The MLM (Multi-level Marketing) Business Model
What is MLM? For some they understand what MLM is, others don't know, and worse yet there is a large group of individuals who think they know what MLM is, but really do not have a clue. Due to this division of the population, the question of what is MLM is usually answered incorrectly. The other factor to further confuse the issue of what is MLM is the bias that the comes from the individual who is trying to answer the question. That is the purpose of this page, is that it is to answer the question what is MLM in simple to understand and in unbiased manner.
MLM, Multi-Level Marketing also known as Network Marketing, is a well-established business model. Used most widely in the Direct Sales industry, the MLM business model has been in existence for more than 60 years. In that time it has generate more than $110 billion USD in revenues, and is used in more than 172 markets around the world.
What distinguishes the MLM business model from traditional business is the way in which products are sold. In MLM the bulk of the products are sold through what is called relationship referrals, or word of mouth. People recommending products that they have used and are satisfied with, thus their friends too want the same results and will purchase products. The number of sales for the MLM company increases as the network of independent distributors / associates working with the MLM company grows.
The network of independent distributors / associates grows as they are paid to spread the word about their respective products. Instead of having multi-million dollar advertising campaigns, the parent MLM company will pay their independent distributors / associates based on their compensation plan.
While the MLM business model works well for companies looking to sell product, it work even better for the average individual who is an independent distributor / associate as they are able to leverage the MLM company's compensation plan an earn an income that they would most likely not be able to earn elsewhere.
In MLM there are two important terms that everyone should utilize and maximize and that is leverage and duplication. The independent distributor / associate can leverage the efforts of others to increase their incomes, as well as duplicate the success before them. A one develops into a leader and leads their groups, they will then teach and mentor their groups to duplicate what they have accomplished.
In this manner, everyone wins! The distributors earn more money each and every week, more products are being sold, again helping the independent distributor / associate to make more money, and the parent MLM company is making more money with the additional sales.
Why Companies Choose MLM Business Model
The bottom line for any company, regardless of industry is just that . . . their bottom line. The company wants to increase revenue, increase their customer base and if their operations are in order and their products are priced correctly, they should be able to increase their profits. That is the reason any company is in business, and that is to turn a profit and make money.
Where the difference between a traditional business and a MLM business is the means in which the company expands their customer base, revenue and their profits. The traditional company will have an advertising budget which they will use to get the product and/or services in front of the public so that they are aware of the product and/or service and the need that it can fulfill. The company than has to have the proper channels for their products and/or services to be sold, and for this they turn to retail outlets. The retail outlets are what a customer goes to, whether in person or online, and purchases the products and/or services that they saw advertised.
In following this traditional business model, money is spent on manufacturing the product, advertising, distribution to the retail outlets and the retail outlet's mark-up. In a MLM business model, the money that would have been spent on advertising, shipping and retail outlet mark-up is saved. Instead it is paid out in commissions to the independent distributor / associate.
In today's environment with multiple sources of media everywhere we look, it is becoming more and more difficult to engage people and share a new product and/or service. MLM allows companies to get through the multiple levels of distractions and work with an individual's referrals to sell their product. No longer does the biggest advertising budget win, as it can be very difficult, if not impossible for new start-ups to compete with their larger, corporate competition.
MLM levels the playing field and gives start-up companies the chance to build their customer base. Also as the MLM model is more directly in contact with it's customers, better customer service can be achieved and thus increased customer loyalties also. Everything from developing new products / services as requested by the customers, to saving the customers money as the "middle man"; is no longer present in the business model. It is a win-win situation for the company and it's customers!*Examples in these materials are not to be interpreted as a promise or guarantee of earnings. Earning potential is entirely dependant on the person using the products, ideas, techniques and efforts put forth on Engineered Lifestyles. For our full earnings disclaimer click here.
Become an Entrepreneur
Possessing a team of like-minded people is one of the keys to success and is essential in any business. The results you achieve will be directly related who you surround yourself with. You may be in business for yourself, but you cannot do it by yourself, you need a team. A team that you can rely on. Engineered Lifestyles has the experience and can provide you with the team you need for success!
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