What is MLM Network Marketing? Is this a Legitimate Business or One of Those Pyramid Schemes my Mom Warned Me About?

I Was Clueless

about MLM Network Marketing until I started using a product and wondered how I could buy it. I looked on eBay (because everything is available there – legal or not) and purchased the product for several months, but the bidding thing is not for me.

I just wanted to buy the product straight away and be done with it. After all I'm a computer person and efficiency is in my blood.

I went back to the person who introduced my husband and me to the product and sat through “you can get rich or at least use the product for free” meeting. I signed up because I just wanted the product easily without bidding on eBay.

The presentation started and I had no idea what was going to happen, but I quickly said to myself OH NO, is this one of those pyramid schemes I’ve heard about my whole life. This was my introduction to network marketing so I started doing some research.

MLM Network Marketing is a marketing strategy

I discovered network marketing and MLM are used interchangeably nowadays. MLM is a marketing strategy that compensates promoters of Direct Selling companies. The promoter is compensated for selling the product and signing others up to sell the product along with introducing them to the company. The products and company are usually marketed by Direct Marketing through word of mouth marketing. (1)

Once you're signed up you become an independent distributor

Watch out, my upline started selling the company immediately and telling me how rich I would be if I just do what they say. They neglected to tell me if I “use the turnkey method already in place” I will likely not have any friends or family left never mind make any money.

It is your business

The independent distributors develop their MLM network marketing organizations by building an active customer base or by recruiting a downline of independent distributors who also build a customer base. As we all have been taught building a downline is the most lucrative for independent distributors.

The independent distributor earns a commission on s/he sales generated along with the sales of s/he downline. Commissions are paid according to the company’s compensation program.

Why a MLM Network Marketing business is unique:

• Very low start-up costs
• Daily, weekly and monthly cash flow options
• No employees
• No collections
• No franchise fees
• No special skills
• No special permits
• No manufacturing
• Tremendous tax advantages and tax write-offs
• Co-operation instead of competition
• Unlimited international markets

Determine the MLM Network Marketing Company's Legitimacy

Do your research on the company you want to affiliate yourself with. If it looks like you will become rich with very little effort, RUN. There is no such thing as get rich quick. Everything in life, worth having, takes effort and work.

Most MLM Network Marketing companies pay commissions on sales of the company's product or services. If a company is paying you for recruiting alone be suspicious.

Think about it. How is the company making money if they are not selling a product? When red flags go up take a step back. Also be careful if a company requires you to buy an enormous amount of their product.

MLM Network Marketing Compensation Plan Types (1)

There are several different types of compensation plans in network marketing companies. They are as follows:

Stair-step Breakaway plans:

This type of plan is characterized as having representatives who are responsible for both personal and group sales volumes. Volume is created by recruiting and by retailing product. Various discounts or rebates may be paid to group leaders and a group leader can be any representative with one or more downline recruits. Once predefined personal and/or group volumes are achieved, a representative moves up a commission level. This continues until the representative's sales volume reaches the top commission level and “breaks away” from their upline. From that point on, the new group is no longer considered part of his upline's group and the multi-level compensation aspect ceases. The original upline usually continues to be compensated through override commissions and other incentives.

Uni-Level plans:

This type of plan is often considered the simplest of compensation plans. Uni-Level plans pay commissions primarily based on the number of levels a recipient is from the original representative who is purchasing the product. Commissions are not based on title or rank achieved. By qualifying with a minimum sales requirement, representatives earn unlimited commissions on a limited number of levels of downline recruited representatives.

Matrix plans:

This type of plan is similar to a Uni-Level plan, except there is a limited number of representatives who can be placed on the first level. Recruits beyond the maximum number of first level positions allowed are automatically placed in other downline (lower level) positions. Matrix plans often have a maximum width and depth. When all positions in a representative's downline matrix are filled (maximum width and depth is reached for all participants in a matrix), a net matrix may be started. Like Uni-Level plans, representatives in a matrix earn unlimited commissions on limited levels of volume with minimal sales quotas.

Binary plans:

A binary plan is a multilevel marketing compensation plan which allows distributors to have only two front-line distributors. If a distributor sponsors more than two distributors, the excess are placed at levels below the sponsoring distributors front-line. This “spillover” is one of the most attractive features to new distributors since they need only sponsor two distributors to participate in the compensation plan. The primary limitation is that distributors must “balance” their two downline legs to receive commissions. Balancing legs typically requires that the number of sales from one downline leg constitute no more than specified percentage of the distributor's total sales.

Hybrid plans:

Are compensation plans that are constructed using elements of more than one type of compensation plan.

There are Three Steps about How MLM Network Marketing Works

The three steps should seem intuitive because they are taught by every MLM Network Marketing company. Everything about MLM is simple if you follow the right process. The three steps are:

• Use the products and experience it benefits
• Share the benefits of the products with others
• Share with the interested people the income opportunity

You'll notice step three says interested people not friends and family who have no interest in the business opportunity. Your friends and family can be customers. If your product is helping you they will be interested for their own use.

NOTES: (1) MLM Network Marketing Wikipedia Reference URL