What is MLM?
MLM is an acronym for Multi-Level Marketing, sometimes called Network Marketing.
As the name suggests, multiple levels of people are marketing a product to consumers. A sales representative (also referred to as a distributor, member, affiliate, partner or associate) gets customers and recruits and trains another sales rep to get customers.
Sales rep gets customers and trains another sales rep to get customers
Multiple levels of marketing are actually what all companies desire (both MLM and non MLM companies). If you’ve ever heard a traditional company announce, “Refer a friend and you’ll receive a discount on your next purchase,” this is multi-level marketing. Health clubs, real estate, telecommunications, and countless other industries use this technique. Professionals (doctors, dentists, accountants) live or die based on their customers telling others about them. All these businesses are simply trying to get current customers to advertise and market their product or service to potential customers.
The Traditional Company
In a non-MLM company, a sales manager and sales reps are hired by the company. The company is limited to the number of sales reps they can hire based on the financial resources the company has to pay salaries and on the traffic the sales manager can handle. Once a sales manager is overwhelmed, the company can hire another manager or convert a sales rep into a manager. This could be called “Multi-Width” marketing because it expands the organization horizontally as compared to “Multi-Level” marketing, which expands its organization vertically.
Traditional companies (non-MLM) use “Multi-Width” Marketing
The MLM (Multi Level Marketing) Company
An MLM (Multi Level Marketing) company “starts” by recruiting one person who gets customers and recruits sales reps (just as above in the traditional company). But each sales rep is also given the option to become a manager, who can also recruit sales reps. The MLM company only pays commissions, not salaries; therefore, there are no limitations on the number of sales reps or managers an MLM company can recruit. This is beneficial to the company because of rapid expansion by the number of trained sales reps. This is also beneficial to the sales reps because their income isn’t limited to only what they can sell – they can also earn commissions for having trained other sales reps.
MLM uses “Multi-Level” Marketing, which is similar to traditional marketing (see above illustration “Multi-Width-Marketing,”) except there is no limit to growth.
Very simply and factually, MLM (Multi Level Marketing) is one of the five main methods used by a company to sell and distribute a product or a service to a consumer.
All companies (MLM or traditional companies) have one main characteristic in common: they provide a product or a service that hopefully makes a consumer’s life better. Once a company has such a product or service they need to make it widely known. They do this by distributing it. Distributing a product involves finding customers and getting the product in their hands. There are five primary ways to distribute a product or service:
The Five Primary Ways to Distribute a Product or Service
Company rents or buys a store in busy area to get walk-in traffic. Hires sales person to communicate with customers who walk in.
Each of the five methods above can use techniques from one or more of the other methods to get customers. Meaning, a Store Front isn’t limited to only walk-in traffic. The Store Front can also advertise on radio, television and in newspapers, magazines, and mailers (post cards, flyers, etc.) directing prospects to the store location. This can increase the number of people walking into their store.
Similarly, a distributor in an MLM company can use some or all of the 4 other methods as well as getting customers through friends and family. And of course an owner of a store front (such as a restaurant) can also tell his friends and family about his store!
So what is MLM (Multi Level Marketing)? The main point to understand is that distributing any product means to make it known. MLM and the other four primary ways to distribute a product are simply methods used to make a product known.
MLM is Organic
Organically, the MLM industry is a fantastic model. By “organic,” I mean that if you strip away all the hype and noise and just look at it conceptually, it is the purest way to move a product to a consumer and the purest way to be compensated. Here’s why…
- In its organic state one person shares a valuable product or service with another (not because they will profit, but because the product is valuable). “I like it, maybe you will too.” That is clean and pure.
- A person shares a business idea with another – this is the foundation of all businesses throughout history. “I found a business I like and maybe you’d like to work on it with me.” That too is clean and pure.
- The person who shares the business with another ONLY profits IF the person they shared the business with succeeds – that is ultra-responsible, which is also clean and pure.
Those three steps are the organic concepts of MLM and are absolutely brilliant.
If you strip traditional marketing down to its core, it would be a person writing an advertisement and 98% of the people who review the advertisement not responding (a top marketer gets a 10% response; the average is 2%).
Look around and see what all it takes to move a product to the consumer in the “traditional” sense, and you’ll see a lot of wasted actions and resources. Can you imagine how pure a city would look if there were no advertisements? Think of the number of trees that get consumed in the name of advertising, and the materials that then end up in land fills.
Perhaps a good way to describe MLM is to demonstrate how MLM is the same as a traditional company, and also how MLM is different. Look at this diagram for a visual.
Please understand that I am not criticizing the use of trees, the cluttered environment, or advertising – I’m simply asking you to look at the amount of unnecessary actions that go into moving a product to a consumer, as compared to the simplicity of one person communicating with another.
Recommended next page: How does MLM work?
About the Author
Tim’s experience in building his own downline of 56,000 network marketers helped him develop his signature training series. A public relations ambassador for the network marketing industry, Tim has also dedicated his time to debunking the false information spread about the network marketing industry.