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What is  MLM /Network Marketing?

BusinessDictionary.com defines Multi-Level Marketing as a direct selling method in which independent agents serve as distributors of goods and services, and are encouraged to build and manage their own sales force by recruiting and training other independent agents. In this method, commission is earned on the agent’s own sales revenue, as well as on the sales revenue of the salesforce recruited by the agent and his or her recruits (called downline).

That’s great but lets break it down and spell it out.

The Basics

In every  MLM  there are what I call the Basics, these basics are the Products, the Company, the System, and the Plan. To gain a solid understanding of  MLM  you must understand each of these basics. Like everything in business it all starts with a Product.

The Product

The object of every business throughout the world is to sell products. Now, I use products in a loose way to mean tangible or intangible goods as well as services. Really, products are anything that can be sold by one and obtained by another.

So  MLM  begins with a Product that someone realizes has value and desires to sell to others. That person realizes the need to begin a company who’s task it will be to continue to produce and distribute this valuable product.

The Company

Once a company is formed, it must develop the production of this product. Whether the product is Information, Juices, Vitamins, Travel, Consumables, etc. it is the task of the company to create a brand and begin the production of this product. Production is underway and a brand has been setup now a company must determine the method of distribution. They have to figure out how to move the product.

There are a couple of systems to move products. Most of us are familiar with Retailing, that is the stores we shop at and buy the product from the shelf. Some are familiar with Direct Sales, this is the door to door sales man. I remember my parents buying Encyclopedia’s and Vacuums from Direct Sales people when I was a kid. Another system is  MLM .

The System

Here is the heart of  MLM .  MLM  is truly a system to move the product from the Company to the Consumer. It is based around the notion that people will buy from a person over a corporate entity. Different  MLM’s  work differently however the basics of the the system work like this:

A person is enlisted/sponsored as a distributor or independent agent (or whatever the company calls them.) The agent then is able to buy the product wholesale and then sell it retail. This is one source of income for the agent. These independent agents are also able to sponsor other independent agents to create a network or downline of other agents.

Most  MLM’s  will pay the sponsor a percentage of their downline’s sales. This is another source of income. Most  MLM’s  also include a Plan or a business opportunity through recruiting a sales team. This Plan is often what  MLM  focuses on as a huge source of income.

The Plan

The Plan is the business opportunity side of the an  MLM . This involves the benefits of recruiting others into your downline to create that powerful sales force that is moving the product. Most  MLM’s  offer at least one financial bonus for recruiting other independent agents and achieving different levels of success. It should be mentioned that any solid  MLM  will measure success via Sales Volume.

The Plan is often times why people confuse  MLM  with Pyramid Schemes. A pyramid scheme though is a non-sustainable business model that involves the exchange of money primarily for enrolling other people into the scheme, often without any product or service being delivered. However as we explained above the purpose of enrolling other distributors is to increase the distribution of the product.

Each Plan will be different with various forms of compensation. All should include compensation from the sale of the product and as well as some form of compensation for sponsoring other distributors. Remember though that if you find an  MLM  based on recruiting others with an undefined product you should be leery. Because all solid  MLM  systems and plans know that the Product must Move or Nobody will get Paid.

Summary

Multi-Level Marketing in the end is a system used to distribute products from a company to a consumer through an independent agent. It offers an opportunity for anyone to become their own business owner and create wealth beyond their wildest dreams. This system, while often times looked down upon, has created more millionaires than any other industry. While I will never say that  MLM  is easy, it is a journey well worth traveling.

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Source by Joshua Yearout