MLM and Niche Business

What is MLM? MLM stands for Multilevel Marketing. According to en.wikiepedia.org: MLM is designed to create a marketing and sales force by compensating promoters of company products not only for sales they personally generate, but also for the sales of other promoters they introduce to the company, creating a downline of distributors and a hierarchy of multiple levels of compensation in the form of a pyramid.

Many think of MLM’s as a “pyramid” and associate that with illegal dealings. Some MLM’s are not what the doctored order and those are called “pyramid schemes or ponzi schemes”. However most MLM’s are just an extension of a companies marketing division.

Think about a typical business structure. You have the Business. Then you have the Marketing Department. In the marketing department you have sales associates that are employed by the company. Their job is to sell the product or service to customers for the company. The sales associates are paid a set salary and benefit by the company no matter how successful they are or are not in acquiring customers.

Now think of an MLM structure. You have the Business. The business has a marketing department. The marketing department’s purpose is to acquire independent associates who in turn acquire customers for the business. The customers acquired results in revenue for the company. The associates are paid based on the revenue generated from the customers.

If the independent associate does not acquire customers they are not paid. However if the independent associate grows their customer base resulting in more revenue and then expands their downline of independent associates who grow their customer base the profits can be very handsome. The benefit to the independent associate is the potential for a lucrative income. The benefit to the company is low overhead and no expense of a traditional marketing department with a set number of associates employed by the company. With independent associates no benefits or salaries are paid. The independent associate in an MLM is driven by shear income potential. The more associates in their downline and the larger the customers base the larger the income potential.

Is this a good idea for a starting a niche business? It can be. Most MLM’s already have an established system if followed can be profitable to the marketing associate. But there are no guarantees. There is work involved and most new entrepreneurs are not good fits for MLM’s. MLM’s are not a “Get Rich” quick scheme which many naïve entrepreneurs are looking for.

A few examples of well-known MLM companies are Pampered Chef, Pre-Paid Legal, Mary Kay, Amway, and Avon. Most people don’t realize these companies are MLM companies. What these companies have in common are they a direct selling business or they sell directly to consumers through independent business owners.

The Top 5 Global Ranked Direct Selling Company in 2011 was Avon, Amway, Herbalite, Natura Cosmeticos SA, Vorwek & Co. KG, with Mary Kay and Tupperware coming in at 6th place and 7th place respectfully.

Some of these you may have heard of some not. Two of the companies in the top 5 globally are from Germany and Brazil. Either way you look at it if you are not considering a Direct Selling Company as a potential Income Opportunity you are cutting yourself short.

With any business you need to be passionate about the business. If you love Avon products but hate to conduct home parties, talk to people, and handle the orders then that obviously is not the right business for you. Most people who introduce you to a business opportunity are family, friends, and neighbors. If it sounds great but you don’t believe the opportunity is for you just say so. They’ll understand.

When considering any business venture you must research the business and be willing to do a lot of work in making your business successful. There are really no free rides but there are great opportunities. Don’t miss out from fear of the initials “MLM“.

 

 

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