Multi-level marketing is a business model where salespersons, consultants, distributors, and even franchise owners and independent owners work in harmony to increase the sales of the product, on a commission basis. This is more like a franchise arrangement where the sales of the product depend on the combined effort of each franchise and regional manager. There are multiple levels of people receiving commissions. Usually there are seven or more levels. Multilevel marketing is basically a combination of franchise and direct marketing.
This concept started in 1980s when most of the companies started handling the stocking and distribution issues and started compensating all the individuals involved. This increased the interest of each member in promoting sales due to the chance of earning bonuses and since then the Multilevel Marketing companies have assumed the responsibility of taking orders, shipping goods, and paying revenue. Things became easier with the transition to Internet. Product promotion, advertising and sales were made online and hence, the whole process began to be known as online MLM.
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There are various MLM compensations plans. According to the uni-level or stairway breakaway plans there are two types of distributors involved; managers and non-managers. According to the matrix plans, the width of each level in a distributor’s group is regulated. In binary plans, the limit of each level’s width has two legs. Commission was paid when both the legs reached a specific target. In the elevator scheme, the distributors pay splits after a certain number of units have been paid.
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The commissions are paid in two ways, the first is when the commission is paid only if the product is sold and the second one involves paying commission even if the customer just signed-up, it doesn’t require the customer to buy anything. Because of the second method illegitimate MLM or illegal pyramid schemes began to rise. The intermediate members used to make proxy customer sign-ups to receive commission and they used to tempt the participant to buy more products than they can be sold.
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Fortunately, most of these businesses present themselves as legal, but precautions must still be taken to avoid those unscrupulous behaviors which persist. It is better to approach businesses that follow the first method of commission, where it’s compulsory to make a sale and not just recruit a customer. Here money isn’t paid for customer sign-up at all. MLM marketing is being practiced all over the United States and in hundreds of other countries.
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In 1979, Amway Corporation was accused of price fixing. They exaggerated sales claims, while their distributors sold the products at a minimum price. After that, the FTC issued a warning to all multi-level companies that operated with commission structures which were was based on recruiting and not sales.
In 2006, all the business sellers including MLM organizations were asked to provide customers with thorough information according to the Business Opportunity Rule introduced by the Federal Trade Commission, so as to save them from deception. Before that many motivating programs were started with the intention of hiding the truth. Such programs were known as cult programs.
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Laws have been made stronger and as a consequence, pyramid schemes are banned in most countries. Under current systems all newly hired salespeople have to bare the cost of initial training and material. Some of them even have to buy a sizable amount of inventory. To test the legality of MLM marketing, the 70% rule is being implemented. The members are stopped from over-loading so as to increase their commission. Only when seventy percent of the inventory is sold, can an order be made for new material. For the most part MLMs are legitimate businesses operating within the law.
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Over the last two years, after discovering the internet, I began a process that is designed to create the conditions necessary to attain the goal of financial independence, but it must be the brand of financial independence that is recession-proof. Is recession-proof financial independence attainable? The answer is yes! How is it attained? It is achieved when all the requirements defined in the above paragraph are met, in addition to a continued flow of income which replenishes what is spent from existing wholly-owned resources.
Residuals: defined as payments made to a performer for each rerun of taped or film television material in which he or she has appeared. Let's apply the term residuals to professional sales, as in the case of life insurance agents: Work performed today is compensated for today and continues (at a reduced rate) for many future years, and in some cases, for a person's life. Sales made today establish qualification to receive compensation in future years. Residuals are very real in network marketing! Once the qualifying requirements are met, payments continue to be made for years in your future. That's a fact!
If you have read to this point, there is one thing more which you must know. Network marketing is the only business which allows you to create the conditions that will help you to attain recession-proof financial independence with minimal investment requirement; And it is one of the fastest growing home-based businesses in the world. The following are a number of Network Marketing Businesses for your review and, if you choose, involvement. For more options, please read more