketing (MLM) is a marketing strategy (business model or marketing structure) which is designed to create a marketing and sales force by compensating promoters or independent distributors of the company’s or business’ products not only for the sales they personally generated, but also for the sales that the other promoters or distributors they brought (recruited) into the company. This will lead to the creation of a downline of promoters or distributors and a hierarchy of multiple levels of compensation in a form of a pyramid. Many highly regarded companies or businesses are using this business model and have successfully created a brand of their own. The products of small businesses are usually directly marketed to the consumers and potential business partners by means of relationship referrals and word of mouth marketing.

MLM is also known as network marketing and referral marketing. Multilevel marketing businesses have grown massively over the decades. It is popular among home-based small businesses and those business-minded people who want to create a business quickly. A multilevel marketing business requires you to invest time and money. you need to be competitive in order to generate leads and win sales. In MLM, you need to work your business online and other marketing media (such as message boards, forums, paid advertisements) in order to attract the number of leads and get serious prospects.

MLM: Legit or Scam?

MLM Lead

A common misconception of Multilevel Marketing is that it is nothing more than a pyramid scheme. As a business model, it should not be mistaken or confused with the illegal practice of pyramid scheme. While the recruiting element of MLM is similar to a pyramid scheme, there is a big difference. The big difference is the way how business operates in MLM and in a pyramid scheme.

Multilevel marketing practice that is legitimate is based on product sales. In other words, MLM’s purpose is to move the product through the downline. The larger the network of distributors or promoters, the more product your business will be able to sell. Unfortunately, in the pyramid scheme, the main purpose is to get your money and use it to recruit others. There is not product exchange and if there is, they are not sold to anyone outside the program.

So, now, if you are wondering if MLM is legitimate and if it works, the answer is definitely YES!!! It WORKS (given that you have started it right) and it is LEGIT!!!

Advantages of MLM

MLM Magnetic Marketing

Now that we have established what MLM is and how it works, it is best to discuss how you (as a small-scale business owner) can benefit from this marketing strategy.

Having a successful small-scale business powered by MLM can give you the profit that you have always dreamt of. You will make the most money since you have the responsibility and position to your business or company. Since you need steady consumers, your distributors will only get paid when they have regular customers. With this, you will earn a small commission off every sale your distributors or promoters make for themselves and those they sell to as well. When your customers continuously buy your products, this will create a stable flow of money. Your income is leveraged by you and your promoters’ efforts.

If you practice multilevel marketing in your small business, you will have no or (at least) less overhead expenses. Usually overhead expenses will take a huge portion of your profit. But with MLM, you will never be worried about salaries and wages, rent, maintenance, and other operating expenses. Most of the time, small-scale businesses practicing MLM don’t need employees since the business structure dictates people to work together independently. Thus, you will be saved from salaries and providing employee benefits. You will have the advantage of a business life that is more abundant that no other business model can help you.

Marketing your product will not be very difficult. You will not be hassled by advertising and the its cost since advertising is by word of mouth. But advertising efforts should not be strictly confined to by just word of mouth. You can still make use of other advertising and marketing media. With MLM, you can use and promote your products simultaneously.

For those who are just planning to put up their own small-scale business (whether online or offline), starting a business with MLM has minimal risks. Apart from that, an entrepreneur will not need a huge capital (which is contrary to popular belief!!!).

And lastly, you can have the liberty to choose people who you want to work with. You will have the chance to choose to work with winners and not with people who are time wasters.

Now, do you think that Multilevel Marketing is a good strategy for your small-scale business?

Jeremy Oms

Jeremy Oms

Jeremy is an entrepreneur and leading manager of New Blood, Inc. Excited about all things Internet related, Jeremy spends much of his time project managing custom web applications and directing advanced search engine optimization efforts.

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7 Comments »

  1. After reading the paragraph of mlm advantages, I am kind of agreeing that multilevel marketing is good for small-scale business. Just personal opinion.

    Comment by party plan software — December 25, 2011 @ 6:28 pm

  2. Very well written article. There is a lot of different rumors and misconceptions glad you cleared some of them up.

    Comment by Jared Brown — June 4, 2012 @ 6:24 pm

  3. MLM gets a bad wrap. I use to be one of those that gave it a bad wrap. But once you really find the right company and really apply yourself it is actually the best thing in the world. Your income potential is based on the amount of work you put in.

    Comment by Solavei — August 13, 2012 @ 10:36 am

  4. I think there are many scams out there. But there are also many great ones as well. If you can catch on to something that is legit it can really take you far. You just need to do something that you have a passion for so it is not so much work.

    Comment by Solavei — September 13, 2012 @ 2:17 pm

  5. I think it all comes down to the product when you’re talking about mlm. Most companies in mlm will fail due to the product being bad or the price point not working out for everyone. It also takes a certain type of person to be able to take on that type of marketing because it’s not always as easy as people make it out to seem

    Comment by Solavei — October 7, 2012 @ 10:03 pm

  6. The value of MLM can be greatly under exaggerated by those who are the critics of MLM. The greatest fear that is brought into discussion is that ultimately anyone who is interested in the [product or service] will have no one left to sell to.

    While this may seem to be true in theory, there is the possibility that with the RIGHT [product or service], the market will remain endless. You must also keep in mind that not every person will want to be part of a MLM. This helps to keep a viable market available.

    Comment by Montgomery Beyer — January 28, 2013 @ 7:37 pm

  7. Very nice article, I used to refuse being involved in a MLM business, but as many have mentioned, I’ve found a great company, that covers one of my greatest passions, and best of all, I have a lot of fun when doing my business, I actually enjoy it, also having a great platform to develop personal and professional growth.

    Kind regards,

    Comment by Ana Ramirez — December 2, 2014 @ 9:31 am

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