No, multi level marketing is not synonymous with pyramid scheme. I think something about the “multi-level” part just conjures up that image of a pyramid and that’s where the association begins. I know it did in my case. More about that later
But on to the answer you’re looking for…
What is multi-level marketing?
Multi-level marketing, also known as network marketing or MLM, really just refers to a business model which is part of the direct selling category. So, rather than appearing in stores, the multi-level marketing product or service is sold directly by the MLM distributor. Some examples of well-known multi-level marketing companies include Avon, Mary Kay Cosmetics, Pampered Chef, Herbalife International, Tupperware, Arbonne International, MonaVie, Shaklee, and Southern Living at Home, just to name a few of literally thousands around the world. Products and services that do well in an MLM model are those that require a little bit of explaining in order to convey their true value. That’s where the network marketer comes in. This person will answer questions, provide demonstrations, host events, etc., in order to explain the full benefits of the MLM products/services they market, and interact directly with the consumer.
The multi-level marketing model works like this. You join, usually for a relatively small fee, and you are then granted commissions on the products/services that you sell, and on the people that you bring in as part of your sales force, and on what they sell. This is where the “multi-level” part comes in…An MLMer has levels of distributors above him, and levels of distributors below him within his or her organization (which, by the way, is no different than the structure of most organizations–what is different is that your pay will be affected by the levels below you).
Each MLM business has a different pay plan or structure and these plans vary widely from MLM to MLM. While you should understand your MLM’s compensation plan, don’t get too caught up in it, because how successful you become really doesn’t depend on how the pay plan works. It has a lot more to do with the products and services you sell, how many you can sell, and how well your MLM business management and you yourself can recruit, motivate, and train your team members.
What multi-level marketing is not
Network marketing is NOT a get-rich scheme. Like any other business, it takes work, dedication, and skills that more often than not must be learned along the way. The truth is that network marketing has the potential to make you a lot of money very quickly, but not if you are just starting out and doing it only part-time, or just a couple of hours a week. Once you do build up your business, you can then work less and still make the same amount, or more, money, but this comes after you’ve put in your due diligence.
Legitimate Multi-level marketing businesses are not pyramid or Ponzi schemes. MLMs and pyramids schemes are often confused, understandably so in some ways. First of all, pyramid schemes cropped up just shortly after the network marketing model was born in the mid-1900s–in fact, they were created by unsuccessful network marketers who decided to make things easier by doing them the illegal way! Before the government caught on, thousands of people had fallen prey to these types of schemes. And that is why the FTC is now very quick to clamp down on pyramid and Ponzi schemes. This is also why multi-level marketing companies are under extreme scrutiny.
Here’s how you can tell a pyramid/Ponzi scheme from a legitimate network marketing, MLM, or multi-level marketing company. The legitimate MLM sells products and services. The scheme does not. So, if you run into a company that is offering you a commission just to recruit other members into the business, then that is a pyramid scheme. Network marketing companies will also offer you bonuses or commissions if you recruit members into your team, but the business is based on products and/or services, not only on recruiting team members.
Multi-level marketing is not for everyone.
Anyone over 18 can join an MLM business and the start-up fees vary from company to company. But while anyone who can invest the start-up fee is able to join an MLM, not everyone is suited for this business. In fact, more than 95% of those who join network marketers end up quitting. there are several reasons for this. One is that, often, new MLMers are lead to believe that the network marketing business is a get-rich quick opportunity and it can be done without putting much effort into it. Also, many people jump into MLM because they are told that anyone can do it. While this is true in a way, to be successful in MLM, you do need to know about sales and marketing. Can you learn it? Of course. Will you do well without having sales and marketing knowledge? Probably not. Finally, while many new network marketers are dedicated and willing to learn, they are not being trained correctly. Luckily, there is a substantial amount of reputable MLM training available both online and offline today, and it is suitable for all network marketers in all MLM companies.
Why Join a multi-level marketing company?
when you join a network marketing company, you are essentially in business for yourself, and you can make of that business what you want. Network marketing is by far the most affordable way to start your own business. You don’t have to come up with a product or service. It is there for you. You don’t have to produce marketing materials. They are also at your fingertips. Most companies also offer you a corporate website that you can send customers and prospects to. And often, you don’t even have to hold inventory.
It is the dream of financial freedom, especially during this economic downturn, that causes people to seek out non-traditional business opportunities. Network Marketing businesses are especially attractive because the initial investment is extremely low and the potential for gain is extremely high.
Residual income is the coveted gem of multi-level marketing–the ability to be paid even when you are not actively working. As a successful network marketer, you leverage the time of others, after you have put in the time training them. Once you have an established downline (the people in your team who you have recruited, or who have been recruited by others under you), they will go on to train others as you have trained them (hopefully), leading to more profits for you without you spending any extra time or effort. It is not a coincidence that the most successful MLM business owners are also the best trainers.
Another great draw of multi-level marketing is that representatives can work from home (or anywhere else) and establish their own schedule, goals, plans, etc., rather than those of their bosses.
Many start out on a part-time basis to substitute a second job–working a “night-shift” from home on your own computer, rather than at a factory, all-night supermarket, etc., is comparatively appealing.
There is an undeniable surge in the market towards entrepreneurship and home-based business. As the current economy is eliminating traditional nine to five jobs, the number of multi-level marketing corporations and those who represent them is also on the rise. Some of the most recognized advocates of the MLM business model are Donald Trump, Robert Kiyosaki, and Bill Clinton.