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 MLM , Multi Level Marketing, is a method of doing business that bypasses many of the traditional steps in the distribution chain that we are familiar with.

Normally we go to a store and buy a product and if it works properly then that is the end of it. We do not stop to think of all the steps that go into getting the product into the store, ready for us to pick up.

In  MLM  companies the manufacturer is often the supplier who you buy off. All of the middle men have been cut out of the chain.

This is why many of the  MLM  companies are referred to as Direct Sales companies as the manufacturer sells products directly to the consumer.

The products you buy from such a company are normally consumer products that people will use and then buy again, nutrition products, household goods, beauty items, weight loss products. Products that need to be best quality to give the results people are looking for but that are consumables so that the individual customers become regular customers and a stable distribution of the products can be established.

Where the normal manufacturer sells products through a manufacturers agent, to an international supplier, to an importer, to a wholesaler, to a retailer, the  MLM  companies avoid all these costs. In traditional distribution these layers of middle men often chew up 70% or 80% of the retail price of the product. A chair you buy for $100.00 is likely to have only cost $20.00 to manufacturer.

In the Direct Sales companies they replace the entire chain of supply with their own independent distributors. They then set up warehouse distribution themselves in each country where they operate and ship products, order by order, to their distributors or to the customers who the distributors sell the products to.

With their distributors marketing the products on a personal basis the manufacturer is saved the costs of advertising and marketing themselves. This leaves enough cash for the companies to give solid margins to the people who sell their products for them. In the better companies the margin at retail can vary from 25% of the retail price through to as much as 50%. This is based on the principle that the people who are working directly to source the customers, sell them the products, and supply back up and support to them are bringing the most value to the market and deserve the largest share of the profits. Those who do the work, get the pay.

Beyond that, the companies wish to grow so they encourage their distributors to recruit people to work with them, also as independent distributors. These new distributors are tracked by the companies computers so that the original distributor has a sales/distribution team of their own people.

The companies then set aside wholesale or royalty payments they give to the sponsoring distributors to encourage them to support and train their people.

If an item sells for $100.00 the distributor supplying the product and supporting the sale may make $50. Good money.

Their sponsor may make 5% on the sale, or $5.00. That does not sound like much but the term Multi-Level has significance here. Imagine the 5% was paid 3 layers deep. If a distributor recruits 5 people, who each recruit 5 people, and they in turn recruit 5 people of their own then there are 25 personally sponsored people, 5 on the second layer, and 125 people on the next layer. For this example that is 155 people.

If each of the 125 people sold a product for $100.00 then the royalty income would be $5.00 by 155 people or $775.00 dollars.

If each distributor each had 10 customers spending $100.00 a month then the royalty income would be $7,750.00 a month or approaching $100,000.00 a year.

Now imagine a model that paid more than 3 layers, or having a personally sponsored team that was 10 wide at the top, and you will realize while good companies in the industry have top people earning $10,000, $20,000, $50,000, $100,000.00 a MONTH and more!

The top Direct Sales /  MLM  companies have been around for 30 years now, are listed on stock exchanges like they New York Exchange, and turn over Billions of dollars in sales. This is a market model that is established and proven to work. It is becoming a main stream system of distribution and is taught in may of the most prestigious collages across the world.

Finally, this is a style of marketing that is often counter cyclical to traditional business and expands in difficult financial times when there is an influx of really good people who are looking for a way to increase their income but who can find limited opportunities in their traditional fields of endeavour. When things are difficult it is a great time to get started in Direct Sales and build a team of like minded people.

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Source by Warren Tattersall