Multi Level Marketing Companies
Our site explores various aspects of multi level marketing companies and why some people really love them and other people absolutely hate them.
The Basics of Multi Level Marketing
People often refer to it by the first letters of the term, or MLM. It is also called network marketing.
Network marketing companies use a system of independent distributors in a multi-tiered structure to sell the company’s goods and services to the consumers. These independent distributors receive a commission for the retail sales that are credited to them.
Independent distributors (or representatives) also bring in other people to be independent distributors in their downline, which is made up of people in the multi-tiered group below a specific person. A distributor usually gets another type of commission for sales made by the people in his or her downline.
Multi level marketing companies pay commissions to these independent representatives to spread information about the company’s goods and/or services because these companies know that word-of-mouth promotion and personal referrals can be a very effective form of advertising.
Is MLM Really Legal?
Most MLM programs are operating legally. However, a small number of companies, as well as a few distributors, operate illegally.
One of the ways this can happen is when they make claims about the product that have not been properly proven.
In the United States, the Federal Trade Commission (FTC), the Food and Drug Administration (FDA), plus a few watchdog groups constantly monitor network marketing programs and their conduct. For example, the FDA does not want any claims made about nutritional supplements being able to cure or prevent any disease unless there is accepted medical testing to back up those claims. Most nutritional supplements are beneficial in some way, but distributors need to be careful about making certain types of claims.
Another way of doing something shady, or downright illegal, is when a specific level of income is guaranteed.
It is common for a company and distributors to show the pay plan and talk about the income potential. However, some go too far when they say a certain income is guaranteed when they really need to emphasize that it’s what is possible and certain things need to happen to make that possibility a reality.
Every now and then, a network marketing company will be shut down by a federal agency or by an attorney general. That happens when that MLM has crossed the line in one or more ways.
Also, sometimes a distributor will be forced out of an organization because they have not acted in the best interest of the company or they have pushed the boundaries of responsible marketing. Sometimes, it is a lack of awareness and other times it is done on purpose out of greed.
Other types of businesses might get shut down for various reasons, but they usually don’t get as much negative attention as when it happens to an MLM program. The critics of MLM make it sound as if all MLMers are up to no good. We find that very unfair because the majority of companies and distributors are making a conscious effort to be in compliance.
The detractors like to criticize and point fingers at something they don’t understand.
Is It A Pyramid Scheme?
There are people who erroneously believe that MLM is a pyramid scheme. This is ironic because it was a group of law-abiding multi level marketing companies that asked the government authorities to outlaw what is known as “pyramid selling.”
“Pyramid selling” is when the people involved bring in more people and the money collected from the newer people is paid to the first ones in. As more people are brought in, the newer people have little chance of getting any money.
The people involved in a legitimate MLM program get a commission that is based on the sale of goods and/or services. They are not paid simply for bringing more people into the organization. Also, the timing of when they join should not matter as long as they (and/or their downline) make the sales that result in commissions.
“Pyramid selling” became illegal when new laws were enacted to ban the practice. It is unfortunate that sometimes those laws inadvertently discriminated against the legitimate multi level marketing companies. This was sort of throwing the baby out with the bath water.
Pyramid is not a “dirty” word. There is nothing at all wrong with the pyramid shape. Many people simply misunderstand the concept.
The image loop below shows the pyramid shape and how it is all around us in many ways.
Pyramid-shaped organizations can have legal or illegal activities going on, but it has nothing to do with the pyramid shape. It is the way business is conducted that will make the activities legal or illegal, not the shape of the organization.
Love It or Hate It?
Okay, we are going to be very blunt and brutally honest here.
Many of the people who did not meet their success goals with one or more of the programs only have themselves to blame. Yes, that includes me on a few occasions.
Sure, there are many reasons why things don’t always work out, such as:
* Pay plans that strongly favor the full-time heavy hitter (stacked against the part-timers).
* Lack of a good marketing plan for the new distributors to follow.
* MLM programs that suddenly go out of business.
* Product is way over-priced OR people simply don’t want it.
* Poor management at the company or upline levels.
Even with all of the things that might hinder us from reaching a significant level of success, we are often our own worst enemy!
Too many people think they can join and things will begin to happen. That might be true to some extent, but we need to be involved and put in a certain amount of time and effort to make it all come together.
With human behavior being what it is, we sometimes want to blame other things when we don’t succeed, even when other people succeed under the same set of circumstances. I found out the hard way (as have many others) that a big part of success is taking responsibility for what happens (at least the things you have control over).
The main thing I want to emphasize is that if you want to enjoy a better-than-average income, then MLM is one of the best ways for a person from ANY background or educational level to make such a thing possible.
As you might imagine, some multi level marketing companies are better than others, so check things out carefully to make sure you understand what it’s all about.
A good MLM program, combined with a strong team (the upline leadership) will enable you to reach your dreams with a modest amount of effort on your part.
