MLM stands for multi-level marketing, and it is essentially a strategy where your sales team will earn compensation for the sales they generate as well as the sales that other salespeople that they recruited generate. If it sounds a little bit odd or sketchy, that’s because it is. MLM marketing can be done right, but too many companies are getting caught up in the fad and taking risks that only work for the short term and not the long term. It’s important to understand how it works and how to make it work correctly before diving into anything, which is where this article comes into play (and for many, the information needs to come sooner rather than later).
MLM Marketing vs. Pyramid Schemes and How to Be Successful
Once again, if you’re looking to improve your sales strategy or try something new, MLM can actually be very tricky and therefore risky. While a new idea may sound exciting, sometimes MLM approaches turn into what are called pyramid schemes. Walking this fine line can be tough, so it’s important to know the differences before even considering making changes to your sales approach:
- Pyramid Schemes. This essentially means that people make money based on the number of people they recruit and then the sales that are made to those people. This is actually an illegal practice and will cost everyone money in the end. You end up promising those who participate compensation for enrolling others in the scheme as opposed to actually selling products/ services to consumers.
- Multi-Level Marketing. The difference here is that this strategy allows employees and the business to make money based on the sales they generate from the public. Nothing more, nothing less.
As you can see, the reason MLM has such a bad reputation is because it generally profits only those who join early as well as the corporate team all at the expensive of those wrapped up in this strategy.
So how can you be successful with an MLM method? Well aside from making sure you aren’t turning into a pyramid scheme described above, you have to make sure you offer your employees proper training, networking event opportunities, and marketing tools. It’s all about making sure every single employee has what they need to be successful outside of the MLM format so that the MLM income is just a little bit extra. You need to be evaluating the sales team based on what they sell to consumers and nothing more.
The Takeaway: Is an MLM Strategy Worth It?
In the end, MLM marketing can work but you have to be very careful. If your sales team is really struggling, I would recommend trying everything first before jumping into an MLM way of doing things—go through extra training, bring in people with more experience, change what you say on the phone, change the way you find leads, etc.—which you can learn more about here.
If all else fails and you feel like you can create an MLM format without turning into a pyramid scheme of any kind, it is definitely something that companies are still using today. According to an MLM Skeptic blog article, however, you need to dedicate two to five years to build your organization in order to achieve minimal income with this method. He looked at the Direct Selling Association’s statistics (the official MLM industry committee), and concluded that companies using this method were only making slightly above minimum wage. I recommend reading the article for more on the study.
Moral of the story: I would try and avoid an MLM approach as much as possible just to be on the safe side and because the benefits don’t always outweigh the risks in the end.
What are your thoughts on multi-level marketing? Let us know in the comments below.