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You know you have been at it too long when you think
that everyone should understand the shop-talk lingo of
your particular profession.
For example, I still get surprised when I am asked,
"What is MLM?"
So, what is MLM?
MLM is short for multi-level marketing. Variously
spelled as multilevel marketing and multi level
marketing but preferably, and arguably more accurately,
called network marketing.
Even if you don't know the MLM abbreviation, you
would certainly recognize some of the names of the major
MLM companies. Perhaps the best known and one of the
oldest is the famous (infamous?)
Amway. Other well-known company names are
 Shaklee,
Herbalife,
Nu Skin, Avon,
Usana, Mary Kay
and Melaleuca.
But, the fact is, there are too many for anyone to
accurately count. We have many hundreds listed in
our
MLM Opportunities and Network Marketing Companies
Directory.
Very
simply, MLM is a product distribution method.
Rather than use traditional channels of distribution and
advertising, a network marketing company chooses to use
independent distributors to market their products thus
avoiding the advertising costs typically incurred.
Why called "Multi Level?"
The "multi-level" part of the name is more a
description of one aspect of the compensation method
used than a description of the type of marketing used.
The marketing methods used by "MLMers" is better
described by the word "networking," though increasingly
Internet marketing methods are being used as well as the
sometimes maligned person-to-person, friends and family
networking approach.
If you become a distributor, representative,
associate, independent business owner (IBO), etc.
– regardless of the names
used, the function is the same –
the company will pay you every time you sell the
company's product or services.
The most intriguing and potentially lucrative aspect
of MLM compensation plans is that you can also get paid
on the product or service sales by any of the people
that you introduce to the company. Further, you
can get paid on the sales volume of the people they
introduce, and the people they introduce
– through multiple levels.
From a legal standpoint, it appears totally
irrelevant how many levels a company pays on. If you, as
a representative, can also recruit new representatives
and get paid a percentage of their sales volume as well
as your own, the company will probably be considered an
MLM company. This is important to understand.
Is This Company an MLM?
Multi-level marketing has earned a bad reputation in
many circles. Consequently, some companies do not use
that terminology anywhere in their literature or website
descriptions. Some even outright deny that they are
"MLM." But that is merely an exercise in 'PC' semantics.
From a legal standpoint, if a representative of the
company can also get paid on the volume of sales
generated by the people that they bring to the company,
the company is most likely an MLM by legal definition.
Unless they are . . .
An Illegal Pyramid
Many people, even professional business journalists,
do not know the difference between a legal multi-level
marketing company and an illegal pyramid.
Frankly, though not surprisingly, smarter founders of
illegal pyramids do every thing they can to try to look
like the legal companies.
The biggest difference lies whether it can be
demonstrated that there are a good percentage of sales
of products to real customers who receive real value in
exchange for their payments significantly more value
than simply the right to recruit more representatives.
The payment of money for recruiting new
representatives who are essentially paying for the right
to recruit yet more representatives is clearly illegal
– no matter how elaborately
disguised.
Because of the difficulty involved in understanding the
differences, I have recorded a video entitled
Pyramid Schemes vs. Legal
MLMs that best describes the difference between even
the best disguised illegal pyramids and legal MLM
companies. Further, it explains one of the key criteria that a network marketing
company has to meet in order to truly produce the
ultimate kind of income: reliable, long-term, leveraged,
residual income. You can view the 20 minute video
for free
here.
Is MLM a Good Thing?
Inherently, a company that uses a multi level pay
plan is neither good or bad, contrary to the most
outspoken critics of the model. In those cases, the
critics have either never participated, or in the least,
never participated where MLM was done well.
I have seen the MLM concept implemented
extraordinarily well. I have also seen MLM
done very, very poorly –
just like every other kind of business.
 I
love good charities. I despise the ones that
merely masquerade as such while funneling off most of
the money for "administration."
My father was an excellent attorney with a specialty
in corporate tax litigation. Many admired his integrity.
He didn't even like it when attorneys started
advertising, thinking it unprofessional. I need not even
comment on his opinion of the stereotypical ambulance
chaser.
The secret is knowing how to tell the difference
between the good companies and the bad. Unfortunately,
most join an MLM company because a friend they like
invited them. In most cases, neither person knows any
criteria by which to judge whether the company is good
or not, whether the model is sound or not, whether
management is good or not, whether the product line
makes sense or not, whether the compensation plan is
properly balanced or not, etc., etc., etc. Nor do they
have any significant experience to tell how any
particular "opportunity" compares to any other
opportunity. So too often it becomes a case of blind
leading the blind.
How can I learn more about what really works?
I wrote my Special Report,
MLM The Whole
Truth to help people better understand the whole
'industry.' In it, I teach what we call the "12 Critical
Success Factors." They are the criteria that must be in
place for anyone to get the best chance of success in
any network marketing company. May I strongly recommend
the investment in this knowledge before making another
step?
Your reputation, your friends and family
relationships, even your finances, your hopes and your
dreams are at stake.
Learn More
about the Special Report
Watch the
best explanation of the morality, legitimacy, and
profitability of Network Marketing.
Network Marketing Companies Directory
"What is MLM?"
by MLM expert, Lou Abbott
September 5, 2008
Copyright 2008
You may reprint this article under the sole condition
that you do so in it's entirety with all hyperlinks
included.
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