You have seen the ads that are too good to be true: “Make $10,000 a month from home” or “Be your own boss and make $3,000 a week!” These ads are in the paper,
on the Internet, on television commercials and fill up your inbox.
These advertisements are trying to draw you into the elusive world of multi-level marketing, otherwise known as MLM.
What is MLM?
Multi-level marketing, also known as network marketing, is a form of direct sales in which individuals, known as distributors, sell products, usually over the telephone or go door to door. Distributors recruit other distributors who do the same.
Each distributor makes money on the products that their recruits sell in addition to the money they make from their own sales. The idea is that eventually the original distributor can just sit back and let the distributors he recruited make money for him.
For a fee, usually between $25 and $100, these MLM companies will sell people a distributor kit that includes informational brochures about the product they will be selling, price lists, order forms and an instructional manual.
When it started in the 1930s, MLM was a legitimate business practice that afforded a way for small businesses to get their products to consumers in rural areas that had no access to these products. The idea was much like that of the traveling salesman. At the time, the products sold themselves and the percentage that went to the owner(s) was regarded as an award to those who built the organization. The focus remained on the product.
MLM today
Today, with the advent of technology giving us the ability to travel far distances, there is no need for these “distribution systems.” Therefore, the focus has shifted from the product to recruiting new people to buy into the program or to sell low-quality products for high-quality prices (for example, selling a face cream that costs $4 for $25).
The idea is that Distributor A will recruit people who will pay to become distributors, and then Distributor A will get a portion of the money paid for the distribution kits and the overpriced products sold by these new distributors.
In today’s Internet age, where you can comparison shop and buy products all over the world, MLM has no place in the marketplace for selling products. That is why now they are basically just selling memberships and expecting future memberships to be sold – this is the definition of a pyramid scheme, which amounts to securities fraud. In fact, many of these companies have been forced to close for securities fraud and people who were running these companies now have criminal records.
Other marketing options
You have so many other marketing options there’s no reason to even think of using MLM in your business. You can legally print brochures, posters, and other color printing materials to promote your business. You can write press releases, create television and radio commercials, hand out flyers and business cards, partner with complementary businesses … the choices are nearly endless and have much better results than anything you will get from MLM.
