What Is MLM?

What Is MLM?

MLM stands for Multi Level Marketing and is also known as Network Marketing or Referral Marketing. A company is considered MLM where the products or services delivered to their customers, are distributed by independent contractors also known as distributors. This is the major point of difference between MLM and conventional systems. Instead of a complex system of wholesalers, warehouses, distribution centers, freight companies and retailers – with all the added costs at each point of handling – MLM companies normally deliver direct to either the distributor or the customer. The savings in infrastructure, multiple handling, storage and transport are huge. These distributors are compensated based on their own sales as well as the sales of other distributors they have recruited and trained. The terms “multi level” and “network” come from this concept of recruiting and training a huge group of distributors (also known as a downline) as your own sales force within this company.

The idea, of course, is to build a huge downline that will amass a large customer base. Obviously, the person who has the most customers in his/her network is compensated the best. Most MLM companies do very little advertising in comparison to more conventional companies, since word of mouth referral is the primary promotional medium. This represents enormous savings, which are normally channeled into network rewards. Compensation plans very from company to company but if you build your downline the right way you can reap a huge financial reward.

Most of us do a little network marketing every day. The difference is that we don’t really know that’s what we’re doing and we’re not actually getting paid for it. Let’s say you saw a great movie and recommended it to all your friends, you are doing network marketing for the theater and the film company that produced the movie.

The same goes for a favorite restaurant; article of clothing, favorite album or a good book you just read. Herein lies the difference between network marketing and multi-level marketing. Network marketing does not have to be multi-level nor does it have to include building a downline.

The problem in network marketing arises when people focus solely on recruiting recruiters and training them to recruit. Neglecting to acquire customers and to train your downline to do the same results in no compensation. Legitimate MLM companies only payout when customers are acquired not when a downline distributor is acquired. A lot of the negativity towards network marketing arises because of lack of understanding of this one issue.

To your success!

Steve