What Is Multi Level Marketing (MLM)? Entering the Controversial Realm

How Does Multi Level Marketing (MLM) Work? Entering the Controversial Realm

Published Under: Content Marketing | Multi Level Marketing
Last Updated: March 09, 2020
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Brands strive for attention and they can get it easily if they have good marketing tools and practices at hand. Well, let’s face it, this is 2020 and there was no way the marketing realm could have settled with just one way that does it all. Brands needed something extra – something that would allow them to tap broader markets. Something like MLM, also known as Multi-Level Marketing. Let's have detailed look into what Multi level marketing (MLM) is and how it works.

Tina Anderson

Multi Level Marketing (MLM) is a something that many brands have wet their feet in, despite realizing the consequences. MLM is speculative, yet it’s surprising to see how most brands still prefer using it.

The origin of MLM dates back around 1886 and Avon was the first brand to practice MLM.

What is Multi Level Marketing?

Multi Level Marketing (MLM) is a business model or a sales and marketing strategy that includes a network of people that are committed to sell a product to customers. The people who sign up for MLM are remunerated with commissions. Simply put, MLM works when participants sell products and get a commission for it.

Not every brand works with the mindset of Spectrum Communications that provides an affordable connection to its customers with its high-quality Spectrum internet and cable TV bundles. Some like to rely on shady marketing practices in hopes of benefits.

Brands that rely on MLM focus more on the quantity of products they intend to sell, rather than maintaining a good workforce. Maybe this is the reason why people who engage in MLM are never in it for growth.

MLM Vs Pyramid Scheme

The main difference betweem MLM and Pyramid Scheme is that MLM schemce will pay you off, depending on your sales to retail customers, without having the need to recruit new distributors.

If the main source of the income in the scheme is via recruirement, further down the line, also know as "downline", it is probaly a pyramid scheme.

Is MLM Good or Bad? Spilling the Tea

MLM has garnered a pretty negative connotation. Not quite sure if these are solid speculations or just us overthinking, but the brands that have tried MLM haven’t been able to do quite well. Allegedly the products sold behind the MLM masquerade are never of good quality.

Then comes another factor, i.e. the revenue that the company generates, which only confirms the illegality of this practice. Turns out, all of these practices are a part of the pyramid scheme.

In case you’re wondering, a pyramid scheme focuses more on making money off a product, rather than marketing it. People recruit more people and this goes on until the numbers of new participants add up and in the form of a pyramid. Still confused? Well, here’s an example to help you understand what we’re trying to say.

Embedded content: https://drive.google.com/open?id=1-ca3-I1h4mhrCB_6-DiAlPCxtFOdSr0C

Notice how these figures are expanding just as the number of levels increase. This is what the pyramid scheme is all about.

Now what makes Pyramid Schemes weird is that the new recruits are often asked to pay money disguised as entry or training fees. Of course, this entire process is not only illegal, but once the number of potential recruits reach their saturation point, then things go awry; businesses collapse, people lose their money and everything just crumbles into an unrecoverable mess.

Therefore, concisely, pyramid schemes and MLM bear a remarkable resemblance to one another and this practice is nonetheless illegal, unethical and definitely not worth trying.

MLM Failure

Let’s be very clear, the old saying that “if you want anything done right, you’ve got to do it yourself” does make sense.

If we are to summarize the main reason why MLM fails in most cases, then this phrase provides the best explanation.

However, it’s better to understand why MLM fails so that if someone is to use it, they know what to look out for.

1. Putting Faith In Inexperienced Professionals

The first problem is that this system puts its faith in people who might not necessarily be experienced professionals. Anyone can talk to anyone, but making a sales pitch is a professional task and even the most loyal customers often find it hard to even justify why they are loyal to a brand, let alone convince others to try it.

Most startup MLMs can avoid this simply by making sure they have sound and professional leadership. Every MLM company knows it must have the top-of-the-line infrastructure to support the MLM network.

However, if the leadership within that network is not strong enough, It’ll probably start to crumble and there would be risk of miscommunication to the customer being pitched.

2. Getting Product Wrong

Sometimes it is not the people or the system at fault, but the product itself. You cannot go out in hopes to set up a network of customers promoting your product if the product itself is not promotion worthy. MLM is highly dependent on the product’s acceptability and demand.

Before any organization launches an MLM campaign for a product, it needs to be thoroughly trusted in the market for its reception by the people. This acceptability is not limited to the general purpose of the product, but also the price at which it is offered to the public and the overall satisfaction that it brings.

Most importantly, the product being pitched via MLM must be better than its competitors so that its use is believable and acceptable to others.

Organizational set up for MLM

Coming back to the organizational set up for MLM, it is imperative that every person added to the chain of MLM is clear of the organizational goal and demographics of the market they are about to engage. A lot of MLM ventures fail when marketing teams enter the field without prior data on the type of people they are about to interact with.

MLM cannot be a stab in the dark, like other marketing techniques, it must be carefully targeted at a pre-defined market. MLM tends to fail where the potential customer is not properly introduced and the goals are not set in place.

Capitalize influence via social media

Most people have the misconception that MLM works when people tell people about a product and convince them to use it via word of mouth, i.e. two people conversing face to face. This would be true if it were the 1800s because now word of mouth has a very different definition. Word of mouth is not only spread by face to face conversations, but through social media as well. MLM setups that fail to recognize this notion, fail at the overall MLM practice. Currently, most people not only rely on social media to keep them updated on the current affairs, but also to guide them through important decisions in their life. Such is the power and influence of social media in today’s world. If an MLM company is looking towards successfully deploying their network of reeling in customers, then they must capitalize influence people have via social media.

A good idea while implementing MLM is to stay within the bounds of the law. As mentioned earlier, the legality of MLM, particularly an uncontrolled MLM network, is questionable. Therefore, it is always a good idea to keep a tight check on your business activities, particularly when going into new domains and marketplaces. This includes keeping a lookout on your current and potential tax brackets, salaries and frontloads. This may seem like a general rule, but the truth is that the growth that comes with MLM is very unusual and fast-paced. Most MLM companies don’t even realize where they crossed the line and thus, they eventually find themselves in regulatory authority crosshairs.

Strong technical system for growth management

Speaking of MLM growth, it is important to understand that whenever an MLM company is intending to expand itself, then it must make sure that it has a very strong technical system set up at its base. MLM often engages people over a vast area and even different cultures and geographical locations to set up its network.

This means that the system set up to keep all these people under one umbrella must be multilingual and able to cater to different business environments of different countries. MLM structures fail badly in front of competitors that are more agile in terms of their presence beyond borders.

What Are Your Thoughts On MLM?

Most organizations initiate MLM because in the beginning it sets off like wildfire and gets an amazing response. This is where most businesses fail in sustaining MLM because instead of solidifying the success factors, they get greedy for growth and dive deeper in this system.

As a result, the one controlling the system loses sight of the goals defined at inception and the overall network loses its passion for marketing.

Now, you can only imagine what happens when an unpassionate person is responsible for a marketing pitch.

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Meet The Author

Tina Anderson

Tina Anderson is a Marketing Analyst, consulting various organizations across the globe. She endeavors to fuse tech with marketing.

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Disclaimer: Whilst we have made every effort to ensure that the information we have provided is accurate, it is not and advice. We cannot accept any responsibility or liability for any errors or omissions. Visit third party sites at your own risk. This article does not constitute legal advice