MLM multi-level marketing

Imagine achieving so much more for so much less! Click here for free tools and know-how materials from the Mud Valley™ strategy & brand marketing community.

Question - is MLM multi-level marketing a scam?

Answer - usually MLM schemes are not scams – they offer high quality products and good marketing support materials. However, the vast majority of people do not have the skills to make it as entrepreneurial business people, so the chances of success as a distributor are slight (3-5%)

Key points

As a manufacturer / brand owner, MLM multi-level marketing is in essence a way of leveraging social networking theory to generate a sales force that pays you rather than vice-versa.

In its core, the proposition is very attractive to manufacturers and brand owners and could be equally attractive to people who are good entrepreneurial business people and talented networkers.

However, it should be born in mind that some 95% of MLM distributors never make their money back. Most of the products never get past the distributors because they simply do not possess the skills to sell them on.

In more detail ….

The essence of multi-level marketing is that a manufacturer develops or gains access to a range of products, usually a perfectly acceptable range of products, and then looks for a cheap way of selling them face-to-face which does not require significant capital investment.

The distributor perspective

As a potential distributor of MLM products, you sign up with the manufacturer typically for a fee and buy some initial stock which you will need for samples. When you make a sale, you get a commission or a margin, and your ‘upline’ (the person who recruited you) gets a share too. When you recruit other people, you get a share of their sales.

It all looks very attractive and MLM originators do particularly well in a recession where people have cash redundancy awards they wish to exchange for a steady income.

The problem for both sides – the manufacturer / brand owner and the distributor – is that the reality is rarely as good as it is sold. Yes, in theory, you can recruit a mass of distributors under you and get a share of all their sales; equally, you can sell stacks of products in your own right. However, either way, you have to be a smart sales person who likes dealing with people and, in regard to recruiting others, does not mind being a bit unscrupulous, knowing that most of your recruits will never make it.

Very few products sold through MLM have strong brand names (otherwise they would be franchise operations), so as a distributor you are virtually starting up a new business. The brand owner will have collateral marketing materials they will sell you, hedged around by rules as to how you can use them and brand collateral in general. Most of the marketing communications will have to be funded by you and distributors like you.

The odds against a new business lasting five years are over 80% against, simply because even excellent entrepreneurs often fail the first time around, and most people are not that. If you are the type of person who can sell coals to Newcastle, sand to the Sahara and Belgian packaged food to France, then you may become one of the 3-5% of people who do well out of MLM.

The manufacturer / brand owner perspective

From a manufacturer / brand owner perspective the prospects are much rosier. You have to generate some decent products which will stand up well to rigorous testing and some decent marketing materials (most distributors will need to be convinced by the product quality and market opportunity before they sign up), and you will need to recruit a central core of sales people who will persuade potential distributors that this scheme constitutes a sure-fire opportunity in the face of mounting scepticism of MLM strategies.

However, once the band wagon is rolling, each distributor is a potential loyal customer, and each of their customers are too (as well as being potential distributors).

All-in-all, MLM schemes work better for the owners than for the distributors.

What the manufacturer / brand owner will need

• Quality products
• A well developed and policed brand strategy and management processes
• Strong marketing materials
• Product approvals / certification for any country in which the products will be sold
• A quality management system
• A sophisticated financial system
• A core sales force
• On-going event management and marketing communications skills

What the distributor will need

• The sign-up fee
• Stock / inventory
• Strong marketing communications skills and funding
• Social networking skills
• Sales skills
• Business skills

We can help you in two ways - we have a mass of smart strategic brand marketing tools, processes and workshop techniques for you to use, and a mass of smart brand marketing agencies as members across the world with niche knowledge and experience to support you thereafter.

Click here for free tools and know-how materials from the Mud Valley™ strategy & brand marketing.

© 2000-2009, Mud Valley ™ brand marketing community.

Related answers