What Is MLM - Network Marketing?

What Is MLM-Network Marketing?

Multi level marketing, commonly referred to as MLM, also known as network marketing, is simply one of many ways of selling products or services by a company to customers.  It is based on the belief that word of mouth promotion is superior to more traditional advertising, and more efficiently moves company products dollar for dollar than most other advertising means.

By offering monetary incentives far greater than you would find for a company salesman selling the same product, the lure of wealth and riches is usually the carrot that brings people into the MLM or network marketing business.  Even though the products and services may be purchased directly from most companies without becoming a distributor, most people opt for spending a small amount for a "business kit" from which they can derive their products for free if they just refer a few people.  Thus, network marketing companies make a great majority of their sales to distributors, as opposed to customers who are not involved in the business even though many of those distributors many never refer a single person or even sell a single product.

This has created a firestorm among the anti-MLM and even some government agencies that MLM network marketing opportunities were nothing more than a "pyramid scheme" since over 90% of the products or services marketed by most MLM companies were to distributors and not to regular customers which is in violation of the laws which govern the MLM industry.  However, when you consider that most of the distributors are not actively building the business, they are in essence, just regular customers even though they paid a small fee to become a distributor.  So, the number of "customers" is much higher than the statistics portray.

MLM-Network Marketing Compensation

In getting back to the compensation of MLM companies, most compensation plans are very complex when it comes to how an individual earns money, but the true draw for people is the potential for "residual income".  After all, when you can earn money years from now for work you do today, it opens up a whole world of possibilities.  And considering that the only people, prior to the proliferation of the MLM industry, who could make true residual income were people in the entertainment industry, it instilled thoughts of being as wealthy as movie stars or rock stars into millions of people, where a movie or CD playing commercially years later still earned the artist "residuals".

MLM-Network Marketing Products

As far as the products or services that are produced by the MLM Network Marketing companies are concerned, many are very unique and, in many cases, of high value, since that is one of the ways an average person can market to his/her family or friends without being a sales person.  By having a product which can't be easily bought or duplicated, it creates a unique selling opportunity if the product has value to the end user.  Consequently, MLM products and services usually sell for more money than their competition because they have unique selling points that must be communicated to the customer that a simple ad cannot normally do.  That is why many, many Fortune 500 companies have used the MLM distribution channel to market some of their products.  Because it is cost-effective as well as creates a long term user of the product with repeat sales.  MLM distributors are usually very loyal product users.

Some have claimed that an oversaturation of product markets has occurred when a popular network marketing company has exploded in certain areas causing a oversupply of product and an associated lack of demand.  However, many companies have research and development teams that are constantly producing new, quality products so that doesn't normally happen with MLM companies that produce their own quality products and control the supply chain of ingredients.   And many of these companies have won awards for their superior products and continue to grow market share regardless of the global economic situation.

Conclusion

In conclusion, the MLM network marketing industry has had its share of critics over the years, some of the criticism has been warranted due to slick "snake oil salesmen" trying to make a killing without a true product or making medical claims about products that have been totally out of line and/or against the law.  Nobody benefits when certain people try to con the industry for their own gain.  But, similar types of things have happened in other industries and the entire industry wasn't crucified by the media in most cases.  That hasn't been the case in the MLM network marketing industry.

Over the years, the MLM network marketing industry has evolved into an industry with a "dark cloud" over its head due to some unscrupulous characters and a growing group of dissatisfied former distributors who feel that they had been mislead at the very least, and lied to at the most.  And because of the advent of thousands and thousands of companies with questionable products and top loaded compensation plans, many people today look at legitimate network marketing opportunities with a more than skeptical eye, leading honest distributors to look for other ways to make money online, or at least investigate alternative ways to market MLM network marketing opportunities.