What is an MLM company? Is network marketing a scam?
MLM is an abbreviation for Multi Level Marketing. Multi level marketing is a common business model for a wide variety of product and service companies. So, what is an MLM company? A true MLM organization utilizes a proven business model, and the term describes the organizational structure of the business.
Each individual that joins the business opportunity is typically sponsored or recruited by someone else. Each new member works to build a customer base, and recruit other distributors or promoters into the business. This “multi level” effect is how the term Multi Level Marketing was coined.
Multi Level Marketing Companies are also referred to as direct sales and network marketing companies. The business structure, and compensation plan will vary from company to company, however most MLM business opportunities are very similar. The core advantages of the MLM business model are low overhead ( i.e. minimal infrastructure, less mainstream marketing expense, performance based compensation plans etc. ), and the “low risk” initial investment is attractive to entrepreneurs.
Individuals, and sometimes organizations, are recruited to distribute and promote a company’s products or services. MLM companies are attractive to many because they offer a “ready made” business plan, and generally require little to no investment to get started. Direct sales companies utilize the most powerful form of advertising in any company’s marketing tool box, “word of mouth”. Fortune 500 companies and network marketing companies discovered decades ago that consumers are much more likely to buy based on relationships and personal interactions than mass marketing influence. This is the power of “word of mouth”.
The next time someone asks, “What is an MLM company?”, we will have a better answer. Next, we will cover the common misconception that all MLM companies are a pyramid scheme, or a scam. This is simply not true.
Is network marketing a scam?
No. True network marketing is not a scam. In fact, network marketing is the most powerful tool in any company’s marketing tool box. Are there “pyramid schemes” or scams out there? Yes, but with a bit of understanding and due diligence we are able to sort out the good from the bad.
When someone we meet makes a statement like, “That’s MLM”, or “This is just another one of those pyramid schemes”, there is a good possibility that they themselves, or someone they know, were once involved in a network marketing business. The reason for their opinion may be that they were involved with a bad company, or perhaps it was a great company and they failed to learn a few basic skills that are necessary to be successful in network marketing.
Can I Make Money With Network Marketing?
Absolutely, many of us are! However, it is important to do some research, and to have proper expectations. For those of us with the entrepreneurial spirit, it is extremely important to do our due diligence before getting involved in any direct sales opportunity. We need to ask questions, review the compensation plan, seek third party validation from existing distributors, and we certainly cannot allow ourselves to be pressured into making a decision.
It is not necessary to know a lot of people to earn a significant income, yet we will need to learn some simple skills to grow our network. Remember we are building a business. There will be an initial investment, and an ongoing investment of time. Like any business model, we can make money with network marketing if we do our homework and put in the effort.
Now we have a better understanding of what an MLM company is, and that many do make money in network marketing. When we engage with someone that is unaware of the facts, please share this article with them! And by all means, feel free to use this article as a tool to educate prospective team members in an MLM business.