Multi-Level Marketing – does it work?

You will hear many promises that with Multi-Level Marketing or MLM you can become very rich, very easily.

Does Multi-Level Marketing work? Is it good or bad?

Firstly let’s define what multi-level marketing really is. Wikipedia provides this definition; Multi-level marketing (MLM) is a marketing strategy in which the sales force is compensated not only for sales they personally generate, but also for the sales of others they recruit, creating a downline of distributors and a hierarchy of multiple levels of compensation. Other terms for MLM include network marketing, direct selling, and referral marketing.

Pyramid Selling

You will often hear these schemes called pyramid selling which in most countries are illegal because they simply revolve around recruiting people into the pyramid to fund the ones above with no real product or benefit other than making those above very wealthy. These schemes ultimately collapse as people at the bottom can no longer sustain the business.

For a multi-level marketing business to succeed it needs several things. A good product that people will use, a compensation plan that allows everyone in the business to earn from being in it and a product that is not overpriced.

Many MLM companies are sailing close to the wind as far as the law on pyramid selling is concerned so if you are approached by an MLM company please pay close attention to the above principles. Do not be fooled by hype that you can earn a fortune and all you have to do is recruit a few people who in turn recruit a few and without selling a single thing you will be a millionaire. That does not work, it is a pyramid style hope and possibly scam. Each distributor needs to be able to continually distribute a product of some kind if it is to work. The business needs genuine sales.

Avoid companies that require you to purchase sales kits and DVD’s to watch and learn how to be good at MLM. The kits are the earner for the company.

MLM is it Creditable?

In principle if a company sets up the scheme in the right way using MLM is a creditable way to distribute goods and services. It would be little different from the usual line of distribution. A manufacture to wholesaler to retailer to consumer and possibly a few agents in between. Distributing goods is expensive. Some items that cost pennies to make have a final mark up of several thousand per cent! This leaves plenty of room to have a MLM network to distribute a product with so much margin built in.

There are some very well known MLM companies that provide many people with income and some do very well. I will attempt to review a few of these in the future.

Your Experiences with MLM

It would be good to hear from people that are or have been involved in MLM. Please leave your comments both good or bad in the box below. Please tell us why it works or why it doesn’t. I would ask you not to use this as advertising! Only give details if you personally can substantiate the claims from your own income and not that of someone else.

Roland Millward
The Entrepreneur Club

Image: zmkstudio / FreeDigitalPhotos.net

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9 thoughts on “Multi-Level Marketing – does it work?

  1. I am an independent distributor for a multi award winning, FTSE250 British PLC and have been now for almost 4 years. I have lost count of the number of times I have been told that it is a pyramid scheme or a scam! I personally have only positive feedback to give – I do earn a good residual income which is growing month on month; I have qualified for a car; I have met some good friends through my business; the opportunity for training and personal development has been fantastic, I have many more skills and much more confidence than before I became involved in Network Marketing. Indeed, through contact made via my business I am now involved in another venture (not MLM) which is opening up even more avenues for me.

    It is important to understand that there is a lot of hard work involved, as with any other business, and that it takes time to build a business which is going to pay a decent amount of money. It is also important to treat your business seriously – I have seen people look at me with something which I can only describe as a cross between disdain and pity because they think I am dabbling in something small which pays me spending money. It no longer worries me – they obviously don’t get it!!

    In my experience, if you find the right company, the right product or service and are prepared to work hard with the right positive attitude, MLM provides a great opportunity to become a successful business owner and to benefit from a good income, whether that be just a few hundred pounds extra each month or something more substantial.

  2. Good article, there are hundreds or thousands of ways to earn legitimate incomes from home, and one of them is definitely MLM.
    For disclosure, I am an active and money-earning distributor for Mandura.
    Unfortunately, the industry is constantly besieged by those those who push either scam companies or are scam artists themselves ruin it for everyone.
    Rule of thumb – if it costs money as a ‘sign up’ fee, or they make you buy a bunch of product, RUN!
    However, for people who are willing to WORK, and recognize not everyone comes in totally prepared to build a massive downline and therefore they must learn and practice new skills… for a $30/month investment in product they can make $1000, $5000 or much more a month
    http://JonRPatrick.com

  3. I have been in several, made tiny returns on a few, had some very good sales related training and used some superb products. I’ve also met some fantastic people who I still connect with me now.

    If you want to go this way I am totally with Mandura, know the journey! Be sensibly realistic…so with that in mind I say the following

    …it takes three (core character) things…

    1. Focus – a clea sense of purpose why you’re doing that particular MLM scheme. Don’t get distracted by “the next best scheme”.

    2. Time – If you’re new to MLM, you need to allow yourself a good 12 to 18 months to build a robust, time proof downline.

    3. Determination – It’s not only about the above but also staying focussed and hanging in there when you hear others successes and you just had a bad month with most folk saying no. You feel emotionally tired and mentally drained but stay the course…you will come through. Don’t feel bad, but BE well connected with those around you to support and encourage you.

    I would add a fourth if thats OK.

    Just because someone built a huge downline in X number of days, don’t think you can do the same unless – your financial base is the same, your contacts are the same and your MLM experience is at the same level.

    I lacked these core characteristics and mindets when trying to build an MLM business in the past.

    I now have a keen sense of my lifes purpose and MLM is not part of that, that I can see right now. Nothing wrong with MLM if its RIGHT for you AND your long term goals.

    I hope this helps by agreement and some “other” views/tips to the above.

  4. Good article Roland but don’t totally agree with the paragraph avoid companies that require you to by a starter kit.
    If you are selling a product I believe you need to be using it and have product to show/sell, so a starter kit is good so long as it is not over priced and that will go for the product to start with, I don’t see any point in trying to sell a product that you can find at less money in the high street.
    Also don’t get sucked into buying a greater amount of product to get you to a higher level in the comp plan.

  5. Hi Robin. Thanks for your comment. In my article I am really referring to sales kits not products. There are some companies that charge for kits that are supposed to turn the distributor into a super sales person. You know the sort of things, CD’s or DVD’s, books etc. A starter kit that includes product samples can be viewed on merit of value to the distributor and not the company.

  6. My only gripe with MLM is the issue of recruitment before products – how many times has the next big thing been advertised, sign up to etc. without knowing what the product will be. Surely if it is heavily reliant on distributors then it becomes a pyramid scheme.

    There are definitely some great MLM businesses out there and a lot of which I like.

  7. I’m on the fence. Have you heard of the Global information network with Kevin Trudeau? I would really like to hear some feedback. Thanks!

  8. MLM does i feel work, I have been doing this for about 4 years with a large company with very good products what sell daily. My team I see weekley and have regular training. As long as you look after your team and help them along the way MLM will work. If you expect your team to make money for you without helping them. It will fail

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