MLM Business

“Word of mouth” can be an amazing thing. It’s the driving force behind many successful home-based businesses, and it’s what separates MLM (multi-level marketing) from conventional sales models.

 

But what exactly is the difference?

 

Using a conventional sales model, a company will spend a large portion of its marketing budget on consumer advertising and employing sales forces to market its products to vendors. These marketing dollars translate into television ads, magazine ads, radio ads and so on – all with the goal of introducing a product to people and convincing them to buy.

 

MLM is different. In comparison to companies using conventional sales, MLM companies spend very little on advertising. Instead, they pass that savings onto home-based distributors as commissions for helping spread the word about their products. This is what makes the MLM sales model so different, and arguably much more efficient than traditional sales methods.

 

MLM companies figure they can achieve higher sales numbers by having ordinary people promote the product to friends, family and others. When an MLM distributor makes a sale, they get a portion of the profits as compensation. So their own success is entirely dependent on the effort they put in.

 

It’s an incredibly effective sales model in part because there are real people to promote the product, rather than impersonal advertising. Think about it. If you heard an ad about a new $50 weight-loss drink on the radio, would you call to order immediately? Some might, but not many. Now, what if your best friend approached you about this same drink? And what if she had a real-life success story about the product? Say she lost 20 pounds and encouraged you to try it yourself. You’d be much more likely to give it try, right? That’s exactly what MLM companies have in mind.

 

Another big reason for the effectiveness of the MLM sales model is the fact that distributors are rewarded even more for finding other people who would like to become distributors too. In most MLM compensation plans, distributors not only earn a portion of their own sales, but also a portion of the sales of distributors who they’ve recruited onto their team. In many cases, this commission structure continues down for many levels – sometimes to infinity – hence the name: multi-level marketing.

 

So, for example, if a distributor – let’s call him Bob – recruits Chris to start his own MLM business, and then Chris recruits Dave, and then Dave recruits Eric – every time Eric (or any of those people) makes a sale, Bob makes a commission on it, even though he wasn’t directly involved.

 

This unique, multi-level compensation plan encourages the fast growth of distributor teams, which is why MLM can be so lucrative – both for the distributors and the companies themselves. The companies need only to make this opportunity available and the rest virtually takes care of itself. Compare that to a traditional sales model in which a company is spending billions of dollars on advertising that achieves very poor results.

 

It should be noted that the MLM sales model is not necessarily appropriate for every company. Some of the largest Fortune 500 companies, for example, have achieved great success for decades with traditional sales models. But for many companies offering unique products and outside-the-box, work-from-home opportunities, “word of mouth” is the way to go.