Is Multi-Level or Network Marketing Still a Viable Business Model?

multi-level marketing business

Whenever one dreams of starting a business the idea of a business model comes into being. Today, there are so many different ways to do this. It somewhat depends on the product or service you wish to have as your core competency. A few modalities are:

  • Independent Company with a product or service
  • A Franchise
  • Digital Internet Marketing
  • Direct Selling is also known as Multi-Level Marketing (MLM)

Multi-level marketing was pioneered by the Amway Corporation and has inspired many other companies with products or services to do the same. Some of the most popular network marketing companies are Avon, Tupperware, and Quixtar.

Although I currently am not involved in any multi-level marketing business, I used to be an Independent distributor for several of them myself. Ranging from tangible products to intangible life insurance and financial services, and a telecommunications service business back in the 90’s. Although I did not make a lot of money with them, the experience, the training and the knowledge I learned were phenomenal. If you love people, like to network and mentoring, multi-level marketing business may be the right business for you.

So just what is multi-level marketing? At its very core is the concept of connecting up with a company that has a high-quality product or service and has chosen to use its marketing dollars to pay independent representatives to sell or promote their products. The independent representative is given the opportunity to simply sell the product or service to customers, or build up a downline of other independent representatives or do both.

The real pitch here is that rather than spending money on advertising they use the power of word of mouth marketing. That would mean recruiting other independent sales agents and motivate them to expand so they, in turn, can start building their own downline or network.

As the downline is built up, overrides are paid up the downline for the sale of product or services. This is when you really can start making some serious money. Understand that the parent corporation has to also make money and there is only so much money to spread around from the sale of each product or service. Consequently, the product or service has to be of such high quality or uniqueness that people are willing to pay a higher price for it.

In addition to this, each independent representative most of the time is required to purchase a minimum amount of product or service on a monthly basis to stay qualified to receive overrides. The result here is that the people on top of the distribution chain receive higher compensation than those on the bottom. However, the potential for anyone on the bottom to build up a sizeable downline is always a reality.

The cost is typically minimal to become an independent representative, typically less than $200. And this is the appeal. A low buy-in cost! Compared to a franchise cost this is a dream come true maybe.

This is not to be confused with an illegal pyramid scheme. The reason is that a legal multi-level marketing company has a real product or service to deliver aside from the direct selling or direct marketing approach.

So can a person today start a viable multi-level marketing business even with the bad press and other forms of business available? The answer is yes of course, but it will not be a cake walk.

As with any other business, the 80/20 rule will begin to take effect. Roughly speaking, 80% of your downline business will come from 20% of your independent representatives. Might even be closer to 90/10 rule!

multi-level marketing

So if you wanted to become involved in a network marketing company as an independent representative, here are a few things you should do. First of all, do your research. I recommend the following:

  • Research at least 50 different multi-level marketing companies
  • Examine and look for high-quality product or service that you can buy into yourself
  • Look at annual sales
  • Attend several of their meetings and take down notes before you make a decision
  • Understand that it is time and money spent, what is the return on investment?
  • Find a good upline or mentor and work with him or her

Once you have done that research, you are ready to make that move to become an independent distributor. Of course, you could not expect every person in your downline to have the same research attitude so it may take a while to build up the business. However, that is okay, because you want high-quality people in your downline, not just the ones that take up your time and never do the work themselves.

How do you become successful in Multi-level Marketing Business or Network Marketing? Here are some tips.

  1. Make sure to treat your multi-level marketing business just like a real business. This could mean working more than eight hours a day which may include attending or conducting meetings, doing webinars and social media marketing.
  2. Be honest with yourself, to your downline and your customers. Are the products or services really good and will help people or your only concern is the payment structure?
  3. To save time and money, identify your target market and focus on them. Create a marketing strategy to target a specific market.
  4. Be professional in dealing with your downline. Show them that you care and that you’re a team player and you want them to succeed.
  5. Be persistent but not annoying. Discuss the benefits of the product or a service.
  6. Focus, focus, focus. It’s easy to be motivated, the hardest part is staying motivated.
  7. Don’t stop learning. Read books, talk to people and do not be afraid to ask questions. Use the power of the internet to gain more knowledge.
  8. Take care of your physical body by staying healthy. A healthy body is a healthy mind. You are going to need a lot of energy to succeed in this business.
Author

BA in Accountancy, he entered the entrepreneurial world by starting his first online marketing business in 2004. Passionate about personal finance, the stock market and a digital marketing addict. I also love to read books on entrepreneurship and technology and always on the lookout for new opportunities. I'm an avid golfer and currently a 15 handicapper.

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