039 · What is MLM and how can it help you make money?

Have you ever heard of “Multi-level Marketing” (MLM) or ” Network Marketing “. No? So, what is it exactly? Can you make money with MLM? And if so, how? And above all, should we be wary of it? So many questions deserve clear, precise, and, above all, objective answers.

• Here's the program
• What is multi-level marketing?
• Why does multi-level marketing have a bad reputation?
• What are the advantages and disadvantages of multi-level marketing?
  • The disadvantages of MLM
  • The advantages of MLM
• Some tips to get started with Multi-Level Marketing
• Conclusion

In this article, Liza Way, Silver President Team at Pm-International (a manufacturer of food supplements and cosmetics based in Schengen, Germany and operating via this relationship marketing system), read and brought some comments and clarifications to this article.

What is multi-level marketing?

Multi-level Marketing, or MLM, is a type of direct selling in which the sale of products to customers is done through a growing network of sales agents, mostly self-employed. The distributor (or salesman) has two sources of income: the first through the commission from the sale of products to customers and the second through the recruitment of other distributors. The idea is to apply “referral marketing”: Distributors are recruited most often from among the customers enthusiastic about the range of products.

Liza: These are products that are not usually found in stores but only through distributors. We are in fact the brand’s advertising, the recommenders. Satisfied customers very often start, with the help of their distributor, by making recommendations among their entourage, thus allowing them to earn additional income with products they like and already know.

Multi-level marketing, therefore, requires the creation and use of a personal network of customer-sellers. When a salesperson makes a sale, he or she receives a commission. The person who recruited this salesperson, called the “sponsor”, and the sponsor of this sponsor and so on, receive a percentage (hence the name “multi-level” marketing/sales).

Liza: You don’t necessarily get a commission on every level, or the company would be bankrupt (laughs). The percentage decreases depending on which level the distributor is, so the company can keep up, of course. We get paid on up to six levels at our company, but that number varies with each company and the remuneration system in place.

Note that the hierarchy that is created with this system differs from a classic company: The people at the top have no authority over the salespeople on the lower floors, so a sponsor is not the boss of his or her recruit!

Liza: That’s absolutely right, and a sponsee can even greatly exceed his sponsor, which doesn’t exist in a pyramid system—the goal being to keep a balanced structure where everyone can evolve according to his or her work and ambitions

If this still seems obscure to you, know that you are probably already familiar with this process, especially through the “Tupperware meetings”. In fact, the Tupperware company is one of the first to have popularized the multi-level sale. If you haven’t heard of them, they were (before the concept was democratized and opened to all segments of society) meetings organized by a housewife, who invited other housewives that she knew or from her neighborhood and proposed cooking workshops to promote Tupperware products.

A Tupperware meeting somewhere in Florida, USA, in 1958. Photo by Joseph J Steinmetz

Liza: Just like the Avon company by the way. MLM comes from the USA where, for nearly 80 years, a large part of the population has been doing relationship marketing. It is progressively arriving in Europe, but as with any new concept that is still not well known or understood, a certain amount of mistrust is at first felt. But I am convinced MLM will become more and more popular in the coming years.

She then proposed to her clients to become “brand ambassador” themselves, so that she could earn a percentage of the commission on their sales—a percentage that was in addition to the commission the housewife earned on her own sales. Note that, even today, the products sold are mostly products used in daily life, such as cosmetics, soaps, cleaning products, food supplements, etc.

Why does multi-level marketing have a bad reputation?

Well, yes, people’s opinion about MLM is not always positive. Most of them are confused with the pyramid system, which is illegal in most countries.

Even though there are similarities between these two systems, there are also some important differences. The main one is that the pyramid scheme is a business model that relies exclusively on the recruitment of new participants and not on sales. Simply put, the pyramid scheme invites investors to make an initial investment, which it collects in part or in full, and then invites those investors to recruit new investors, who in turn will donate money to pay the first investors, and so on. In many cases, this type of system does not even distribute real products.

Liza: There’s not even any sales product in this system. It sometimes offers a training service that will be at best very incomplete or at worst completely dumb, to be downloaded for free, just to look good.

Multi-level marketing, on the other hand, sells products at an affordable, and sometimes even at an advantageous, price that can only be found through its distributors, and it is the commission from this sale that will give the salespeople income, and not only the recruitment of new salespeople! So, it is not a pyramid scheme (although you may sometimes hear it described, wrongly, as a “legal pyramid scheme”).

One of the other elements that can explain the bad reputation of MLM is the sometimes very insistent behavior of some salespeople, which can sometimes turn into harassment. Indeed, they lack patience and cannot help but insist sometimes heavily on reluctant people, to the point of provoking their irritation. However, this is not specific to MLM but rather linked to the relatively rude character (it must be said) of some of these salespeople.

Liza: It’s totally true, just like those who regularly harass all their contacts by message, how horrible! Kind of like some of the door-to-door salesmen back in the day… The company of course absolutely does not condone this kind of totally counterproductive behavior!

What are the advantages and disadvantages of multi-level marketing?

The disadvantages of MLM

Let’s start with the main difficulties you should be prepared to encounter before you start.

First, you have to be very careful about possible scams because there are some. If you want to embark on this project and partner with a particular company, it is important to learn about it first. For this, there are nowadays all kinds of sites where people can leave a review (Trustpilot, G2, Capterra, etc…) and talk about their experience concerning a whole bunch of subjects (use of a software, feedback on an online purchase, service offered by such and such a company, etc.). If you search the name of the company on Google, there is a good chance that you will find this kind of feedback. There is even a good chance that you will find complete articles, in the press or on blogs, about them.

Liza: Be careful with the search for reviews though. Some unsatisfied distributors do not hesitate to smear their partner company because they simply cannot achieve the success they had hoped to reach (often due to a lack of work, ambition, or other reasons), and it is often much easier to criticize than to question ourselves. Hence the importance of the relationship of trust that must be established from the start between sponsor and sponsored. This is a vast subject on which I could debate for hours…

Another point to emphasize is that it is not always easy to find the MLM company that has a product that will interest your customers (current or future). It can, therefore, be useful to launch some market research (e.g. do research on Google Trends and also survey your customers if you already have some) before doing anything. Some people launch themselves blindly into this adventure, only on the basis of the promises made to them, and end up realizing (too late) that their product does not interest anyone.

Liza: I don’t necessarily agree with you on that. A well-recommended product will certainly sell. We are the company’s advertisement, so it is up to us to promote it well. And then any marketer knows that it’s not the product that people buy, but the seller 😉. If customers have confidence, they will buy, regardless of the product.

Then, it is better to break the myth right away. MLM requires a significant investment of time, especially when you start. Some people try to make you believe that you can earn money without doing anything, but this is far from the truth. Those who have been involved in the sales field, in general, know what it’s all about.

First of all, you will have to get to know your product perfectly, its advantages but also its weaknesses as well as its possible medical contraindications, know the state of the market and of the competition, contact your customers and find new ones, possibly prepare advertising visuals and take care of the packaging (but in most cases it is the company that takes care of the shipping), etc…

Liza: Indeed, it takes a lot of hours of work to build your network, at the beginning. It takes time, and it will depend on each person too. At the beginning the income is relatively low, and it can sometimes be discouraging. Then, with time, you’ll reach the salary of a classic employee, and there comes a time, after 2 to 7 years, when it becomes a passive income (since the team you formed can now work without your help) that allows you to live comfortably and above all freely.

Moreover, it is better for you to have a strong mind and an unfailing motivation because you should expect to face many rejections. Customers will not always be enthusiastic to see you, so there will probably be many disappointments, but there will also be victories. Don’t worry.

Finally, you should know that the gains are not huge, especially at the beginning. The competition is tough, and success takes time. It will not be easy and immediate money. Some people who have launched their business even declare to have lost money. It’s not recommended to make it a full-time business, at least not in the beginning. And if you are starting your own MLM-related business, it’s best to avoid investing a lot of money (keep what you need for a decent living).

Liza: It is true that your income will be low compared to the hours you will devote to it. The mistake here is to think like an employee when you should think like an entrepreneur… Generally, the entrepreneur opens his business, works very hard to recover his initial investment (often important) after 10 years, sometimes more. Here, it’s the same: We work to create our network, except that it’s faster and simpler, and especially that the investment is zero, so there is zero risk.

Those are the main negative aspects of this business. If you’re still here, if you didn’t run away after reading these few points, let’s move on to the positive points. The advantages of MLM are indeed numerous and not negligible.

Advantages of MLM

First, know that you don’t need to do or have done any specific studies. This activity is really accessible to everyone! But this doesn’t mean that you don’t need any specific knowledge to be able to practice it. Like all jobs, you will have to learn certain basics, and in this case they are those of sales, communication, negotiation, and more generally of marketing. And there is no need to follow a costly and time-consuming training course for this. There are all sorts of cheap or even free ways to train yourself quickly (online training, YouTube videos, books…). Don’t neglect this point because this knowledge will have an impact on your success.

Liza: Indeed, whatever your age, social level, professional status, nationality, etc., network marketing is open to everyone. But more subtle than sales, it is the basics of recommendation that you will have to acquire. Companies offer free training, of course, but you can also take it elsewhere if you wish. There are many books on the subject, by the way.

Then, you will taste the joys of being your own boss and not having a superior (except, maybe, the tax agent). You are the boss and it is very exhilarating, especially at the beginning. You are the only master on board of your ship and will not have to take orders from anyone, and you will also be the master of your time, to decide on your vacations, when and where to work, etc… But as you already know, “with great power comes great responsibility”, so keep your feet on the ground because from now on each of your actions and decisions will be decisive in your quest for success.

Liza: Keep in mind that you will be working in a team; you will never feel alone. And even if you are your own boss, there will always be someone to help you with difficulties, to motivate you, coach you, etc.

And even though it is unlikely that the money will start flowing right away once you start your business, it is true that if you put your heart and soul into your business and the conditions are optimal, you can make a lot of money! A significant number of those who have tried it now make a full-time living out of it. Don’t forget that your recruits will also bring you money, and in a passive way!

Finally, a significant advantage mentioned by many MLM enthusiasts: The multi-level marketing is first and foremost a human adventure. It’s about meeting people, a close-knit and supportive community. Whether it’s with your sponsor or with your referrals, you can discuss, share your experiences, etc. So, if you like human contact, if you want to work and exchange in community, this is an element to take into account.

Liza: There is also personal development and coaching to erase our flaws, at least those that can penalize us in this business, or to mitigate our darker sides. And then there is also a lot of recognition from the company. Depending on the levels you reach, they offer bonuses, trips, gifts (in addition to commissions).

“Tupperware” meetings are more like that today (yes, with Ken fooling around, as usual 😂)

Some tips to get started with Multi-Level Marketing

• First of all, define your objectives and set up an action plan. It is important to establish a strategy to know where you are and moreover where you want to go.

Liza: Indeed, it is important to know first of all if you just need a complementary income (100, 300, 500 dollars per month?) or if you want to completely change your life. Whatever your goal is, it must be realistic (especially in terms of the time you can devote to it) and then above all ask yourself if you are ready for it and that the motivation you feel is both real and sustainable.

• Pick a company that is a good fit for you, with products that you think you can sell. Research each company you are considering beforehand, and keep in mind that one of the ways a serious MLM company is identified is by highlighting the products they sell, rather than the ability to make money through recruitment (which, again, sounds too much like a pyramid scheme and scams…).

• Listen and follow your sponsor’s advice. He or she is experienced in the field and has as much interest in your success as you do. Don’t hesitate to ask them all the questions you want, and above all, take notes. Be careful, though, because they will help you get on track but will not do the work for you. They also have their own business to manage, as well as other sponsees who also need them, so the time they can spend with you is limited.

• Focus on one MLM at a time. Otherwise, you may get overwhelmed or spread yourself too thin and end up failing completely and miserably.

• Build a list of contacts, possible customer-sellers. And keep in mind as you make this list that the most important elements of successful Multi-Level Marketing are word of mouth and trust. It is also important to note that in choosing your customers, there are two opposing opinions in the testimonials: Some people prefer their family and friends because they are the easiest to reach and the people you know best. However, others advise against doing so, for fear of rejection or annoyance.

  There is no real solution to this issue, so the only advice I can give you is to do it the way you feel. You know the people around you, so you should have an idea of their possible reaction and rely on that. And don’t forget that you should target the people most likely to be interested in your products!

• You can also do what is called “influencer marketing”: This is what influencers do on social networks when they do product placement and try to convince their followers to buy the recommended products. Don’t hesitate to create a blog or to share the products you sell on the networks. It can help you find potential buyers and build a customer base that is easily accessible and reachable! It works for some and not others, so it’s up to you to experiment.

• Last but not least, be patient because the fruits of your labor may take some time to pay off. So, don’t be discouraged because success is sometimes never far away. And if you notice that your sales are not taking off, find out where the fault lies, change your strategy, find new ones, follow the trainings, and talk to your sponsor.

Conclusion

The MLM is really a particular actor in the world of sales. We quickly realize by browsing the various sites and blogs that talk about MLM, that the subject divides, even polarizes frankly the various opinions. So, is MLM a reliable system that allows you to earn money? My answer is “Yes, and I’ve seen proof of this”. And if you ask me if scams exist, I would say “Yes, like everywhere else”.

However, many people earn money by working with companies operating on this model and do not regret their choice. The important thing is to be well informed before joining one of them.

Liza: Here are some tips that will help you find a trustworthy company: First of all, the company must have a “real” address for the offices and headquarters, and not just a P.O. Box, for example. And above all this address must not be located in a tax haven. Then, the company must be at least 3 years old, or even 5 years old (the pyramid system never lasts more than two years) and have a clearly identified founder (with full name, photo, address, etc.). The company must have products to sell (if it doesn’t, it stinks). Also make sure it is registered with the direct sales federation (fvd.fr in France, dsa.org in the US, dsa.org.uk in UK) or other official organization in your country, and that it has a compensation plan registered with the Commercial Court.

Also be careful because the promises made by some MLM companies are very attractive, but do not reflect the reality. Is there a way to make money with multi-level marketing? The answer is yes. But the money won’t fall out of the sky like a miracle. Expect to invest a lot of your time and some of your money (starter pack + possibly and depending on the case for advertising, and other forms of communication…) before you can make a living.

Before you get started, make sure you have the basic knowledge in areas such as sales and marketing, as they will be valuable in helping you achieve the success you are aiming for. However, all this will normally be provided to you via free training that the MLM company makes available to its collaborators, but anything you read on your own about this subject will certainly be helpful.