WHAT IS MLM, ANYWAY?
Probably the biggest impediment to a new distributor's rise in a multi-level
marketing program is the difficulty he or she has in both understanding, and
in explaining multi-level marketing to prospects. The biggest reason for
this is the tendency for people to complicate things so they can use charts
and graphs to illustrate them.
Let's simplify, so everybody can understand.
Conventional Marketing: In conventional marketing, the manufacturer hires a
factory rep to sell to distributors. This rep gets a commission (off the
top, from the manufacturer) that usually amounts to about 5 percent of the
retail value, while selling to the distributor in large quantities. This rep
does not have to buy the product, since he is working for the manufacturer.
The distributors he sells to buy in quantity (usually a gross -- 144 pieces
or more), usually getting a discount of from 60 to 70 percent off retail.
This distributor sells to retail stores, giving them from 25 to 40 percent
off retail, out of his discount. They buy smaller quantities, usually 12
pieces minimum.
Based On Volume: Each product buyer in this string (distributor, store) pays
a price based on the total volume purchased. The smaller the volume, the
smaller the percentage of the retail price they get to keep.
Group Purchases: Similarly, in network marketing, each person earns a
percentage of the retail price based on their total product purchase. But
while the conventional retailers and distributors have to buy it all at
once, in network marketing, you don't. And this is the key to why the little
guy can get started for a very small investment and still make a lot of
money after a while. Since all product purchases by you and those you've
sponsored are grouped over a specific period (usually 30 days), you are paid
on that total, even if your individual product purchases involved only one
unit at a time. That's the major difference between network marketing and
conventional marketing.
Retail Sales: Under an illegal pyramid scheme, the only product involved is
usually the right to sell the sales program to other suckers while making a
profit from their sign-up fees. In real multi-level marketing, you don't
make a profit from signing people up. Your only profit comes from selling
the product. It follows then, that you must sell some product yourself,
along with that sold by your distributors, to make this thing work. If you
have a product that is good, that will not be hard to do.
Customer "Prospecting": With most MLM products, your best prospect for new
distributors are your retail customers who decide they want to make money
selling a product they've already shown they like, by buying it themselves,
at retail. You just have to let them know the opportunity is available and
is affordable and "doable."
MLM Is "Multiplying Yourself": Since you can't usually make the "big money"
most people coming into MLM are after through "one-to-one" retail selling,
it follows that you must "multiply your efforts."
Sponsor Others: You can do this by recruiting and sponsoring other people to
help you sell the product, while buying it through you. This way, everybody
you recruit is not only making a profit for themselves, they're also making
money for you by increasing your volume of sales.
Building A "Marketing Group": As you sponsor more and more people, you begin
to build a marketing group that becomes responsible for more and more sales
volume, causing your own profit to increase while each distributor is also
making a profit.
"Sliding Scale" Refunds: Since most MLM program profits are paid on a
"sliding scale," meaning the more sales volume, the higher percentage of the
money you get to keep as profit, the more you and your group sell, the
higher the percentage each is paid on his or her sales.
The Money Flows Through You: Now here's one of the most important things
about MLM. When anyone in your group buys a product, that purchase is not
only counted as part of that person's sales volume, it is also counted as
part of yours. That means you profit from every sale made by anybody in your
marketing group, including yourself.
You Keep The Difference: When this happens, your distributor makes a profit,
based on a lower sales volume than yours, and so makes a smaller percentage
of profit than you do. This is because with the sliding scale mentioned
above, his refund or bonus is smaller. For instance: a distributor selling
$300 worth in some plans will be paid a refund (in addition to his or her
retail profit collected at the time of the sale) of 6 percent of the retail
value. You, as the sponsor, who may have a volume of $2,500 or more, based
on sales volume from many distributors (whose sales volume goes through
you), make 18 percent refund on the same dollars.
The difference between the distributor's 6 percent refund and your 18
percent refund is 12 percent. And you get to keep this as your profit. Add
this money up on the sales volume of everyone in your group, and it can be
big bucks. One thing to note here: none of this comes out of the
distributor's share. It is paid by the company on top of the retail profit
(usually from 25 to 40 percent of retail) each distributor gets when he or
she makes a retail sale.
Obviously, the key to making a lot of money is in having as many people in
your group as possible, and helping them to sell as much as they can. Some
would say that this is unfair to the distributor. Not so, because each
distributor has the same opportunity to rise to the same percentage bracket
as you have, and beyond, simply by sponsoring and training more people to
sell the products.
"Breakaway": An important factor in real MLM is the "breakaway point." This
is the point at which the percentage of the retail price that is paid to a
distributor equals the top percentage, which is what you will by then be
earning. What happens then? The answer is simple. This distributor -- and
his or her group "break away" and become a separate group from yours. At
this point, you will no longer be responsible for supplying and training
members of this group. This distributor is now considered to have been
sufficiently trained by you to be able now "go it alone." This distributor
will now buy direct from the company, and will be personally responsible for
him or herself and those in his or her group.
Overrides: But you will still be rewarded for this training and supply. When
this happens, the company starts paying you an "override" on this group's
total volume at a smaller percentage than you made on each individual's
volume when they were a direct part of your group (Again, this doesn't come
out of your distributor's share. It is money paid by the company on top of
everything else). But this isn't a bad thing, because as more and more of
your distributors break away -- and they will -- and become equal to you as
a "Direct Distributor" or whatever your company calls them, the company
starts increasing the percentage you are paid in overrides. These overrides
can add up to really big bucks, and these bucks are the kind that you
continue to make, even if you stop working.
Retirement: At this point, you can usually retire if you wish, and still
make continuing profits on the work of those you have recruited, sponsored,
and trained to themselves earn money. You won't continue to make money on
your own personal group of individually sponsored distributors at this
point, since you won't be working with them if you are retired. But if you
have enough breakaways contributing to your income, this amount will be
small in comparison.
More And More Profits: If you don't retire, and your personally sponsored
distributors continue to break away, most companies continue to increase the
percentage they pay you, the more breakaways you have sponsored. Many
people, in many different companies, can earn as much as $500,000.00 a
year -- or even more -- this way.
Dependable Money: And this is "dependable money" because most reputable MLM
companies, since they operate on a cash basis with their distributors, are
also able to operate this way with their suppliers. This means they don't
usually get into the money problems often faced by many conventional
companies who find it necessary to offer credit terms to most of their
customers who sometimes don't pay.
MLM Fastest-Growing: Real MLM is not some "back alley con game." It's one of
the fastest growing segments of the market. Many MLM companies are "Fortune
500" companies and many formerly "conventional" marketers are going into
network marketing in a big way. If you want to make money, look MLM over
carefully. It could just be the medium that will change your life. It has
made millionaires out of many who never expected it. It can do the same for
you if you work at it.
Stay away from pyramid schemes! One of the biggest problems real MLM has is
making people understand the difference between MLM and pyramid schemes -
which are invariably billed as MLM. They are not. The main difference
between the two is the product. A real product that people would buy even if
the MLM weren't involved, and which has uses outside of being the "excuse"
for people to "buy in." If the plan you're looking at requires a specific
purchase, usually on a periodical basis to "keep the money flowing," it's a
pyramid scheme.
If you can "buy into a preferred position," it's a pyramid. If it depends on
specific required purchases on a schedule, or even a one-time purchase (such
as the "four-report" scam where you're required to buy four reports from
four people which you reprint and sell), it's a scam. Stay away from it
because even if you do make some money, it's illegal and you could get in
trouble. Most don't work, and all inevitably collapse of their own weight
when you get to the point where it would take more people than there are in
the world to keep it going. Such schemes proliferate because of the innate
greed in everybody. You've got it, and I've got it. But I don't succumb
because I know better. It should be the same for you. Any time you must
invest a sum of money to "keep the money flowing," it's a pyramid scheme and
will ultimately, if not immediately, lose you money.