The term MLM is the abbreviation for Multi-Level Marketing, which is a marketing strategy that implies creating a hierarchy of various levels of compensation. Also known by the names of referral marketing or network marketing, this is a system by which the generated sales are compensated by all those who are involved in the business, no matter their hierarchic level. Unlike the corporate structure, multi-level marketing provides a level playing field where everyone involved has the opportunity to have the kind of financial success as the CEO of the traditional business model.
This type of marketing offers the ability for the average person to sell products to consumers in a more direct way, by approaching people personally to market merchandise. Because of this manner of selling, the strategy has often been referred to as “direct selling”, though there are also many other types of direct selling.
MLM was developed in 1945, when a company decided to allow its distributors (after they reached a certain number of customers) to recruit other people to their team and draw a percentage of the commissions from their sales as well.
In specialized literature, the term “multi-level marketing” is considered more appropriate for describing the characteristics of the compensation plan, while terms like “network marketing” and “direct selling” describe the distribution system. Also, in order to clearly distinguish the method from others that are considered illegal (such as pyramid schemes), various terms have been created that are used as synonyms, like “relationship marketing”, “word-of-mouth marketing” and “interactive distribution”, all of them expressing the way in which the product reaches the consumer.
MLM uses distributors that do not have a fixed salary. Their job is to sell the products by presenting them directly to the customers, and, depending on the amount they manage to sell, they are given a percentage or bonus from those sales.
These distributors can either build their own customer base and/or recruit other business owner hopefuls who also build a customer bases and assemble their own teams – this is how the hierarchy is formed and the business is expanded bit by bit.
Multi level marketing is a well developed system, and a distributor’s income depends only on how many customers he can acquire to purchase the products he sells. At first, this is a perfect way to make a little extra money on a part-time basis. Since most of the people who engage themselves in a MLM business have as main customers their relatives and/or friends at first, the amount they make from selling the products is minimal, but it is something.
Later on, when they gain more experience and knowledge, most distributors manage to put together a large and solid customer base, and, most importantly, start building their own distributor networks, which will soon allow them to gain money without having to invest too much time and effort into the business. This is when they start earning residual income and their money starts working for them instead of them working for money. In such situations, the income is substantially higher and allows them to comfortably live off their multi-level marketing business alone. This business model has allowed countless everyday people the ability to quit their “day job” and become financially independent.
If you are willing to put in the work, because contrary to popular belief, this is not a “get-rich-quick” scheme, and have or are willing to develop the skills necessary to grow your business, joining the right MLM can be your surest way to success.