What is mlm business. MLM business - what is it. Advantages of MLM business and its advantages. How financial pyramids collapse

collapse

MLM is translated from English as multi-level marketing, which fully reveals the principle of operation of this type of business. This case is an organization consisting of several "steps" - levels. The purpose of its creation is to influence the promotion of certain groups of goods directly from the manufacturer to the buyer without intermediaries, this is done by contacting members of the organization.

What is MLM

You can read about what multi-level marketing is on many sites on the Internet, since running this type of business is considered relevant and profitable. Suffice it to recall the world-famous companies Avon, Amway and Oriflame - bright representatives of a successful network business. All profits from MLM are distributed among all levels of the organization. A multi-level network business differs from ordinary trade in that a certain group of sellers who are daily forced to stand behind the counters, while receiving the minimum wage, are not required to sell products. Selling a product in multi-stage marketing is the task of a large number of people who devote a minimum of time to this.

MLM business on the Internet involves increasing profits by attracting new people to sales. Those companies that have taken this business as a basis do not spend huge sums on the construction and opening of branded stores. In addition, it is not necessary to conduct large-scale advertising campaigns, as well as to form the composition of managers and administrators, whose task is to monitor the progress of the process.

To build an MLM means to make a profit from the sales of certain groups of goods. To do this, it is necessary to organize the system itself and provide motivation for all participants in this system. Those businessmen who have chosen the network direction of business are completely free and wealthy entrepreneurs.

To get a stable income from the business by selling goods means to interest each member of the system in selling products.

Successful business idea

In order for the MLM business to be successful, it is necessary to make the promotion of products not only fast and inexpensive, but also convenient. There is no need to insert advertising and intermediaries into the scheme, and for this it is necessary to make sure that people begin to talk about the company's products themselves. In this case, the percentage of the sale of goods should act as motivation.

The organizer of the system, that is, the network structure, receives income from the total turnover. Thus, he creates passive income, which equates to several tens of thousands of dollars every month.

Network Marketing Tasks

What is MLM and what does it mean to start a network marketing business? The following points can be noted:

• Exclusion of the possibility of the client acquiring low-quality goods that do not correspond to the brand name, which is achieved by the work of the MLM organization with the buyer directly;
• For the end consumer, the cost of the product is reduced, which is achieved by refusing to conduct an expensive advertising campaign on the Internet, on television, etc.;
• It is obligatory to motivate team members with great opportunities and prospects in business and decent wages.
• The accelerated delivery process to the buyer due to the presence of warehouses in different settlements is a carefully thought-out logistics.

MLM business involves high earnings and the ability to build your own business from scratch.

Advantages of MLM business

Anyone who knows what it is and what are the prospects for the successful development of the business in the future will be able to build their own MLM business on the Internet. The benefits of multi-level network marketing for the system worker include the following:

• The ability to choose your own work schedule: in most cases, employment per day is no more than 6 hours. Anyone who wants to work on a flexible schedule, including students, women on maternity leave, can become sales agents.
• Create your own profitable business with minimal costs.
• There are no bosses and subordinates.
• There is no need to immediately change the scope of activities, that is, a smooth transition to business.
• Minimal risk of failure due to comprehensive support from the company and the use of a ready-made scheme for work.
• Free work pace.
• Possibility of independent choice of partners.

MLM project for the companies themselves also has a number of "pluses". Of them:

• Minor advertising costs.
• Favorable replacement of the service department, advertising workers, personnel specialist with one distributor.
• No need to spend a lot of money on opening and maintaining company stores and office space.
• Profit from paid seminars, lectures, etc.
• Realization of only own branded goods, excluding the possibility of being unnoticed against the general background.

Today, due to the difficult economic situation in the world, many linear classical trading companies have remained on the verge of collapse, while the MLM business is actively developing, attracting new sales agents.

business technology

In recent years, none of the varieties of business has experienced such significant changes as the field of network marketing. They affected not only the actions of the distributor who promotes the product to consumers, but also the ways in which he does it. All spheres of human life are gradually transformed, which is considered quite normal. New IT-related business technologies in network marketing have almost completely changed this type of business. It is rather difficult today to meet a representative of a company offering one or another product for apartments with large bags. A modern distributor uses all kinds of communication tools, always has access to the worldwide network at hand, is well versed in the Internet and can always find new customers.

New technologies contribute to strengthening the sale of products, they are increasingly crowding out the personal efforts of the seller. It is enough to look at the statistics for America and many European countries, where half of the inhabitants order food, clothes, furniture and all kinds of household items on the Internet, paying with bank cards or electronic wallets. This trend is constantly growing and spreading more widely.

Choosing a company for cooperation

Building an MLM business means finding a reliable company with which you can cooperate fruitfully and safely for many years. The following criteria are important:

• Reasonableness and fairness of the existing marketing plan;
• Time of existence in the sales market - at least 5 years;
• Opportunity for on-the-job training and comprehensive professional support;
• Functionality, convenience and presentability of the official website of the company;
• Regular consumption of the company's products and its demand among customers.

There are several types of marketing plan on which an MLM business can be built: binary, stepwise, single-level, called linear, and also matrix. Experts recommend opting for a stepped plan. Most well-known reliable companies use it, for example, Oriflame, a world-famous company selling high-quality cosmetics.

Ways to attract customers through the Internet

Every day, building a network business on the Internet is becoming more and more popular. You can read about what it is on many sites where experienced businessmen share their experience, telling how to attract a client to their own MLM business. The most effective ways to find buyers are through the following:

• Forums on relevant topics: about career growth, about earning money, building a business without investments, etc.
• "Seo" promotion - by making your own website and writing articles with certain keywords that touch on network marketing issues, large earnings, you can get a large number of people who will enthusiastically support this type of activity.
• Social networks. It is required to create a community of relevant topics, and people who join the group automatically become potential buyers. The option of "spam" is possible, but in most cases, the account is blocked because of this.
• Contextual advertising, which is configured on your own website. You can read about what it is on the Internet - there is a lot of information about the creation, placement, and more. etc. It is worth considering that the method requires certain financial costs, so many people ignore it.

There is a lot of information on the Internet about various ways to attract buyers and participants themselves in MLM.

Ways to get to know the audience

For an MLM project, it is important not only the number of participants, but also the desire and desire of each of them to work and develop professionally. A lot of information about a person can be learned from surveys that can be conducted on the Internet. From them, it is necessary to identify the main needs, and only then sum up the results based on the results. MLM business involves the participation of active people in it, seeking to earn money, ready for fruitful cooperation. The best option is to create a questionnaire with questions that can reveal interest in the job. Without conducting surveys or interviews, you should not involve a person in building a business in order to avoid negative and unforeseen situations.

It is important to properly organize the first meeting with potential participants in the system who have successfully completed the survey. Be sure to prepare all the information documentation about the business. In addition, it is recommended to make a thoughtful presentation of products, describing in detail all its features and benefits.

First income and expenses

All MLM projects involve investing in the business of both the participants in the system and the organizers. All investments are divided into direct and indirect. The first is the purchase of products, and the second is the selection of partners who are distinguished by their abilities and desire to actively develop professionally. Indirect costs may relate to the areas of advertising, organization and conduct of training courses. Therefore, you should not think that the highest links in the network business chain receive only one profit without investing anything in the development of the project.

In order to get your first income, you need to sell the product to at least 3-4 buyers. This will give you the impetus to move forward. Do not immediately expect large sums. The first profit in most cases does not exceed 1,000–2,000 rubles. To receive a larger amount, the project needs to attract about 5 buyers, of which at least two are planning to jointly develop the business. Each of them needs help to find 3 more people, which will noticeably affect their income in a month. Accordingly, the more "links" in their own chain, the more money the first person can receive.

When attracting new people, it is necessary to talk about the minimum investment in the network business.

Thanks to multi-level network marketing, consumers can purchase products that are distinguished by quality and uniqueness. This type of business helps to regularly receive a stable income, while expanding its financial capabilities by attracting new distributors.

Network marketing is a business based on partnerships. Its other name is MLM or multi-level marketing. The difference between network marketing and traditional business is significant.

Let's take a closer look at what MLM is. Its essence lies in the fact that the company organizes the turnover by creating a network of partners who perform the bulk of the work. In this case, the people involved in the promotion of goods are at the same time the company's customers, since they make purchases at wholesale (distributor) cost. They then resell the product at a higher price. The company spends less on advertising, its customers take care of selling products to customers.

Percentage of sales - not the only plus when working in MLM? This is, first of all, the company's own business of distributors. Network marketing is beneficial to partners in that they receive a good reward for their work. Thus, for attracting new people to the company, active distributors are paid additional remuneration for turnover from their entire team. Such income is called passive, because, once having invited a person, having registered and trained him, the partner now receives constant deductions from his work. But often the structure of such a leader grows to tens, hundreds, thousands and tens of thousands of people. Income in this case continues to flow to the founder of the structure. Thus, in a few years, any person can secure a comfortable future.

Many people ask the question: “What is an MLM business?” First of all, this is a huge job of promoting products, recruiting new distributors. But the reward for your efforts cannot be equal to the payment for ordinary work. It is in the field of network marketing that a large percentage now concerns not only European countries or America. A huge number of MLM leaders in Russia.

Consider network marketing - what is it, what terms are used in this business? The marketing plan is the rules according to which all accruals to the company's distributors take place. It indicates everything and the conditions under which they are received.

A check is a monetary document with a payment indicated on it. It also indicates the partner to whom the payment is made and other necessary data.

Auto-concept is a term that has become increasingly used in network companies. Particularly active partners have the opportunity to receive a car upon fulfillment of their turnover plan determined by the structure.

What is MLM for most of the Russian population? Many people think that network marketing is a scam, through which especially sassy people want to collect more money in their pocket. In fact, MLM is an opportunity to have a business for people who cannot open their own company. Any network company is absolutely legal. A negative opinion is formed by the fact that distributors promise new partners "mountains of gold". Yes, the opportunity to make money in an MLM company is huge, but people forget that you need to put in a lot of effort first. Moreover, for the first few months, the newcomer will mainly hear refusals, ridicule and unpleasant statements. But if he crosses this line, gains confidence that he will continue on the right path, the opinions of other people will not be important to him. A person will strive for his goal, because he knows that he will succeed in the company. And in the future, people who are now scoffing will simply envy his victories and perseverance.

So what is MLM? This is an opportunity that anyone can take advantage of. Network marketing leads to financial independence, free disposal of your own time. And whether to choose a business in an MLM company or stay in your previous job is the right of every person.

What is network marketing - a path to success or a mythical way to make money? Historical facts about MLM + pros and cons + TOP-5 companies in the Russian Federation.

What is network marketing?

Most people agree that these are some kind of fraudulent schemes that allow only happy few people to earn money.

Such thoughts are connected with the main problem of MLM - these are extremely high promises to customers.

Today, after reading the article, you will learn what the essence of network marketing operations is.

And, of course, you will get an answer to the question: is it possible to get real income using such a business scheme.

What is network marketing: historical background

Network marketing (MLM) in its current form was not a separate business development model. It appeared as a manifestation of the need to sell goods.

Who was the first to discover such a scheme and become the founder of a network business?

The founder of the first network sales scheme is Karl Rehnborg.

If the thought occurred to you that this person built his policy for decades before starting a business, this is not so.

All complex things began with a banal approach.

Carl Rehnborg grew alfalfa on his property. At that moment, an idea hit his bright head:

“But what if all the beneficial substances from alfalfa can be converted into an edible form for humans, so that its intake can increase the vitamin tone of the body?”

Undoubtedly, Karl had a good purpose.

Later, he opened his own line of healthy food and began to offer it to friends and work colleagues, explaining the usefulness of the new product.

It is interesting that, out of the kindness of his heart (no other reason can explain this), Karl distributed goods just like that, without demanding any money in return.

What do you think was the effect of promoting free useful products?

No. Nobody believed Carl. Everyone was very embarrassed that a person can simply give away a useful, worthwhile product.

Karl Rehnborg came to an unexpected conclusion: if a nutritional supplement is sold at the average market price, and not just distributed to friends, demand will appear.

And hit right on the spot!

Karl began to use this business scheme, thus giving rise to one of the main postulates of MLM - mutual assistance and team support.

Rehnborg's friends started buying his merchandise. It no longer seemed to them that this was a cheap hoax for one simple reason - it ceased to be cheap.

Then Karl began to look for new ways to expand the network of buyers. And again came to the correct conclusion!

They consisted of a percentage of the sale of nutritional supplements. Now you know the scheme of work of a standard network company? That's how it all started.

The result of the work of Carl Rehnborg:

• 1934 - Carl founds California Vitamins, thereby expanding the range of products sold.

In 1934, Rehnborg renamed the company Nutrilite Products.

The principle of operation remains the same.

A whole network of distributors of products, the so-called partners, was formed.

Each partner attracted new employees by offering a percentage of product sales and dividends for quality organizational performance.

Karl Rehnborg is known throughout the world as the "father of the network business."

After a short historical study, it's time to turn to the realities of the modern MLM business.

What is modern network marketing: terms and definitions

Network marketing- this is one of the types of retail sales of products, based on the direct, direct interaction of sellers with consumers.

A feature of network marketing is the ability of each client to become an implementer.

It would be most correct to compare the network business with a multi-level dealership. MLM also consists of several levels.

No wonder such organizations are often called financial pyramids!

Let's take a look at the main components.

The first step of the pyramid: manufacturer - distributor

The first stage of activity under the MLM scheme is that the manufacturing company provides its products to a partner.

A partner is a natural person who enters into a cooperation agreement with a supplier.

On the territory of the CIS, this contract is not included in the labor format, i.e. does not provide you with social guarantees, has a special form of taxation.

The terms of the contract have similar clauses in any area of ​​the network business:

• obligatory use of the manufacturer's products by the partner;
• attracting new partners to the organization;
• work according to a clear scheme defined by the organizers;
• unquestioning observance of the moral principles and policies of the company;
• minimum monthly sales.

Subject to the execution of each clause of the contract, according to MLM, you get access to unlimited earnings.

Second Stage: Second Tier Partners

From the second order, the whole essence of the scheme of MLM activity begins.

Each partner who was invited by a higher-level participant (Stage 1) performs all the same functions as his curator.

The only difference is that part of the sales income remains in the pocket of the superior curator.

Each participant, as a result, seeks to form his own structure, as this brings real income in the form of dividends from his own sales and the activities of "subordinates".

P.S. The word "subordinates" is deliberately put in quotation marks: in the structure of network marketing there is no concept of line management.

All relationships between colleagues at various levels are based on mutual assistance - this is simply beneficial for all partners.

Step Three: Entry Level Partners

Lower-level partners differ from the founders only in that they have a lower income. At the same time, functional responsibilities, as units of MLM, are unchanged.

Work at the first or second level involves the manifestation of maximum activity not in the sale of products, but in the promotion and formation of one's own structure.

An intermediate conclusion should be drawn:

The scheme of interaction of network sales involves the development of the structures of each employee.

The explanation of this process is very simple - each subsequent implementer receives a percentage of sales + dividends from the entire network organized by him, as a percentage of the profits of "new" participants.

Network marketing - is it that simple?

The concept of network business and MLM structures has negative associations, especially in the CIS, where people have been taught by the bitter experience of financial pyramids.

This section provides the reader with a comprehensive overview of how network marketing works - an unbiased assessment of the income opportunity.

Benefits of network marketing

Lack of a linear system of leadership.

You work for yourself, which is very similar to entrepreneurship.

Close-knit team.

Each partner is interested in supporting "junior colleagues", as it brings him financial benefits.

There will always be a person who will help organize your network activities in the right direction.

Curating is the backbone of network business.

Opportunity for continuous growth.

Another positive aspect of MLM.

It all depends on your abilities, including earnings.

A lot of experience in interacting with people.

This is a useful skill for everyday life and the development of your own entrepreneurial project.

Network business can be considered as a platform for further implementation of one's own business.

Flexible schedule.

Representatives of MLM structures can work from 10 to 30 hours a week, thereby combining it with work or study.

You must understand that network business cannot replace the main source of income.

At least in the early stages of activity.

Negative aspects of network marketing

Possible destabilization of the network structure at any time.

This process may be triggered by the activities of individual partners, which will not meet the company's standards.

You must consider the possibility of the collapse of the entire structure, as many years of experience of MLM participants proves such a possibility.

Undefined payment standards.

An example is the American company Starcom, whose representatives promised high payouts to each participant.

As a result, the partners took loans, pledged property, and the company paid less than 25% of the announced amount.

It is not difficult to guess what material damage customers received.

Opportunity to get into the financial pyramid.

Imagine a situation in which you invested in an MLM structure by purchasing an initial package of products.

Several months pass, the structure of clients expands, they also make deposits, purchase products.

Another month passes, you have not yet been able to cover even your own expenses, since the goods are not in demand.

The company is closing...

In this situation, approximately 50% of the participants remain without profit.

They were unable to sell the product, but made a significant investment.

If you have never dealt with entrepreneurship, it will be very difficult to “resist” in the MLM mode of operation.

The specificity of the activity lies in the constant moral tension, since you are responsible for your sales and the entire organized structure.

After analyzing the pros and cons of network marketing, you can assess the degree of risk of such a business activity as quite high.

A feature of working on a network scheme is the constant responsibility for one's work + training and control of lower-level partners.

You already know what network marketing is and you can independently assess the prospects for development in this direction.

If you are confident in your organizational talent, as well as the abilities of a manager and financier, it's time to move on to choosing an employer.

Network Marketing: Choosing an Employer

Your network income and confidence in stability depend on the right choice of employer.

To begin with, it is necessary to consider possible options for the Russian business space.

Top 5 Russian MLM market

Network company name	MLM market share (%)	Description of activity
	~30	Sale of cosmetics, pricing policy - acceptable for the middle class. Get ready to meet a huge female team and find your place in it. Network activities in AVON are more suitable for girls.
	~30	Marketing sphere - cosmetics, souvenirs, healthy food. One of the leaders of the Swedish MLM market. The advantages include increased loyalty to their employees. Working in this network company will allow you to have a small but stable income.
	8	Stability is the most appropriate word to describe the activities of AMVAY. Marketing sphere - from household utensils to dietary supplements. Unlike the companies mentioned above, it provides equal chances for development, regardless of the gender of the employee. This fact is derived from the wide range of products on offer.
	5	A company that only accepts women. Specialization - cosmetics, products for the care of appearance. One of the most experienced network organizations, but still not widely spread on the Russian market.
	4.5	Leading manufacturer of natural cosmetics. It is one of the most progressive companies on the Russian market, it has a strong base for network marketing.

The main criterion for choosing an MLM company is experience in the market. This is explained very simply: you will get the expected result, verified by others.

It is dangerous to work for the "newbies" of the MLM market, because you cannot be 100% sure that all obligations are true.

You can learn about the many benefits of network marketing from the video:

What is network marketing? After reading the article, you are already able to independently determine the meaning of this term.

Network marketing evokes a subjective attitude in every reader.

With 100% certainty, only one thing can be said - making money working in the MLM system is possible and cannot be argued with.

A completely different question - will it be possible for you to do this?

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The number of distribution companies specializing in MLM is increasing every year. This is due to the fact that this business is profitable and quickly generates income. They are easy to do without even leaving the house. If you study in detail the basics and concept of MLM marketing, you can achieve excellent results in 2-3 months.

What is network marketing

MLM business is a multifaceted concept that opens up many perspectives. It implies the concept of the sale of services and goods, based on the formation of a network of independent sales agents who are not only involved in the sale of products, but also have the right to attract new partners who will be endowed with similar rights. The income of each networker is formed from commissions from the sale of products and additional remuneration (bonuses), which directly depends on the volume of personal sales of the involved sales managers.

History of network marketing

Carl Rehnborg is considered the founder of the MLM business. He developed ideas that later turned into an entire industry with huge multi-million dollar turnovers. In 1927 in the USA, Rehnborg began to work hard on the creation of nutritional supplements. For testing purposes, he distributed the developed drugs for free to his friends, who subsequently refused to take them.

After Carl realized that the free is not appreciated, he began to sell supplements: the results were not long in coming. Information about drugs quickly spread, and the number of people interested in them increased. Karl Rehnborg could not satisfy the needs of all customers on his own, so he had to come up with a new scheme. He invited his acquaintances to provide information about bioadditives, and, subject to successful sales, promised to pay commissions. From these events began the history of network marketing.

California Vitamins was founded in 1934 by Carl Rehnborg. It operated a sales system, according to which the consumer of the product became its distributor. In 1939, the marketing company was renamed Nature's Sunshine Products, the principle of drug distribution remained the same. Network agents independently attracted new clients to cooperation, advised them, made sales plans, came up with individual sales schemes, and offered to create their own network.

The MLM-firm fully provided networkers with goods, paid commissions in a timely manner. So in MLM a new definition appeared - single-level marketing. The story of the business did not end there: a new round was set by the American Way Corporation (abbreviation Amway), created in 1959 by former Nature's employees Jay Van Andel and Rich de Vos.

What is the merit of these people in the development of the MLM business? They began to sell not one product, but several. The list of goods offered to consumers has been replenished with food additives, household chemicals and household goods. Soon network marketing companies appeared on the world market. They began to function successfully in Russia, China, England. Their importance has become enormous both for people and for the economy of many countries.

Types of network marketing

MLM business is developing at a fast pace, its varieties are increasing every year. The main types of network marketing are as follows:

• Puff (the most popular, adapted to the Russian market, its vivid example is the companies selling cosmetics - Avon Products, Faberlic, Mary Kay, Oriflame. The essence of this type of marketing is that the concept of the company is based on the work of certain layers of employees of several levels.
• Pyramid. This type of marketing involves the following scheme of work: there are founders who find a few people who sell services and goods, they subsequently find a few more people and control their activities, and so on ad infinitum.

How Network Marketing Works

The principle of operation of Russian MLM companies is the same:

1. First, a person is interviewed, where he is introduced to further prospects and opportunities.
2. Then the person is told that he should, using the network, attract new people, the greater their number, the greater his monthly income.
3. How does network marketing work? New employees, becoming distributors of the company, independently promote it, for which they receive commissions, contributing to their own development and business development.

The essence of network marketing

What is MLM (multilevel marketing), what is its essence? This is one of the most popular and effective ways to legally promote services and products. MLM companies offer unique products that are in demand both in individual cities, regions, countries, and around the world. MLM business is not only direct sales. You don't have to sell anything to be successful in this field.

The main components of multilevel marketing are well-organized intellectual distribution, the effective use of all its capabilities and advantages. In other words, the main essence of network marketing is that consumers, being at the same time partners of the company, develop its network and make a profit from the turnover.

Network Marketing Principles

MLM business is based on the following rules:

• equality for all;
• helping others;
• minimum entry costs;
• having a residual income;
• pyramid structure (this principle of network marketing ensures the constant development of the business and its stability).

Network Marketing Structure

Running through the MLM business and not noticing the main thing, many do not achieve the desired results. Why? Because they do not know how to properly build the structure of network marketing. What is a structure? These are people who take part in the organization of trade, and the final income directly depends on their number. It can include acquaintances, friends, complete strangers. The main task is to skillfully unite them and constantly motivate them for successful promotion.

Network companies

There are many companies that specialize in MLM business. They sell cosmetics, chemicals, household appliances, household goods, and other products. A detailed list of network companies successfully operating in Russia is given on the Mlmbaza website, the most popular are:

• Life;
• Oriflame,
• "Siberian health";
• Faberlik;
• Avon;
• Primerica;
• Shaklee;
• Talk Fusion;
• Neways;
• Vitamax;
• Zepter International;
• Kirby;
• Atistek;
• Lurk;
• True.

Work in network marketing

Anyone can try their hand at multi-level marketing business. Companies provide training in network marketing, but not everyone can master this profession. An MLM distributor must be able to organize the sale of products, draw up schemes for the effective distribution of services and goods. The profession obliges to attract new partners, expand the client base (network), apply intellectual resources, use the network, establish a system that will generate income directly for the company and the network manager.

Network business on the Internet

The global web opens up incredible opportunities for networkers. Using her gifts, you can make a fortune without leaving your home. On the Internet, products are promoted through their own websites, information groups, blogs, and communities. The main task of the distributor is to find the target audience, create an effective sales information network, constantly improve and develop it. Network business on the Internet has the following advantages:

• the ability to conduct business from anywhere in the world;
• the possibility of attracting potential partners from any regions, cities and countries;
• a lot of information programs that provide prompt assistance in solving organizational issues, conducting education and training;
• the possibility of selling through online stores with an integrated order basket;
• possibility of learning online.

How to make money in network marketing

To be successful in this business, you need to follow a few simple rules:

• be a sociable person who is not afraid to approach strangers with a proposal;
• be able to interest, present products brightly and unusually;
• actively involve their relatives, acquaintances, colleagues;
• constantly improve oneself, raise the intellectual level;
• skillfully build a pyramid by attracting new people, in order not only to earn commissions from sales in network marketing, but also to provide residual income.

Cons of network marketing

Before you start a distributor career, you need to familiarize yourself with the main disadvantages of the MLM business. This is the only way to understand how correctly the direction of activity is chosen. List of cons of network marketing:

• unstable income;
• great moral burden, constant pressure from customers;
• the need for material investments;
• a high level of responsibility for the people involved.

Network Marketing Benefits

MLM marketing has both its pros and cons. He teaches to receive unlimited income, which depends on the aspirations and character of the person. Another benefit of network marketing is financial independence. Network agents have a free work schedule, independently plan their day, make decisions, gain new skills, the opportunity to develop socially, improve their status. These advantages cover all the disadvantages of this type of activity.

Video: how network business works

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How does the online multi-level marketing industry work?

MLM stands for multi-level marketing - multi-level marketing. This means that in an MLM company there are several levels of sellers who contact the buyer directly.

In an ordinary company, as a rule, they act like this: they advertise a product, offer a gift for a purchase, form an image, and then wait for buyers to come to them. In the MLM business, they look for clients on their own: they call, go to apartments, turn on the street. This is called direct selling.

What is MLM

MLM is a direct selling system. MLM is also called network marketing, and the company that uses it is a network company.

Essence of MLM

The idea of ​​MLM is to make the buyer a seller and head of the sales department. Here they benefit in three directions: for their purchases, for their personal sales and for the sales of their structure.

Buyer benefit. You become a partner of the company. The company delivers the product, you buy it at a discount. If the company gives a discount for everyone, the price for partners will be even lower.

Seller benefit. You can use the product yourself, or you can resell it to others and receive a percentage of purchases.

Benefit from its structure. You invite your acquaintances to become the same consumers and sellers, train them and receive a percentage of their personal purchases and sales. These people are your team or structure. They also build their own structure. Their structure is the second level of yours. This second level of your structure is also inviting people to become your third level. That's why it's multi-level marketing.

Members of your team can receive goods from you directly, or they can buy from the warehouse or order delivery. The purchase of each "your" person is automatically taken into account for you and brings you profit.

History of occurrence

Network marketing originated in the USA. In 1934, chemist Carl Rehnborg began producing food additives and selling them to friends. People liked the products, they themselves bought and recommended to their friends, who through them also began to purchase the products of the American chemist. In the future, those consumers of the product also told their friends about it.

A semblance of a network was formed through which nutritional supplements were uninterruptedly supplied. The company had only three people, including Rehnborg himself. The company also did not bear the cost of advertising the product - instead, it had independent distributors and people's word of mouth. People who sold goods received income, and those who found new sellers of the product received additional rewards from the total turnover.

Between the end of the 1950s and the middle of the 1970s, about 30 firms were already working on this technology. In the 80s and 90s, hundreds of MLM companies appeared, tens of millions of people around the world became distributors. Herbalife was the first network company to come to Russia in 1989.

Now, according to the MLM system, biologically active additives, cosmetics, household chemicals, kitchen utensils and insurance are most often sold. Well-known MLM companies: Amway, Avon, Herbalife, Mary Kay, Oriflame, Faberlic, Green Terra, n el international”, “Metlife”, NSG.

Network Marketing Principles

The principles of network marketing are also called the marketing plan. With the help of a marketing plan, an MLM company determines how many people should be at each level, how many should be sold, and what reward the seller will receive for his sales and sales of his structure. Rewards are money, gifts, or discounts on future purchases.

Often, in order to become a representative of a network company, you need to buy a starter package - this is a mandatory set of products. After that, the networker gets to the first stage. The more the agent and his team sell, the higher the step they occupy.

Many companies require each month to buy a minimum amount of goods for themselves. No matter how much the agent's structure sells, he must buy goods for himself, otherwise he will not receive a reward.

Typically, network companies do not hire their representatives, but conclude cooperation agreements or agency agreements with them. A networker can work as a self-employed person or an individual entrepreneur, which is why MLM is called a network business.

Network companies have a training system. They hold seminars, publish methodological literature, managers take newcomers to work with them.

MLM - is it legal?

MLM is a sales system, and it can be used for legal business, or it can be used for fraud.

It is perfectly legal to sell cosmetics, nutritional supplements, or insurance through network marketing, as long as the cosmetics are not defective, the dietary supplements are not harmful, and the terms of the insurance do not violate the law. With the help of MLM they sell goods, but often this system is also used by

How to distinguish MLM from a financial pyramid

With the help of network marketing, you can easily attract new people, and this is what financial pyramids need. The main difference is in the goals. The goal of network marketing is to sell a product, the goal of a pyramid is to attract a new member. There is no product in the pyramids or it does not play a major role.

In financial pyramids, the main thing is the contributions of the participants. Here agents earn if new people come. When newcomers run out, the pyramid collapses. Those who joined last lose money. If you are invited to network marketing, but the company does not sell anything, this is a pyramid scheme.

In MLM, the seller receives a percentage of the turnover of the structure. He earns as long as people need the company's products.

Some financial pyramids, in order to be mistaken for honest business, also sell goods or services. There are four signs of pyramid schemes: low cost of goods at a high price, delayed sales, unclear purpose of the goods, separate payment systems for the sale of goods and customer acquisition.

Low cost at a high price. Often a financial pyramid sells cheap goods at a high price. Or the product itself is inexpensive, but only a representative of the company can buy it, and in order to become a representative, you need to make a large contribution.

For example, the Advokard company sold subscriptions for legal services for 50,000-70,000 R, although such services cost 3,000-10,000 R. But it was possible to make good money on attracting new customers. When those who wanted to overpay ran out, earnings stopped. The last buyers were left with subscriptions bought at exorbitant prices. It was possible to get legal advice on them, but not to sell them for the same price.

In a legal MLM company, goods will be sold at prices close to market prices. A starter package in MLM is also a purchase of products at reasonable prices. If a networker in a pyramid cannot sell a product, he loses money. There is no such thing in MLM: the agent has goods bought at market prices in his hands - it is easier to sell them and return the costs.

Postponed sales. Ponzi schemes may offer to buy goods now and receive them later. At the same time, for the same purchases of beginners, the agent receives a reward immediately.

One company sold apartments in Sochi at attractive prices. It was necessary to buy urgently, until the apartments ran out, and they promised to issue them to the buyer in a few months. But right now it was possible to earn money by attracting people to this topic. At the presentations, they gave examples of participants who invested six months ago and now received their real estate, and even earned money because they told their friends about it. Gullible candidates soon ran out, no one got an apartment, and the pyramid collapsed.

The Edosha company promised to open supermarkets where they would trade using the MLM system. At the presentation, people were told that the supermarket was about to appear, but for now, build a network. When a store opens in your city, you will receive interest on the purchases of your structure. People bought discount cards, calendars and business cards to attract newcomers. They also bought "shares" that were supposed to soar in price after the start of supermarkets.

The top leaders were telling their distributors to wait a little longer. Stores really appeared in St. Petersburg, Samara, Barnaul, Tyumen, Yaroslavl and Kazan, but in other cities the opening date was constantly postponed. Then those who wanted to buy air ran out, and people were left with useless souvenirs, printing and "shares" in their hands. The shops have closed.

Unlike a pyramid scheme, in network marketing they try to deliver products as quickly as possible. The faster the seller tries it, sells it or uses it, the faster he will buy more. Postponed sales are unprofitable for companies.

Unclear purpose of the product. When a product is just a cover for a financial pyramid, its purpose and content can be incomprehensible. But they will say that this product is the future or that the market for these products is growing rapidly, so you need to invest yourself and offer to friends.

In legitimate MLM companies, products are tangible and can be used.

Separate payment systems for sales and attracting newcomers. Some companies consist of two parts: a financial pyramid and trade. In such companies, you can receive a small reward for selling a product, but they promise larger earnings for attracting new members. At the same time, you need to pay an entry fee for a place in the network and the right to build your own network, and not for a set of products.

For example, the Avtoclub company sold network marketing cards that could be used to get a discount in various stores, cafes and gas stations. According to the marketing plan, every time a person from the agent structure made a purchase using this card, he received a cashback. This is the honest half of the business.

But if an agent bought a card and made an entry fee, he was given access to a second marketing plan and promised a larger reward for newcomers who also made an entry fee. When the influx of people decreased, they stopped paying rewards. Now Autoclub deals only with discount cards, but it had to change its name to Aunite Group.

The network company has one structure and one marketing plan. In legal MLM, they can also periodically pay for the registration of a newcomer, but these will be one-time promotions, and the main income will always be from trade.

Why people don't like MLM

Millers are taught to offer their products to as many people as possible, to work with objections and “squeeze” the client. This gives the impression that they are being imposed.

Networkers constantly call their friends, approach people on the street and in transport, invite them to presentations. If the answer is simply “I don’t want to”, the mlmschik may require an explanation of the reason for the refusal, and then he will begin to work it out. Not everyone likes it.

Cons of network marketing

Networkers have to buy a lot of products, and the MLM market is quickly saturated. There are other disadvantages in network marketing.

You have to look for clients on your own. This is the main problem for the networker. Although the company teaches you, the mentor prompts and conducts internships, it is still your responsibility to find clients. The company doesn't care whether you go to apartments, call or advertise via the Internet. They give you a product - sell it however you want.

Over time, the problem of finding customers grows: the agent begins to stumble upon those who already know about his product and even belong to someone else's structure. He works hard, recommends, but people brush it off because they are already tired of such offers. Others buy on his recommendation, but not from him, but from their friend, who also works in his company. As a result, the top of the structure earns, but he does not.

At the first steps they pay little. Another drawback also stems from the peculiarities of MLM technology: often companies pay consultants at the initial levels several times less than at the top. To make good money, you need to work hard: constantly build a structure and acquire regular customers.

Networkers annoy a lot of people. You can’t know in advance who will be interested in the offer, and who doesn’t like network marketing. Therefore, the networker has to constantly offer goods to different people and often encounter negativity.

There may be deposits of products, when the goods are taken badly. This is due to the fact that companies require the networker to purchase a minimum number of products. If he does not have time to use everything, they will accumulate and deteriorate.

Not everywhere networkers are paid with money. In companies that give remuneration in the form of discounts, the agent is forced to buy goods in order to use these discounts. For example, it worked well and now the price for it is 50% lower. He buys products and suddenly he cannot sell them. As a result, you also have to give at discounts in order to recover the costs.

It is more convenient to buy in a regular store. Often buying through MLM looks like this: you tell your friends about the product, they place an order, and a package arrives in a few days. This parcel must be picked up from the warehouse. It’s easier not to wait and not go anywhere, but to buy a similar product in a regular store, often even cheaper. The networker has to aggressively advertise the product and persuade customers to put up with a less convenient buying process.

You can't stop. First, the networker works hard to build the structure, and then has to work even harder to maintain it. Usually, without the efforts of the leader, even a large structure quickly falls apart, consultants stop working and go to other MLM companies, and buyers are too lazy to place orders. At presentations, they talk about passive income at the expense of their team, but in reality, the more successful things are, the more you need to work.

Advantages of network marketing

The main advantage of network marketing is that agents receive money for their own purchases and recommendations.

You can earn on personal purchases. In an ordinary insurance company, the agent does not always receive a commission if he buys insurance for himself. In MLM, you can write out a policy for yourself and make money on it.

MLM has a free schedule and no boss. Obligations to the firm and clients exist, but there is no system of punishments. The agent cannot be reprimanded for absenteeism. If it does not work well, then it will not work, and there are few other restrictions. At the same time, the network company forces them to comply with their codes and can punish them for violating them. For example, some firms prohibit cooperation with competitors. An agent can be a representative of only one MLM company, or he will be excluded from the business. They can also be “fired” if the mlmschik poachs people from other company structures.

Network business can be run from home, Or you can move to another region. The structure remains with the agent, and new consultants can be recruited at a new location. Often MLM business is combined with the main job. This is a good option for pensioners and women on maternity leave.

You can gain valuable knowledge and skills. In the course of training in network business in MLM companies, they talk about sales technologies and business communication skills. This can be immediately consolidated in practice under the supervision of an experienced mentor. Even if you fail to earn money, knowledge and experience can then be applied in other areas. For example, in companies that sell cosmetics, they teach you how to properly take care of yourself. Companies selling dietary supplements explain how to eat right. Insurance companies give financial literacy lessons.

Is it possible to make money in MLM

A networker can make money in MLM under several conditions: he was among the first to enter the business, he has a good product, he likes to do this, and he has chosen the right company.

How to choose an MLM business

The idea of ​​MLM is when a satisfied consumer recommends products to their friends. The networker must be such a satisfied consumer, so he needs to choose a company whose products he would buy regardless of the business opportunities.

First, the agent studies the marketing plan and tries to imagine whether it will be easy for him to achieve the levels laid down in it and whether the promised reward suits him. His mentor will calculate how many people to invite, what turnover to make and how much he will eventually receive for this.

An example of a calculation according to the marketing plan of one network company. 10 people from the first level buy for 3000 R each - the agent receives 300 R. 100 people from the second level buy for 3000 R each - the agent receives 6000 R

How to develop in MLM

Mentors will tell the agent about this. He will have three tasks: to sell, recruit people to his team and learn.

First, the networker will be invited to a presentation, where they will briefly talk about the products and the company and offer to join the business. They will offer to start work from a list of acquaintances: it can be made up of contacts on the phone, social networks, notebooks, and from everyday social circles. Mentors will recommend contacting acquaintances and talking about the business or inviting them to a presentation.

To be successful, it is important to keep learning. MLM companies teach how to sell and invite to business, describe the benefits of products. MLM training systems will help you set goals and determine the steps to achieve them. As a result, you need to calculate how many people you need to talk about the business daily in order to receive the desired profit.

The next step is an internship. It's good when a manager shows how he talks to customers, and then watches how a network manager does it and analyzes his mistakes.

When the agent gets used to it, he will start working independently, and when he reaches income, he will register as a self-employed or individual entrepreneur.

How much can you earn

It is very difficult to calculate this. Working networkers try to present their business in a favorable light, so they can inflate earnings. If you ask this question during the presentation, the mlms will answer that the income is unlimited and depends only on your goals. They say so because in this business the agent receives a percentage of the sales of his structure, and the company does not set the upper bar.

When the manager calls the newcomer, they discuss the desired earnings. In such conversations, networkers boldly make plans to earn at the level of 100,000 R.

In fact, earnings in MLM are not guaranteed. The more turnover the agent's network makes, the more money he will receive. The earnings of a networker depend on many factors. Someone earns from 100,000 rubles a month, but most networkers earn from five hundred to ten thousand rubles. In fact, they are buyers who receive cashback and bonuses for referrals.

Companies selling nutritional supplements and cosmetics pay 1-30% of turnover. Insurance companies - 10-50%, and if the insurance involves regular contributions, then up to 100% of the contribution. It happens that they pay not a percentage, but a fixed amount for each sale, for example, 1000 rubles per contract.

Doing an MLM business via the Internet also does not guarantee income. There are successful examples when, when switching to the Internet, networkers quickly build a team and reach an income of 100-200 thousand rubles a month. But many keep their blogs for a long time and do not get new customers. Sometimes networkers spend more on contextual advertising than they earn.

What are the features of MLM business on the Internet

Now this business model has moved to the Internet. Networkers maintain blogs and groups in social networks, provide contextual advertising and sell goods through online stores.

How to start an MLM business on the Internet

Depends on the chosen strategy and willingness to invest. If the agent decides to work for the future and without investments, he creates a group or blog in a social network. There he posts interesting materials about business and products, invites friends. Then on the basis of this it will be possible to make a separate site.

If the mlmschik wants quick results, he makes a selling page, invents or finds the ad text, buys ads from search engines and social networks.

Then the networker determines his target audience in order to understand which social network to choose, what materials to post, what texts to use. Usually he chooses people with whom it will be easier for him to work and whom he can hook on with something.

As a rule, it is more profitable to join the team of a networker who himself is engaged in MLM on the Internet - he can suggest the right steps.

Advantages and disadvantages of MLM on the Internet

The Internet allows the networker to work only with interested candidates, gives a wide coverage. You can sell and recruit via the Internet automatically. There are other advantages of MLM on the Internet:

1. Less negative. If a person joined a group or followed a link, he is already interested. The likelihood of getting a bad reaction in the face is low, and rejections and negativity on the Internet are not so painful.
2. Contacts around the world. With the help of the Internet, a networker can sign people from anywhere in the world to his team. The main thing is that the company allowed to register distributors from there.
3. Work can be automated. A selling page or group on social networks works around the clock. You can set up a mailing list for beginners so that they regularly receive motivational letters, record a training webinar.

Working via the Internet has its drawbacks:

1. Turnover. On the Internet, it is easier to refuse and change your mind. People from the Internet join the team and do not buy anything or disappear after the first purchase.
2. Beginners may not be available. You can’t meet in person, take a newbie for an internship. It is difficult to form team cohesion. If a newcomer lives in a region where the company does not have warehouses and offices, there are problems with the delivery of products.
3. The seller does not know people from his structure well, he cannot use an individual approach.

Briefly about MLM

1. MLM is a sales system where a buyer becomes a seller and invites other sellers. It turns out a multi-level structure.
2. MLM has a free schedule and constant training, but income is not guaranteed.
3. In network marketing, you can build a structure and sell over the Internet.
4. Financial pyramids also work on the network marketing system. The main thing in MLM is to sell goods, and in pyramids - to recruit more participants.