A common term that we often come across nowadays in the marketing world is MLM. But many of us are confused as to what MLM exactly refers to. To get a clear and simple understanding of what MLM is and how does it work, read through this.
MLM stands for “multi level marketing”. It is also known by the terms like network marketing, pyramid selling and referral marketing. It is a marketing strategy that brings a new concept to the idea of distribution which contains two or more tiers of commission overriding. It offers an opportunity to everyone to become a part of the system by distributing products to consumers and adding more people below them. The sale force of MLM companies is build and grown by recruiting and motivating independent distributors to go out and sell their products.
The MLM companies encourage existing distributors to recruit new distributors below them who are then paid a portion of the recruit’s sale. Distributors can also make money by directly selling their products to consumers. Amway is a popular sales company that has been utilizing MLM scheme.
Now, let us understand more clearly how MLM schemes work. So, MLM’s are network based marketing schemes where a particular person has to add more people under him. Let us cite the example of Amway business model. You have to pay a certain amount of money to join the business and then you have to keep adding more people to the business below you. You will get a portion of the entire sales done by the people below you. There are various ranks like silver, gold, diamond etc. and the higher your rank, the more money you can make.
By the end of this, you will have the idea that MLM is a network marketing scheme where your profit basically does not come from the actual products you sell but from the number of people who are recruited in business below you as sellers and you can make a commission from their sales.
