Multi-level marketing is direct marketing…
In direct marketing, an individual sales promoter sells products obtained from a supplier directly to a customer. Hence, direct marketing model has the sales promoter (who is variously designated as ‘independent distributor’, ‘sales advisor’, ‘sales consultant’ and so on) as the only intermediary between the manufacturer and buyer, whereas in traditional marketing there are additional layers like wholesaler, retailer etc.
The most popular version of direct marketing is multilevel marketing (MLM, in short), wherein the independent distributor (known as ‘up-line’) appoints distributors under him (known as ‘down-line) in order to generate business. Distributors in the down-line can in turn appoint distributors under themselves, so that a person who is a down-line under someone can be the up-line above someone else.
The MLM model’s success and popularity is due to the fact that every upline gets commission for the business generated by his/her downlines in a certain proportion. MLM companies have devised points-based systems as per which points are credited to every distributor every month based on business generated by their downlines in that month. Commission amount is directly linked to points earned. However, there is usually a floor level of minimum points which have to be earned in a month for the commission payment to kick-in.
Pros and cons of MLM…
If you are looking for an independent income to supplement your earnings and are able to devote an hour or two on business promotion every day, MLM could be an option for you. If you do not have any other income source, you can even do MLM business on a full-time basis.
To take up multi-level marketing, you do not need any qualification or experience. Neither is age a factor because many students and retired persons pursue this activity successfully. However, communication skills, ability to develop relationships and a passionate desire to succeed are a plus.
You can operate by holding minimal stocks because stocks are always available for replenishment from local offices of the MLM companies. Training is imparted MLM principals through lectures, programmes, conferences and sales kits.
On the negative side it is observed that most of the new joiners drop off within a year, because they find that MLM field is not as easy as it appeared to them initially and building downlines is tough particularly in view of presence of many rivals. It can be hard going initially because to build a successful MLM business hard work and perseverance are to be put in for the initial 2-3 years. Another aspect is that some State Governments consider MLM to be similar to chit-funds business and therefore are making it difficult for MLM companies to function from their States.