Why The Internet Has Changed MLM Forever! - Part II

MLM vs. Network Marketing

Network marketing is not illegal anywhere (that I know of) and works very differently indeed. In this kind of marketing, people are recruited by the originator to sell to the person’s friends, relatives and colleagues, their ‘network’.

Is Network Marketing A Popular Business Model?

Many companies have operated this type of marketing over the years and many still do, including large insurance companies and cosmetics firms. Network marketing is little more than word-of-mouth advertising, but with the addition of a financial reward for the person recommending the product. This alone has given Network Marketing a bad name, simply because the MOTIVE for recommending the product comes into question.

Recommend A Product And Get Paid For Doing So

The idea is that the people selling the products are using them themselves and like them so much that they recommend the products to people they know. In return for this extra business that the product manufacturer enjoys, they will pay the person recommending the product a commission, usually at the end of each month.

MLM Is Nothing Like A Pyramid Scheme

Multi-Level Marketing, or MLM as it is most frequently termed these days, is often confused with a Pyramid Scheme, however, in reality it’s much more like Network Marketing, in that there are still actual products available for purchase.

The main reason some people still don’t understand the difference between MLM and a Pyramid Scheme is because of the remuneration structure of MLM. There are two ways to get paid with Multi-Level Marketing; the first is selling the product directly to people, just like Network Marketing. In effect you are recommending the product because you’ve experienced its beneficial effects yourself and want others to benefit too.

Two Ways To Get Paid In Multi-Level Marketing

The second way to be paid in a Multi-Level marketing company is to have people that are already your customers become distributors of the product themselves, because they in turn have experienced the benefits and want to promote it to THEIR friends, family and colleagues. The person who helped them become a distributor will also receive a small payment based on the second-tier person. This will continue down to a certain fixed level, sometimes as low as two tiers, but often down to about 10.

What’s Wrong With MLM?

One of the main reasons that MLM has had a bad reputation is because it can attract the wrong kinds of people, that is, people who maybe have no prior business experience or no sales experience. Or perhaps those that have unrealistic expectations of the amount of work involved in promoting the products and servicing their customers. MLM will also attract individuals with very little money to invest in their new business, so may already be desperate for money, and desperate people can do irrational things (unlike most humans who NEVER do irrational things).

It’s About Perception

So, the real problem for a company that operates an MLM system is the PERCEPTION of the people involved. I firmly believe that the majority of Multi-Level Marketers are good, hard-working individuals who really want to run a business of their own, but, as is always the case, the majority are tainted by the few “bad apples”, and the general perception is that a disproportionate number of these people find their way into this kind of business model.

Tomorrow I’ll discuss the way the internet and the Worldwide Web have changed MLM forever.

Luke.