Multi level Marketing

6 Key excerpts on "Multi level Marketing"

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  Organizational Studies and Business Models

  • (Author)
  • 2014(Publication Date)
  • College Publishing House

    (Publisher)

  Multi-level marketing Multi-level marketing ( MLM ) is a marketing strategy in which the sales force is compensated not only for sales they personally generate, but also for the sales of others they recruit, creating a downline of distributors and a hierarchy of multiple levels of ____________________ WORLD TECHNOLOGIES ____________________ compensation. Other terms for MLM include network marketing , direct selling , and referral marketing . Although the products and company are supposed to be marketed directly to consumers and potential business partners by means of relationship referrals and word of mouth marketing, critics have charged that most MLMs are pyramid schemes. MLM companies have been a frequent subject of criticism as well as the target of lawsuits. Criticism has focused on their similarity to illegal pyramid schemes, price-fixing of products, high initial start-up costs, emphasis on recruitment of lower-tiered salespeople over actual sales, encouraging if not requiring salespeople to purchase and use the company's products, potential exploitation of personal relationships which are used as new sales and recruiting targets, complex and sometimes exaggerated compensation schemes, and cult-like techniques which some groups use to enhance their members' enthusiasm and devotion. Not all MLM companies operate the same way, and MLM groups have persistently denied that their techniques are anything but legitimate business practices. Direct selling and Multi-level marketing It should be noted that some sources classify Multi-level marketing as a form of direct selling rather than being direct selling It must be also mentioned that Avon, Electrolux, Tupperware, and Kirby all originally used single level marketing to sell their goods and that multi-level marketing was used in 1945 to sell the vitamin supplement Nutrilite Michael L.

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  The Power of Passive Income

  Make Your Money Work for You

  • Nightingale-Conant, The Staff of Entrepreneur Media(Authors)
  • 2019(Publication Date)
  • Entrepreneur Press

    (Publisher)

  Whether we admit it or not, Americans have always had mixed feelings about the benefits of hard work. On the one hand, we admire people who live by the sweat of their brow—and we really admire people who get ahead that way. At the same time, we don’t really hold a grudge against those who inherit wealth, especially if they share some of it through philanthropic or charitable causes. In other parts of the world there’s a deep resentment against the rich, but that anger has never really taken hold in this country—probably because so many of us want to be rich ourselves. And given a choice, most of us would like to get rich the easy way rather than the hard way. We’d prefer to win the lottery tomorrow to spending 20 or 30 years building up a business. And we’d rather just get a check in the mail or a wire deposit to our bank account than work 9 to 5 all week for a payment on Friday. In short, we admire people who work really hard, but in our own lives we’d like to replace that hard work with passive income to the greatest possible extent.

  These dual feelings about work and wealth and what it all means come into sharp focus around the topic of MLM. In a sense, multilevel marketing is the ultimate in passive income. In multilevel marketing, if things go according to plan, you quickly develop an ever-expanding group of subordinates whose work benefits you as well as them. To see how that happens—or how it’s supposed to happen—let’s start with the basics.

  MLM 101

  Multilevel marketing—also called MLM, or network marketing—is a way of selling products and services through a chain of semi-independent distributors rather than traditional retail outlets, such as stores or mail order. Each MLM distributor has two basic jobs. The first job is to sell the company’s products or services, and the second job is to recruit more distributors for the same purpose.

  In turn, each new recruit a distributor brings into the organization is encouraged to bring in his or her own recruits. Eventually, an active distributor develops a substructure known as a downline. Once that’s happened, the distributor not only gets commissions on his or her own direct sales, but also gets a commission on the sales of the distributors in the downline. There are also usually performance bonuses for reaching certain sales levels. Since each distributor profits from sales of the downline, it is to the advantage of the distributor to help those below them to succeed.

  The basic concept of MLM has existed for at least a century, but in post-war America, its first big success was the company then known as Amway—a contraction of “American Way”—which was founded in 1959. Since then, Amway has conducted business through a number of affiliated companies in more than 90 countries and territories around the world, as well as the United States and Canada. This family of companies reported sales of $8.6 billion in 2017. Its product lines include personal care products, jewelry, dietary supplements, water purifiers, air purifiers, insurance, various home goods, and cosmetics. As the Amway website puts it, “For more than 45 years, Amway Corporation has enabled people to have a business of their own.”

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  Marketing Strategy

  • O. C. Ferrell, Michael Hartline, O. C. Ferrell, Michael Hartline, Bryan Hochstein(Authors)
  • 2021(Publication Date)
  • Cengage Learning EMEA

    (Publisher)

  Thus, for the remain- der of this case, think of a direct seller as one that sells products such as Avon, Juice Plus+, and Herbalife Nutrition. C17.1a Single and Multilevel Direct Selling Direct selling has two compensation methods. There are single and multilevel compensation models of direct selling. Single-level marketing occurs when direct sellers only earn commissions for sales they make themselves. Multilevel marketing is when direct sellers earn income from their own sales of products as well as commissions from sales made by those they have recruited to sell the product. Forms of multilevel direct selling operate in nearly all countries, but the practice is often strictly regulated and/or closely scrutinized due to pyramid schemes that have given this form of direct selling a negative connotation. In most cases, multilevel marketing companies are legitimate because they sell products to consumers and do not require direct sellers to recruit others in order to earn a profit. Thus, properly monitored and managed multilevel direct selling models are not pyramid schemes, as they offer companies a sustainable way to directly sell their products through a hardworking salesforce of individuals that believe in the products they sell. In fact, most direct selling representatives are champions for the products and often become in- dependent contractors to get discounts and provide the products to friends and neighbors. The vast majority are involved part-time and are not trying to earn a living. Many well-established companies operate using a multilevel direct sales model (see Table 1 for the top 10 global direct selling companies based on annual revenue). Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).

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  Plan B

  The Real Deal Guide to Creating Your Business

  • Kathleen Rich-New(Author)
  • 2013(Publication Date)
  • Morgan James Publishing

    (Publisher)

  The term now refers to any investment design in which the early investors are paid off with money coming in from later ones. No products or services are sold. The only focus is to get as many investors as possible.

  Pyramid schemes

  The Federal Trade Commission (FTC) has defined pyramid schemes as plans that concentrate on the commissions earned for recruiting new distributors and that generally ignore the marketing and selling of products and services. For example, FUND AMERICA's founder was arrested because 90% of revenues came from selling distributorships and not from selling their products. This made it a pyramid scheme, and not a legitimate network marketing company.

  “…unlike pyramid or Ponzi schemes, MLMs have a real product to sell. More importantly, MLMs actually sell their product to members of the general public, without requiring these consumers to pay anything extra or to join the MLM system.”

  —DEBRA A. VALENTINE, GENERAL COUNSEL , US FEDERAL TRADE COMMISSION 8

  NOTE: MLM (Multi-Level Marketing) is another name for network marketing.

  Some indicators of a pyramid scheme include:

  •  A large and required up-front investment. Legitimate network marketing companies require only a low investment to become a distributor. Technically, you should be able to join for a few dollars. However, you will need some tools and inventory to get started so you should expect to invest in them—even in a legitimate network marketing company.

  •  No unsold inventory buyback. Legitimate network marketing companies will buy back unsold inventory for at least 70%-90% of what you paid. The guaranteed buyback is typically for at least a thirty-day period; some offer it for up to one year.

  •  No focus on selling products or services, only on recruiting other distributors.

  Now you know more about the good and the bad news, as well as the advantages and disadvantages, of network marketing. You also better understand why legitimate network marketing companies are not pyramid or Ponzi schemes.

  Bottom line: Legitimate network marketing companies pay compensation on both sales and signing up new distributors. It does not matter when you join; you can out earn your up-line. In Ponzi and pyramid schemes, on the other hand, the money goes to those at the top of the organization and pays out as new people are recruited, bringing with them a large investment. No products or services are sold. So if a company tells you that you do not have to sell any products or services to be paid a commission—step away.

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  Networks in Marketing

  • Dawn Iacobucci(Author)
  • 1996(Publication Date)
  • SAGE Publications, Inc

    (Publisher)

  In their summary of legal issues related to network marketing, Grafton and Posey (1990) reflect this spirit: Nearly every manufacturing firm uses a system of middlemen to distrib-ute its products. A pyramid shape emerges, with the manufacturer on top, supported by an ever-widening group of wholesalers and retailers, with a broad base of consumers at the pyramid's foundation. Multilevel [or network marketing] franchises combine both traditional distribu-tion and direct door-to-door selling techniques Neither the existence of a large direct sales force nor a market system that forms a pyramid shape indicates that a distribution system is illegal, (pp. 599-600) In this same vein, it is important to acknowledge that the oppor-tunities inherent in any given business will change as the business becomes more prevalent and successful. Marketing and operating the first McDonald's in a city is much different from managing the 35th. Yet both can be successful. 332 CONSUMER NETWORKS Second, like other businesses, network marketing organizations are slow to reach a complete saturation point because of the standard market frictions that result from differing human abilities, motiva-tions, and preferences. Even when a network marketing organization is starting out in a market, selling and recruiting is a difficult sales process. For example, network marketing executives estimate that 70% of the adult population is unlikely to become a new recruit and that a majority of the remaining 30% do not aggressively build a network (Coughlan & Grayson, 1994). This same research suggests that time constraints are a major factor in determining success, although differing skill levels certainly also play a role. Personal goals will also influence individual success and overall network growth— many people join network marketing organizations to generate only a moderate amount of part-time income.

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  Advances in Social Network Analysis

  Research in the Social and Behavioral Sciences

  • Stanley Wasserman, Joseph Galaskiewicz, Stanley Wasserman, Joseph Galaskiewicz(Authors)
  • 1994(Publication Date)
  • SAGE Publications, Inc

    (Publisher)

  254 MARKETING AND SOCIAL NETWORKS 255 Network marketing entails distribution of products and services through a network of independent businesspeople, who in turn either take care of the distribution themselves or recruit others to do so. The canonical examples are Tupperware (Miller, 1991) and the pyramidal Amway structure. The formal hierarchical structure characteristic of such sales networks as Amway's is probably atypical of social networks in general, but this approach to marketing is now being promoted by lecturers in the marketing profession and adopted by a variety of firms in diverse industries. Consider, for example, the Network Marketing Store, a chain of brokerage firms allowing persons interested in sales and distribution to shop for suitable manufacturers. The founder of the Store optimis-tically hopes to open 1,000 such outlets (each with an upper limit of 2,000 members) by the year 2001 (Miller, 1991). MCI's 1992 Friends and Family campaign offers discount calls to residential customers when dialing a telephone number from a list prespecified by the customer, who in turn must furnish MCI with the names and other information about the targets on the list. The latter are then contacted by MCI's sales force in an attempt to induce them to enroll in the discount plan. Advertising by competitors of MCI has depicted this effort as both an invasion of privacy and an imposition by one friend or family member upon another. As the two cases illustrate, social networks can and have provided the foundation for effective marketing strategies. The challenges facing both marketing strategists and marketing scientists are, however, to move beyond the anecdotal cases to a better understanding of the potential the field of social networks can offer to such questions as these: 1. Which types of social networks can be used as a basis for marketing strategy? 2. How do we identify and measure social networks? 3. How do we mobilize and manage social networks? 4.

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