One of the first questions often asked by friends and family is…”What IS MLM?”
Most people don’t know that there is a difference between Network Marketing and MLM.
While some people refer to their business opportunity as a Network Marketing company you will hear others call it an MLM company.
It is good to know all about your company but if someone asks you, “What is MLM?” it wouldn’t be good for your credibility if you weren’t able to explain it. And there actually is a difference between the two.
Let’s talk about network marketing first…
Network Marketing is basically what the title says . . . network marketing. It is simply marketing ANYTHING to ANY network of people. A Network would be described as a group of people that you already have a connection or rapport with.
This is why in most network marketing companies encouraged you to make a list of everyone you already know. They call this list a warm list or your warm market.
The reason they call it that is because approaching people you don’t know would be compared to a term called “cold calling.”
So in a nutshell Network Marketing COULD be any business that encourages you to market to your network of friends and family.
So What IS MLM?
Multi-Level Marketing companies often have people invest a fee into the company to be able to market their products.
This fee often includes some product, a few business materials and often a website to start building your business.
After the fee is paid the individual becomes an independent representative or a sub-contractor for that company.
However there is no contract with the individual. Most independent representatives consider it to be key to starting their own business.
However, they work for themselves, not by themselves.
The fees that are invested are usually used to fund the different aspects that take care of the independent representative’s progress, checks, products sold, balances, and also their downlines progress, etc.
You rarely ever see an independent representative playing the role of accountant, CFO, CEO, and Manufacturer. The fee usually helps take care of that aspect of the business.
Independent representatives usually have the responsibility of marketing or introducing the companies’ products or services.
Then the mlm company pays a commission or compensation for the customers that the independent representative generates.
So in conclusion, what is mlm?
- It is when the independent representative has the opportunity to invite people (usually their warm market) to join him in business.
- These people pay the investment to the company and then become the independent representatives business partner (or downline) but placed beneath them, usually in a hierarchal structure.
- Independent Representatives not only receive compensation or a commission for products sold or customers gained, but receive commissions and compensations for the customers generated or products sold by the people they introduced to the business (also known as their downline).
- Independent representatives usually move up in seniority and commission percentage the more they produce.
For example, their title might be Independent Representative,
then they may be promoted to a Team Leader. Next would be a Regional
President position then the Senior Regional President position would be
the highest paid position in the company.
Once you understand the basics of multi-level-marketing, the simple question “What is MLM“won’t be so intimidating.