MLM - what is it?
If you are wondering what MLM is, read the following text carefully, I explain the basic concepts and the idea of network marketing in it.
The advertisement you know has just ended. It doesn't work anymore, it's a colossal waste of money and if you don't notice it in time, you will be in trouble - unfortunately I don't remember where I heard these words - forgive me🙌
Network Marketing Idea
Network marketing, otherwise known as multilevel or MLM (short for Multi Level Marketing) combines two important terms. First of all, it is "Marketing", i.e. transferring a product or service from a service provider or producer to a recipient. The term "Multilevel", in turn, refers to the system of calculating remuneration for individual distributors (i.e. persons responsible for delivering a product or service to the final recipient). So the strategy of companies operating on the principle of network marketing is to distribute the product outside the traditional store network.
Money is not spent on expensive advertising campaigns
The general idea of network marketing is that instead of spending huge sums of money on such things as advertising, sales promotion, traditional marketing, allocate this money to reward your colleagues. Interestingly, in network marketing companies there is no management who would manage sales. Each distributor has equal rights and possibilities.
Network construction leaders
The so-called network leaders play a very important role. A leader is a person who, thanks to his commitment and appropriate work, has built a large group of distributors, which translates into a sufficiently high level of product turnover in the company. A leader is a person who is an example of the possibilities offered by the multi-level marketing system.
The leader who built a large distribution network with a stable level of regular turnover obtains the so-called "passive income". It consists in the fact that once completed work aimed at building the structure - every month receives income related to the level of turnover generated by its own group. It is the perspective of passive income that is one of the main motives that are the driving force for many people to start their MLM business.
An important difference between classic distribution and MLM
In today's highly developed economies, creating a product is not a major problem. Developing and producing a high quality product is really the beginning of the road. Today, distribution is the most important link. When I say distribution, I mean all the steps and steps that must be taken for the product to go from the manufacturer to the direct buyer (i.e. customer). In today's world, the distribution system has the largest share in the final price of the product. Many years ago, business owners focused their attention on maximizing the optimization of the production process and reducing the costs associated with it. In the modern world, in many industries, production costs are only 2 to 10% of the final price of the product. The remaining 90% of the price is expenditure on promotion, advertising and distribution path. That is why it is here that currently has the greatest potential in terms of earning.
Distribution gives the greatest opportunities to earn
The world is full of good products, but in the modern market, not only the quality of a given product is of key importance. The path of a given product to the customer is extremely important, and the level of sales mainly determines whether a given company will grow or collapse. The sales departments of all companies in the world are wondering what they can do to make the customer buy their products. The key issue is how to get to the customer in the jungle of information from different sides, present the product and, consequently, make a sale transaction.
We're all used to classic distribution. Here, to reach the end customer, you need to create a network of intermediaries and invest in advertising. Each of us is bombarded with advertising messages every day. We hear them on the radio and see them on television. Driving a car, we pass hundreds of billboards, even reading the newspaper our eye stops on advertising boxes. There is a saying that "advertising is the leverage of trade" and in the case of classic distribution it works great. Without advertising, the customer will not come to the store and will not choose the product offered. Very often a well-known actor or athlete becomes the face of a given brand and takes part in all advertisements for a given group. This is the case for many types of products, from cosmetics to financial services. However, advertising is only the first stage. Because the product must go through a long chain of intermediaries, such as wholesalers, warehouses and retail stores, before it reaches the customer. Look at the figure below, it simplifies the classic distribution scheme.
It is worth noting that the owner of the store running its own business must cover a lot of costs. The main expenses - for example: rent, utilities, employee remuneration, compulsory employee insurance, taxes or sums allocated for advertising. Many of these expenses should be incurred monthly, regardless of whether the business is profitable or not. Very often the monthly costs are very high.
In the classic distribution, all these costs and surcharges of individual agents are added to the final price of the product. The path of the product to the customer is very long and the level of sales depends mainly on the effectiveness of advertising campaigns.
In turn, in many network marketing companies the product path to the customer is much shorter. This is a simple distribution system. Moreover, most often MLM companies do not use the traditional form of advertising. That's why we usually won't see product advertisements on TV. The principle of the functioning of this system is completely different. The product goes from the manufacturer through the distributor to the customer. In turn, a distributor is a person who has a contract with the company and can order products directly from the company. At MLM, the network of distributors is responsible for the process of delivering the product to the customer. The main sales engine are not advertising campaigns but oral product recommendation. Take a look at the figure below showing the distribution scheme of network marketing.
The amounts saved on advertising are allocated to improving product quality and to remuneration for distributors. Products of companies operating in the MLM sector are usually of very good quality, because sales are based on the oral recommendation of the product.
Network marketing is a business you can't see
Often when I talk to people and mention network marketing, my interlocutors say they have never come across such a concept. They've never heard of something like network marketing. The reason for this is very simple. There is not much information on the subject of MLM on television, no advertising, and nothing can be heard on the radio. MLM companies also do not have their stores selling products in shopping malls. That is why it is often said about network marketing as "a business that cannot be seen." You can often meet people who do not see the opportunities offered by MLM, because with the naked eye it is difficult to see anything.
Three levels of cooperation with a network marketing company
Most companies operating in the MLM system give their colleagues several opportunities for cooperation. After signing the distribution agreement, we usually have three rights. Here they are:
1. The possibility of buying products at wholesale prices
We all like to save on shopping. Therefore, it is worth becoming a distributor of the company whose products we use. It's very simple - you sign a distribution agreement and you can immediately order products at low prices for your own needs. In a word, you order products directly from the manufacturer.
2. The ability to share the product with people around you
Hundreds of thousands of distributors in Poland and abroad exercise this right. Simply collect orders for products, deliver them to your customers and thus earn. It is a simple and quick way to make extra money for many people. Sales are usually on a small scale among friends, family and colleagues from work. It's a fast and fun way to fund your home budget.
3. Ability to build your own distributors structure
If you want to earn big money in MLM then you should focus on developing the distribution network. It is in the construction of the network that lies the key to the largest revenues. This is because you also give other people the opportunity to earn money with you. You invite more people to take advantage of these three possibilities, which you already use. In traditional companies, sales, various brokers, marketing specialists are responsible for sales and promotion. There is no such thing in MLM, and that is why leaders who build a prosperous distribution network receive adequate remuneration from the company. The level of income is proportional to the level of orders that was generated, among others, by the company. People who successfully develop such groups of distributors are so-called network leaders.