We work with quite a few MLM companies. Throughout our involvement in this dynamic and growing industry, we’ve come to realize that some of the terms used to refer to network marketing companies are viewed negatively. I wanted to take a moment to define the common industry terms, and talk about ApogeeINVENT's experience with successful network marketing companies.
How did MLMs get a bad rap?
Let’s start with the basics. Multi-level marketing (MLM) is a marketing strategy in which the sales force is compensated not only for sales they 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.
MLM companies are also called Network Marketing or Referral Marketing companies, which are types of direct sales companies.
Direct sales is the process of selling products face-to-face away from a retail store location. Many times this is done through in-home shopping parties, presentations, and/or catalog sales. For a minimal fee, companies give you a starter kit that includes everything that you need to start your own business.
If you’ve ever gone to a Tupperware party at someone’s house, or participated in a Facebook party event and bought from a catalog, chances are you’ve purchased from a network marketing company.
Are network marketing or MLM companies pyramid schemes?
No. A pyramid scheme is when a company takes money from distributors just to be part of the company, but offers no product or service in return. Each distributor is required to recruit more distributors and pay up the line. This is the illegal practice that has been dubbed a “pyramid scheme”. Because these companies operate with a similar structure to legitimate MLM companies, it resulted in the confusion that makes some distrust the MLM structure.
Can distributors make money working for MLM companies?
Yes. Just like any business, a distributor is required to make sales and work hard to market themselves and the products or services they promote. You can work from home, and generally MLM companies have resources they offer to their distributors, or independent business owners, that help sell products and recruit new distributors.
We create marketing and business management tools for MLM companies. Our software helps MLM companies and their distributors to sell products / services, recruit new members, and also calculates compensation owed and pays automatically.
There are a few less-than savory businesses in MLM, just like any industry, but we have been privileged to work with some really fantastic MLM companies. Members can make money if they are willing to work hard and sell themselves and their business. The owners of the MLMs we work with are some of the hardest working individuals we’ve met, and that is how to turn an opportunity into a success.
Learn more about the basics of MLM / Network Marketing by downloading our Intro to MLMs