Definition
Multi-level marketing (MLM) is a marketing
strategy in which the sales force
is compensated not only for sales they personally generate, but also for the
sales of the other salespeople that they recruit. This recruited sales force is
referred to as the participant's "downline", and can provide multiple
levels of compensation. Other terms for MLM include pyramid selling, network
marketing, and referral
marketing.
Most commonly, the salespeople
are expected to sell products directly to consumers by means of relationship
referrals and word of mouth marketing. Some people use direct selling as a synonym for MLM, although MLM is
only one type of direct selling,
which started centuries ago with peddling.
MLM companies have been a
frequent subject of criticism as well as the target of lawsuits. Criticism has
focused on their similarity to illegal pyramid
schemes, price fixing of products, high initial entry costs
(for marketing kit and first products), emphasis on recruitment of others over
actual sales, encouraging if not requiring members to purchase and use the
company's products, exploitation of personal relationships as both sales and
recruiting targets, complex and sometimes exaggerated compensation schemes, the
company making major money off its training events and materials, and cult-like
techniques which some groups use to enhance their members' enthusiasm and
devotion.
Old fashioned advertising will surely cannot
survive in this generation. That is why multilevel marketing is here to keep
your business active. What is the advantage of switching into MLM campaign?
·
Asset to your business income
·
Positive cash flow
·
Fame online and offline
·
Non stoppable marketing
·
Continuous lead generation
·
Numerous
customers
What's Wrong With Multi-Level
Marketing?
Bad Image or Bad Reality?
"Let me tell you about an incredible
ground-level business opportunity," and you are invited to a house or to
lunch for "a discussion." Funny enough, you feel sick in your gut
that there is some hidden agenda or deception. "Probably a multi-level
marketing (MLM) organization," you think. Suppose it is? Should you trust
your instincts? Is there anything wrong with MLM? This article will analyze
four problem areas with MLM. Specifically, it will focus on problems of I) Market Saturation, II) Pyramid Structure, III) Morality and Ethics, and IV) Relationship Issues associated with MLMs. Thus, you can
properly assess your "instincts."
New, Innovative?
MLM can no longer claim to be new and, thus,
exempt from the normal rules of the market and the way goods and services are
sold. They have been tried and, for the most part, have failed. Some have been
miserable failures in spite of offering excellent products. Marketing innovations are
not rare in the modern world, as evidenced by the success of Wal-Mart, which
found a more efficient and profitable way to distribute goods and services than
the status quo, providing lasting value to stockholders, employees,
distributors, and consumers. But this is not the case with any MLM to date, and
after 25 years of failed attempts, it is time to point out the reasons why.
Doomed by Design?
The first question is this: Is any company
choosing this marketing strategy destined to fail, to degenerate into an
exploitative venture, regardless of how good the product is?. To see this clearly we must
go through an, otherwise, obvious and elementary discussion of how any business
must be careful not to overhire, overextend, or oversupply a market.
The Real World
Any business must carefully consider supply and
demand. For example, if the ReVo Corporation thinks that it will have a
full-fledged fad on their ovoid sunglasses next summer, perhaps they should
plan to build and distribute, say, 10M units. This involves gearing up
factories, setting up distribution and dealer networks, and carefully managing
the inventories at each level so that ReVo will still have credibility with
their distributors, retail outlets, and the public the following year.
If it turns out that there is a "run" on ReVo products,
and they sell out in mid-June, then they have miscalculated demand and will
miss out on profits they could have made. The more serious problem, however, is
overestimating the saturation point for the product. If they make 10M units,
and sell only 2M units, this may be the end of ReVo as a company.
The all-too-obvious point here
is that management of supply and demand, and keen insight into realistic market
penetration and saturation are crucial to any business, for any product or
service. Mismanagement of this aspect of a business will eclipse good market
access, excellent product design, human resource assets, production quality,
and so on. Simply stated, a failure to "hit the target" of supply and
demand can ruin a company if the market is oversaturated.
"Everyone Will Want to
Buy This Product!"
All products and services have partial market
penetration. For example, only so many people wish to use a discount broker, as
evidenced by the very successful but only partial market penetration of Charles
Schwab. Not everyone wishes to join a particular discount club, or buy gold, or
drink filtered water, or wear a particular style of shoe, or use any product or
service. No one in the real world of business would seriously consider the thin
arguments of the MLMers when they flippantly mention the infinite market need
for their product or services.
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