Multi-Level Marketing: Is It Really A Serious Way To Make Money?

Multi-level marketing allows companies to quickly sell products and recruit employees.

Generating high sales in a short time without much effort – is the dream of every entrepreneur. With so-called multi-level marketing, companies seem to be getting closer to this dream. This special form of marketing or sales not only allows you to sell products in a short time but also to recruit employees at the same time. 

We explain here what lies behind this ominous and critically viewed system.

In order to give you an overview of multi-level marketing right at the beginning, we would like to tell you in advance which questions we will answer in this article:

  • What is multi-level marketing?
  • Is multi-level marketing a Ponzi scheme?
  • How does serious multi-level marketing succeed?
  • What are the pros and cons of multi-level marketing?
  • What are examples of successful multi-level marketing?

Definition: multi-level marketing

Multi-level marketing (MLM) is a special type of sales. With this type of direct sales, products are sold to customers via a growing network of employees. 

In this way, an attempt is made to poach the customer directly as an employee, so that the latter in turn recruits further customers as a sales partner. Because this can create a large network, it is also known as networking marketing. 

Startups in particular use this type of sales promotion very gladly, because they can not only generate more sales in a short time but also grow rapidly. Multi-level marketing does not exclude any industry. 

The lucrative thing about the model for employees is that they can also earn more at higher levels within the company. According to this, the employees climb the internal steps if they generate more sales and sell many products.

Multi-Level Marketing – A Pyramid Scheme?

With this type of distribution, the suspicion of a Ponzi scheme quickly arises. A Ponzi scheme is a business model that is based on a constantly growing network of employees or participants and this is essential for the success of the company. 

To ensure that the number of participants increases rapidly, managing directors lure them with profit sharing or bonuses for recruiting additional employees. Only those who also bring partners on board earn their money. Since this business model can quickly collapse if the growth of new employees stagnates, this type of direct sales is prohibited. 

However, in order to quickly recognize a Ponzi scheme, there are the following characteristics that can be used to identify it as such:

  • Advertisement for an obviously simple business idea that can be used to earn money very easily and quickly.
  • With a “small” investment you can start the business.
  • A bounty or bonus is used to attract more participants.
  • Opaque structures do not allow the founder or initiator to be identified, although he receives a commission from every increase.
  • Reaching higher positions and higher salaries alone serves the purpose of recruiting more and more people.

This is how serious multi-level marketing succeeds

Since the boundaries between multi-level marketing and sales according to a Ponzi scheme flow into each other, it is often difficult to recognize serious MLM. In order to make this possible, you should ask yourself the following questions:

  • Would the customer buy the product even if they did not receive a bonus for recruiting new employees? 
  • Does the business model also work with a stagnating number of salespeople? 

If the answer to these questions is yes, then obviously this is not a pyramid scheme, but a serious form of networking marketing.

The main focus of multi-level marketing is on the products. The aim is to sell high-quality products to customers at a reasonable price and also to constantly invest in product development. In addition, the products are sold to customers who are initially not connected to sales. 

If these customers are convinced of the products, they can use recommendation marketing to increase sales and expand indirectly. 

Accordingly, recruiting employees is of course an advantage for the company, but is not the focus. If customers decide to become sales employees, they also receive training or further education in order to present and sell the products to other people in a qualified manner. 

You can therefore not only become a representative of the company but also achieve a passive income with a constant expansion of the network. Because the larger the network, the greater the income – the more staff recruited, the higher your own earnings.

You can quickly recognize serious multi-level marketing based on the following characteristics:

  • High-quality products at a reasonable price are in the foreground
  • Training and further education free of charge or inexpensive for the employees
  • No investments are necessary or even for small amounts
  • A wealth of information about the products, the company and the management level
  • Direct contacts

The pros and cons of multi-level marketing

In order to be able to see at a glance the advantages and disadvantages of this type of direct sale, the following list is intended to provide assistance.

ADVANTAGES

  • No personnel management is necessary, since the sales partners are self-employed
  • Flexible sales activity, secondary or part-time employment possible
  • motivated partners through performance-related income
  • more sales through a large sales network with additional partners
  • improved advice through direct customer contact

DISADVANTAGES

  • high administrative effort due to partner training
  • Career changers often have no commercial experience
  • The structure of the employee network can quickly become opaque
  • high turnover of partners
  • The danger of slipping into illegality

Conclusion: criticism of multi-level marketing

Since multi-level marketing can quickly become opaque and can smoothly transition into an illegal distribution system, MLM is constantly being criticized. 

In principle, however, networking marketing is legal. Rather, it is an interesting form of sales because it is very flexible for employees and allows for rapid advancement opportunities. Especially when people have a talent for presenting and selling products or services and have a generally open nature. 

But be careful: If you are an entrepreneur and want to set up your own business based on an MLM system, you should know all the necessary specifications and legal regulations. All corporate structures should be transparent and open so that they can be checked at any time.

Frequently asked questions (FAQ) about multi-level marketing

What is multi-level marketing?

Multi-level marketing (MLM) is a special type of sales. With this type of direct sales, products are sold to customers via a growing network of employees. In this way, an attempt is made to poach the customer directly as an employee, so that the latter in turn recruits further customers as a sales partner. 

Is multi-level marketing serious?

In the case of multi-level marketing, the suspicion of a snowball system quickly arises. You will quickly recognize serious multi-level marketing based on the following characteristics:
– High-quality products at a reasonable price
– Training and further education for employees
– No investments necessary or even for small amounts
– Detailed information on products and the company
– Direct contact persons

What Are the Benefits of Multi-Level Marketing?

Multi-level marketing can offer you the following advantages: self-employed sales partners, flexible sales activities, side or part-time employment possible, performance-related income. more sales through a large sales network and improved advice through direct customer contact.

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