home Accounting What is MLM business - the terrible truth. What is MLM business How does MLM work

What is MLM business - the terrible truth. What is MLM business How does MLM work

MLM ( Multi Level Marketing) or network marketing is a method of selling products from the company that manufactured them directly to the end buyer. To promote and sell products, as well as disseminate information about them, the manufacturer attracts the consumers themselves (agents, distributors), who are offered various types of rewards in return. In turn, consumers who become sales agents also attract new members, which ensures the constant growth of the network.

Network marketing from a manufacturer's perspective

A well-built MLM business can quickly capture the market and build a stable network. The creators of this marketing scheme call the reduction in the final cost of the product for the consumer the basis for the success of promotion and the fight against competition. Thus, the production cost may differ from the final price in the store by 2-3 times. This markup is formed as a result of the formation of a complex structure of the traditional distribution channel, which includes dealers, stores and their service personnel, the presence of service centers and much more. By cutting them off, the network business reduces the market price without losing its own profit.

In addition, network companies do not have the problem of building and monitoring a management system, as well as selecting qualified personnel and motivating them. Training the necessary sales skills, attracting new employees and encouraging them to achieve high results is transferred to the agents themselves.

Another important advantage is the protection of products from counterfeiting and maintaining the required level of product quality. This is ensured by the manufacturer’s ban on selling online goods in regular stores or from mobile street counters. Thus, even if a counterfeit batch is produced, it is unlikely to be sold without attracting attention.

Initially, network marketing was also based on the goal of ensuring faster delivery of goods to the end consumer, however, taking into account the realities of the modern market, this side of the network business has become less pronounced.

Network marketing from a distributor position

When entering an MLM business, the average consumer receives three possible options for cooperation:

Attracting new sales agents (network expansion) and receiving bonuses;
Purchasing goods for yourself at a personal discount and without an agent’s markup;
Selling products with profit from the markup (the difference between the cost of goods at personal discounts and the final price for which the goods will be sold).

The work process itself consists of the following stages:

Concluding an agreement with the company;
Purchase of a starter kit of goods and promotional materials;
Search for buyers and new distributors;
Conducting presentations and sales at home, in a rented office, during personal meetings in public places;
Receiving commissions or bonuses from the company.

The relationship between the main company and distributors in network marketing is built according to a specific marketing plan, which determines according to what rules and calculation schemes remuneration will be paid. In practice, there are four main types of marketing plans:

Classic or linear- all invited new network members (not buyers, but new distributors) are the main (first) line from which bonuses are awarded. From agents invited by first-line distributors, the original agent is not entitled to bonuses.
Binary- is based on the fact that only two new agents can be attracted to the network, each of whom also invites only a pair of distributors. As a result, balanced (ideally) branches are formed, called “legs”. Such a marketing plan allows you to speed up the promotion process, but profit can only be obtained if the branches generate income in the ratio specified in the agreement (50x50, 60x40, 70x30).
Stepped- the agent receives remuneration for all participants in the structure he has formed. After reaching a certain level, the founder of the branch gains access to elite bonuses and premiums.
Matrix- bonuses are paid only when a certain number of distributors are attracted to the first line and the further construction of a given number of levels.

Also in practice, combined methods can be used, which is determined by the strategy of a particular company.

Agent registration system

An important component of building an effective MLM business is an accounting system that allows you to control the relationship between sponsors and distributors, track sales and purchase processes, and also calculate bonus deductions. Initially, when most companies used a linear marketing plan, the use of standard spreadsheets was enough to accomplish this task.

With the advent of more complex structures, the need arose to create specialized automated systems (Ritos, B2B-MLM, OKsoft, Easy MLM accounting) that allow working with a load of up to a million network participants. Large companies with substantial start-up investments often develop their own programs.

The difference between MLM companies and financial pyramids

Network marketing is based on building a pyramid in which each higher level receives income from system participants located at lower levels. This principle is also used by fraudulent organizations called financial pyramids. The fundamental difference between them and network marketing is the emphasis of MLM companies' policies on selling products that have real value, and not on attracting investments from new participants.

To distinguish network marketing from a financial pyramid, you need to pay attention to the following signs:

The company offers high-quality goods that have value outside the company’s activities and are in demand (household chemicals, dishes, household appliances, clothing, vitamin supplements).
You are given the opportunity to earn income only from the sale of goods, without recruiting new agents.
The company enters into an agreement with each agent, drawn up in accordance with the law.
The cash contribution is a payment for a starter package of products, and not an investment for participation in the project.

What is network marketing on the Internet

Adapting to modern methods of promoting products to the market, network marketing companies very quickly mastered the Internet space, which is primarily used as a way to find new distributors and buyers of products, as well as as a means of remote network management. The following channels are used for this:

Social media. Here, activities such as actively sending out offers about the opportunity to earn money in the MLM business, selling goods, publishing advertisements in thematic and popular groups, interacting and working on motivation with already attracted distributors can be implemented.
Landing pages. This type of site allows you to both sell network marketing products and register for presentation meetings for future distributors, seminars and sales training.
Portals for registered distributors (online stores). Provide the ability to remotely place an order and track the availability of products in the main warehouse.

Thus, the essence of MLM on the Internet remains the same as in offline business, but there is a significant plus - the target audience is significantly expanded and the scheme of interaction with it is simplified.

How much can you earn in network marketing?

The policy of MLM companies is based on accepting into the structure all applicants who have expressed interest, regardless of age, status, education and experience. However, when choosing network marketing to make money, few actually understand what it is, and therefore a very large number of disappointed participants who do not have the proper qualities and do not want to learn, believe that it is impossible to make money in this area.

When signing an agreement with a network marketing company, when asked about earnings, they will undoubtedly answer that the level of income depends only on you. This calculation is quite abstract, because your time and energy are limited resources. Starting a career as a networker is very difficult and your sponsor (higher distributor) is unlikely to tell you that according to statistics, only 5% of newcomers who come to the network achieve a stable income of $200 per month, only 1% reaches the level of $500 and only 0.5% has a chance receive $1000 after several years of hard work.

There is an opinion that you can get an acceptable income only in young MLM companies, since the chance of being at the top is greater. But the truth is that the founders of the company earn the most, as well as the very first distributors, who are mostly engaged not in sales, but in forming a network, building a corporate culture, conducting trainings and seminars. The rest of the participants in this business are constantly updated. Thus, every five years in large MLM structures up to 90% of distributors can change.

This means that if you are not a manufacturer who is ready to build your business on the network marketing model and among your friends there is no such entrepreneur who is ready to take you on as an assistant, there is no difference for you when to start working as a networker. If your goal is not millions, but several thousand dollars of stable income, the chances of achieving what you want are quite real.

Network Marketing and Legislation

Since network marketing is a fertile area for the development of fraud, in many countries around the world the activities of such companies are regulated by law. Thus, in the USA, in the MLM business it is prohibited to set sales plans for agents and name specific figures for possible earnings. Also, if you want to go out of business, the distributor has the right to return unsold goods, receiving at least 90% of its original cost.

Unlike Western countries, domestic network marketing is not only not controlled by the state, but also does not even have an appropriate definition in law. This huge disadvantage complicates the work of both distributors and manufacturers who want to sell through an MLM scheme. In the Russian Federation, the following format for legalizing activities is most often used:

The manufacturer is registered as an ordinary enterprise (LLC, JSC, CJSC). At the same time, since the network can grow unlimitedly, registration of individual entrepreneurs is not allowed.
Distributors are registered as agents (with payment of taxes by the manufacturer) or as separate individual entrepreneurs (with independent payment of taxes).

When considering the question of what network marketing is and how it works, we can note both positive and negative aspects. It is not an ideal mechanism for promoting goods for a manufacturer, but at the same time it demonstrates fairly high performance and really protects unique products from counterfeiting. As in any business, it requires significant efforts and entrepreneurial savvy from participants in the system to stand out among competing distributors and partners.

Every day, thousands of people around the world are trying to discover ways for themselves that could provide them with the opportunity to obtain a basic or To do this, they have to look at the vacancies that have appeared on the labor market or study certain ways of earning money.

Network marketing allows every person to help solve the problems of generating income. Reviews from professionals in this business clearly indicate that success can only be achieved if the right steps are taken at the start of a career in MLM.

It is quite difficult to explain in a nutshell what network marketing is. Some people, having encountered such companies, call the earning schemes they created a real “scam”. But there is also an opinion opposite to this. According to him, network marketing receives reviews as the only opportunity to open your own business without initially investing large sums of money in its development. So which of these two opinions is correct? In order to understand this, you need to understand the question “Network marketing - what is it and how does it work?”

Only after collecting detailed information about the MLM system will each person be able to come to certain conclusions and decide for themselves whether it is worth working in this area, or leaving it for others.

What is MLM?

This abbreviation stands for: MultiLevel Marketing. And this means nothing more than “multi-level marketing”. This is also a direct sales system.

Network marketing (MLM) is a special way of promoting a particular product with the help of a whole network of people who receive a certain percentage of sales or a reward for attracting newcomers to the company. A person simply tells his acquaintances and friends about the product, and they, in turn, distribute similar information further. As a result, a kind of network is formed that facilitates the rapid sale of goods. This is the essence of network marketing.

Inviting people to the company is very profitable. After all, for each new customer a person receives a certain percentage of the profit received. However, expanding the network of buyers is far from simple. Often, for this purpose, network marketing uses a wide variety of psychological techniques. Not everyone likes this. That is why, before inviting a new person to the company, network marketing professionals must explain to him the essence of such a product distribution technology and explain the advantages that this work has.

A little history

The first company operating on the MLM principle appeared back in 1927. It was then that the creator of food additives, K. Rehnborg, began multi-level sales, in which he achieved good success.

Initially, K. Rehnborg was engaged in ordinary trade. However, a moment soon came when the demand for products became significantly higher than his capabilities. And then K. Rehnborg came up with a great idea. He began to attract acquaintances and friends to distribute the product he created, offering them an appropriate reward.

Somewhat later, people from this company, which was called Nutrilite Products, Lee S. Mitenger and William S. Casselbury, developed the basic principles of such sales. Soon MLM gained popularity all over the world. By the end of the 50s of the last century, on the basis of the company, which laid the foundation for a new type of product distribution, the now widely known Amway retail chain was founded.

But the MLM scheme and companies working in this field gained particular popularity in the 80-90s of the 20th century. And today they offer a very extensive range of products, which includes almost everything, from vitamin supplements to dishes, cosmetics and household appliances. Which companies have chosen network marketing for themselves? "Oriflame" and "Avon", "Faberlic" and "Zepter", as well as many others. According to experts, some of these companies have an annual turnover of products offered on the market reaching about 200 billion US dollars.

Learn to distinguish

Sometimes a network company is compared by those who first encountered MLM with a financial pyramid. Of course, at first glance, the scheme by which sales are carried out is not very simple. However, when it comes to network marketing, a person is not required to invest huge amounts of money and then just sit and wait for a miracle.

If this is real network marketing, how to make money in this area? It will take a lot of effort to grow your customer base. At first there may not be any profit. However, if you put in some effort, you can soon start receiving some income from sales. If the network is too large, the newcomer will be far from the top. In such cases, he should not expect a move to the Maldives or exorbitant fees. But a couple of tens of thousands as a salary increase is quite realistic.

However, before you become an agent and start attracting clients, there are certain things you need to pay attention to. They will allow you to avoid a financial pyramid. So:

True network marketing offers to sell a specific product or service that is contained in the manufacturer’s catalog. Products are never purchased for future use. Only those products that have been ordered by customers are subject to sale. Payment for goods is made on the day it is received from the warehouse.
A company operating on the principle of a financial pyramid will require payment of membership fees or the purchase of “securities,” which outside of this organization are nothing more than ordinary candy wrappers. In addition, in a financial pyramid, each person receives a profit not at all from the volume of products sold by him and his network, but from the number of people whom he brought to the company and who paid membership fees to it.
Another type of online earnings that is questionable is the sale of various equipment or software. Before starting work in such a company, you will need to pay for a certain package of services that allows a person to take one or another place in the trade chain. These can be various tools for work in the form of a plastic card or a personal account, the use of which is impossible without paying a subscription fee. Where can you find this type of network marketing? Examples of running such a business are far from isolated. Thus, Talk Fusion attracts potential clients and agents with offers of income that can only be received after paying a certain amount in advance and attracting two or more new recruits. The chain created in this way will generate profit. Such a scheme is more similar to a financial pyramid, although the company still has a product that needs to be sold. But, in order to succeed in this company, a person must have the qualities of a psychologist, speaker and leader. And even in this case, he is unlikely to be able to rise from the initial level to the very last step.

From the above, we can conclude that successful earnings in an MLM company are possible only after a preliminary study of all the conditions of cooperation. Only by making the right choice can you achieve successful promotion.

Assessing prospects

How to start making money in direct sales? To conduct such a business, a reliable and promising network company must be selected that will allow you to achieve the desired result. The best starting option is a well-known brand. When choosing it, you will not need to make much effort to convince customers of the need to purchase. Cosmetics manufacturers such as Faberlic or Oriflame, as well as companies offering household goods (for example, Amway), are popular. Consumers have already appreciated these products, and they will buy them without any worries.

However, it is worth keeping in mind that the niche of well-known brands has already been occupied by other distributors. And for those who have chosen network marketing for themselves, how to make money in this case? A high level of competition will require the use of a special strategy, without which it will be impossible to create a customer base and start receiving your own passive income. Of course, in this regard, it is easier to make money in a newly created network company that offers a product that inspires consumer confidence, but is also scarce on the market. These are new dietary supplements, training courses, devices for health and home, etc. The choice of one direction or another will largely depend on a person’s personal interest, as well as on his desire to make money from it.

Rating of MLM companies

There are a large number of manufacturers on the Russian market who sell their products through direct sales. What are these network marketing companies? Their rating contains those brands that occupy almost 70 percent of the MLM market. First on this list is Avon. It is followed by Oriflame. Third place belongs to the Amway company. On the fourth is the Mary Kay company, offering cosmetics. Faberlic occupies fifth place in the ranking.

The remaining companies are considered smaller and cover the remaining 30 percent of the market.

Education

If network marketing is chosen as the direction of business, how to make money on it? You should pay attention to the assistance that company representatives provide to newcomers. It may include various manuals and video tutorials, trainings and meetings. All this, as a rule, is provided completely free of charge. Sometimes curators help in attracting first clients. Without training, it is impossible to work in MLM at any stage. The more detailed information a person has about a product and its benefits, the easier it will be for him to convince other people that they need it. That is, persuasiveness directly depends on the existing knowledge base. The experience of MLM professionals also helps, who will definitely tell you how you can make a profit faster, as well as attract new people to create passive income.

Receiving a profit

An important point when choosing a network company is to study the scheme for accruing funds and bonuses. After all, earning money is the main motivation for any person.

With a fairly transparent scheme for generating income, the absence of penalties, as well as unrealistic targets for the sales volume proposed by the company, working in a chosen network company is quite capable of bringing good results.

Action plan

After choosing a specific network company that provides an excellent opportunity to make money, it is recommended to draw up a business plan for yourself that will allow you to understand what attention should be paid to.

So, it’s worth choosing a way to get money. This could be through direct selling or using a passive option. Which one is more promising? Often product distributors seek to start with personal sales. At the same time, they get the opportunity to study demand and create a customer base.

Professionals who have thoroughly studied network marketing look at this issue somewhat differently. How to make money according to their advice? MLM gurus recommend that beginners start from two positions at the same time. After all, among potential clients there will always be people who want to receive additional income, as well as those who want to purchase products at the purchase price.

Networkers who are at the highest or middle level in the hierarchy of the distribution scheme note that they owe most of their earnings to the work of their subordinates, and not at all to direct sales. Thus, after some time, having built up a client base, you can completely abandon direct sales of products, having properly motivated the entire multi-level structure of agents.

Sales methods

How to earn a good income in a network company? To do this, you will need to find the most effective methods of attracting customers. There are several of them:

Direct contacts with people. This method is used if a person working in a network company has free time to visit public places or has a very large circle of relatives and acquaintances who are not yet involved in the MLM business. However, judging by reviews from professionals, this method is very time-consuming and often ineffective. This option is relevant if you already have a list of clients who only require delivery of catalogs and products.
Creating a consumer base using social networks, your own website or online store. In this case, you will need to devote less time to work, and the coverage of the audience of potential clients will be much wider. In this case, only those users who are interested in the company’s products or want to receive additional income will respond to the offer.
Creation of contextual advertising and landing pages, sending offers to advertising sites and by email.

Anyone who wants to make money in network marketing can increase their profits several times if at the initial stage 2-3 MLM companies are selected at once. Thus, customers can be offered simultaneously several brands of cosmetics, as well as products intended for face and body care. This option is also beneficial because the cost of the product among competing companies differs. This allows you to select products from the desired segment for people of different income levels.

Knowing your own character

Not everyone can achieve success in network marketing. In order to earn a high income, you must have the following qualities:

patience and stress resistance;
sociability, which presupposes the ability to speak and then maintain a conversation with any person;
perseverance, which will allow you to achieve your goal, sometimes returning even to places where you have already received a refusal;
psychological skills that allow you to convince a person of the need to purchase a product;
leadership qualities that will provide an opportunity to develop a chain of passive income;
oratorical qualities to speak confidently, correctly and beautifully;
the ability to plan your own time, which will allow you to avoid fuss, eliminate inconsistencies in scheduled meetings and leave yourself time for rest and self-education;
trading skills.

A person who has the qualities listed above, applying all the rules recommended by professionals in this field, will definitely achieve success in network marketing.

What is network marketing: 6 advantages + 3 disadvantages + 5 myths + 10 tips for those who want to make money in an MLM company.

Network marketing or MLM. Who hasn't heard of him today?

Yes, it is perhaps difficult to find such a person.

And yet, most people who are not closely associated with this type of activity do not really know what is network marketing.

Some people overly demonize MLM, others, on the contrary, deify it and consider it almost the only one.

And some people simply don’t take it seriously because they associate network marketing with a friend who every month brings you to look through a colorful catalog and provides the opportunity to buy lipstick at a discount.

And what’s most interesting is that everyone is right, because they look at MLM from their own wheel.

What is network marketing as a type of business?

Network marketing (or MLM / MLM - multilevel marketing) is a special concept for the distribution of goods and services, based on the work of independent distributors, each of whom has the right not only to sell goods and services, but also to attract other distributors to the company.

Earnings depend not only on the quantity of goods and services sold, but also on how much the people you attracted to the company were able to sell.

Network marketing is a kind of pyramid, but unlike financial pyramids, this business is completely legal and can bring you good earnings, provided, of course, that you start cooperating with a serious company that produces high-quality goods and services at reasonable prices.

History of MLM

It was then that the owner of California Vitamins, a company selling vitamins and nutritional supplements, Carl Rehnborg, decided that the products he made would be sold not by professional sellers, but by consumers themselves.

Moreover, these same consumers will attract other buyers to cooperate, thus forming a network.

Thanks to this approach, within a few years the young company could boast a turnover of $7 million.

In the late 1930s, Karl Rehnborg renamed his company Nutrilite Products, but the principle of product distribution remains unchanged: it is sold by consumers themselves, armed with samples and manuals.

These same customers bring in other fans of Nutrilite Products nutritional supplements who want to not only consume them, but also sell them.

Rehnborg's business is growing by leaps and bounds and proves to all skeptics that network marketing has a right to life.

A new round of MLM development occurred at the end of the 1950s.

It was then that two former employees of Nutrilite Products, De Vos and Van Andel, decided that they were no worse than Rehnborg and founded the American Way Corporation, also working on the principle of network marketing.

It still operates successfully on the market today under the name AMWAY.

The heyday of network marketing occurred in the 1980s and early 1990s.

In the USA, with the help of MLM technologies, they distributed everything from household appliances to medicines.

Then they even said that soon the traditional type of trade, and the stores themselves, would disappear without a trace and network marketing would rule the world.

Today we see that these forecasts are far from reality.

Yes, MLM companies are still successfully operating in various markets, including in the former republics of the USSR, but they have not been able to displace traditional trading platforms.

According to the latest data, the turnover of large network companies (and today they number at least 4,000 thousand) is over 300 billion. US dollars.

How network marketing works

Since network marketing is a kind of pyramid, your earnings depend not so much on the number of your clients who purchase products, but on the income of the distributors you attract.

For each distributor you refer, you receive the specified percentage of income.

That is why in MLM companies those who are at the top of the pyramid and have the most widespread network of attracted distributors make good money.

Despite its cosmopolitanism, network marketing depends on the laws of the country in which the company opens a representative office.

For example, if we talk about Russia and Ukraine, network companies are prohibited from:

engage persons under 18 years of age as consultants;
promise a specific salary, because there is no formal employment contract with distributors;
sell dangerous and unlicensed products, etc.

If you want to become a distributor of a network company, then doing so is quite simple:

You agree to negotiate cooperation with another distributor, or you independently go to the office of the company where you want to work.
Fill out the agreement form.
Get training (often this is just a conversation with an experienced consultant).
Purchase catalogs or product samples.
You begin to sell goods and services to customers and attract new distributors to cooperate.

Remember that if you come to work for an MLM company, you will become a freelancer who is not covered by social guarantees, sick leave, or vacation pay.

Even after many years of work, you cannot count on a pension from the state because you did not pay Social Security contributions, etc.

In addition, you have no guarantee that after some time the MLM company with which you have been cooperating for a long time will not close its representative office in your country and you will not be left without work.

Network Marketing - Pros and Cons

If we consider network marketing as a way to make money, then it is worth knowing not only about its advantages, but also remembering the disadvantages.

This will help you make an informed decision when you decide to make MLM your main profession.

This information will not be superfluous for those who consider network marketing as an official salary.

Pros of Network Marketing

The main advantages of network marketing for those who seriously engage in it include:

Opportunity to learn.

If we are talking about serious network companies, then they, caring about both the reputation of their corporation and the amount of their own earnings, therefore constantly raise the qualification level of their employees.

Seminars, courses, meetings with mentors, etc. are organized for them.

Sometimes training is carried out at the expense of the students themselves, but there are also pleasant exceptions to the rules.

Free schedule.

You don’t have to sit in the office at the time determined by your boss, because the boss is you.

You can devote 3 or 10 hours a day to work.

It all depends on its effectiveness: if you have made a profitable trade, you can reward yourself with rest, but there are also bad days when you have to work for a long time, but, alas, to no avail.

In any case, you create your own work schedule.

Unlimited earnings.

Ideally, this is true: no one sets a maximum income limit for you.

If you are a clever, creative person, capable of an unconventional approach to winning a client and ready to work hard, then your earnings will be quite decent and will begin to grow as your qualifications improve.

Financial independence.

By starting to engage in network marketing, you actually acquire a network that you can strengthen and expand.

If you sell high-quality products and fulfill all your obligations to customers, then your customer base will grow, and accordingly your profit will increase.

Moreover, the amount of earnings will not depend on the whim of the boss, but solely on you.

Close-knit team.

Those who have at least once worked in an MLM company can confirm how easy it is to start working here: no behind-the-scenes games for you, no rejection of a newcomer and no set-ups from the old guys.

More experienced employees will always help you, because the level of your earnings affects their income and status in the company.

Interesting job.

Of course, if you have what it takes to get involved in network marketing, you will find interesting and creative work.

MLM is not a tedious sitting in the office; you don’t have to imitate activities in order to survive until the evening. You definitely won't be bored.

Cons of Network Marketing

Network marketing also has some disadvantages, although quantitatively they do not reach the advantages:

Unstable income.

If you work in an organization with a specific salary, then you know for sure that at the end of the month you will receive the exact amount of money.

In network marketing, a completely different situation is observed: successful periods can be replaced by lack of money.

To earn a stable income, you need to have a large client base and constantly expand it.

Material investments.

When inviting you into network marketing, they will convince you that this is a business without investment.

In reality, this is not true, because with your own money you will have to buy product catalogs, as well as testers to demonstrate to the client.

Some MLM companies require their distributors to wear corporate colors or wear some elements of the uniform - all this will also have to be purchased at their own expense.

Emotional stress.

You know as well as I do how people treat product distributors: at best, as annoying flies that need to be gotten rid of as quickly as possible, at worst, as swindlers who are trying to sell some kind of crap.

You need to be prepared for this and treat people’s reactions philosophically.

Also, come to terms with the fact that you will get very tired from constantly communicating with people.

You should also remember that network marketing is not a business for everyone.

If you find it difficult to leave your comfort zone, talk to strangers, if you are tongue-tied, do not have the gift of persuasion, and in general communication is not your strong point, if you are ready to give up at the first failure, then you are better off doing something else.

You are unlikely to have a long-term relationship with MLM.

Network marketing is an opportunity to make money, but not for everyone

I am not a supporter of demonizing network marketing, but I know that I definitely would not make money in this way.

But among my friends there are those who work in MLM companies.

Some take their work more seriously and, in general, make good money, others use network marketing as an opportunity to purchase cosmetics at a discount, which they themselves use.

But I don’t know any sad stories where scammers, under the guise of network marketing, defrauded gullible people who wanted to become distributors, although there are plenty of similar stories online.

Common Myths Surrounding Network Marketing

I know that network marketing is surrounded by various myths.

I chose the 5 most common ones and asked my friend Alexander to confirm or refute them.

Alexander has been collaborating with AMWAY for a long time.

He started working in network marketing more than 10 years ago, when it was still possible to form his own network.

Despite the fact that most distributors’ earnings depend on the number of sellers attracted, Sasha took a different path and began to earn money from sales of, in general, good goods.

My friend’s main source of attracting new clients is, or rather, social networks.

He claims that even in the worst months he earns at least $70.

Considering that he has a main job, then such a source of additional income is quite good.

Network Marketing Myths:

You can earn a lot of money here.

“It may be so,” says Sasha, “but I haven’t met people who have.”

To get rich in an MLM company, you need to be at its origins.

This is not a serious job for students.

If you are going to treat network marketing like that, then you have no business being in this business.

This is serious work that requires a lot of dedication.

It’s horror, not work, to run around with bags of goods and pester people.

You will really have to “pester” people, because without a conversation you will not be able to sell the product or attract a distributor.

But it’s not necessary to walk around apartments with bags; now there are plenty of other ways to attract clients and sellers.

There are only scammers in network marketing.

To avoid becoming a victim of scammers, do not get involved with frivolous companies that you know nothing about or those that have bad reviews.

Serious players do not deceive their clients.

You can't earn anything in MLM.

It’s possible, and I proved it to you using Sasha’s example.

I think that my friend would earn much more if he did not have a main job, but devoted all his time to network marketing.

Usually, myths that you won’t earn anything in MLM are spread by those who have not had success with this business.

But just because someone has failed doesn't mean you will too.

How distributors can communicate with people who are inclined to believe

The expert from this video will tell you the above myths:

How to make money in network marketing?

Despite the fact that there are many myths and misconceptions floating around network marketing, you can make money with this type of activity, and you can do it quite well.

If you feel the strength to do such work, if you know that you are ideally suited for this business, start acting.

10 useful tips for those who want to make money doing network marketing:

Start working in a well-promoted serious company that will not require you to invest a large sum in the business: Oriflame, Amway, Mary Kay, Ivon, etc.
Here you won’t be able to earn a lot of money at first, but you will learn the basics of business.
Strive for development: attend all kinds of trainings, read a lot, adopt the experience of senior colleagues, etc.
Thoroughly research the product you are selling so that you can answer any customer questions.
Build your own network, and don't just try to sell more products.
Use various methods of promoting a product: through personal communication, via the Internet, using advertisements in free newspapers, etc.
Do not lie to the client, trying to sell as many goods and services as possible.
If you distribute high-quality products, then you won’t have to lie.
Look neat, speak competently and beautifully.
Don't be pushy if you feel the customer isn't interested in what you're offering—it angers, not encourages.
Be prepared to work for virtually nothing at first, so don't rush to quit your day job until network marketing starts making really good money.
Don't give up in the face of failure.
If one of your friends did not succeed in making money in network marketing, this does not mean that you will not succeed either.

Knowing what is network marketing, you can always do an interesting and profitable business that does not require special education.

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What is network marketing - the path to success or a mythical way to make money? Historical facts about MLM + pros and cons + TOP 5 companies in the Russian Federation.

What is network marketing?

Most people agree that these are some kind of fraudulent schemes that allow only a few lucky people to make money.

Such thoughts are related to the main problem of MLM - these are extremely high promises to clients.

Today, after reading the article, you will learn what the essence of network marketing operations is.

And, of course, you will get an answer to the question: is it possible to get real income using such a business scheme.

What is network marketing: historical background

Network marketing (MLM) in its current form was not a separate business development model. It appeared as a manifestation of the need to sell goods.

Who was the first to discover such a scheme and become the founder of a network business?

The founder of the first network sales scheme is Karl Rehnborg.

If you thought that this person had been building his policy for decades before opening a business, this is not so.

All complex things began with a banal approach.

Karl Rehnborg grew alfalfa on his property. At that moment, an idea struck his bright head:

“What if all the beneficial substances from alfalfa can be converted into an edible form for humans, so that its intake can increase the vitamin tone of the body?”

Undoubtedly, Karl had a good goal.

Later, he opened his own line of healthy food and began to offer it to friends and work colleagues, explaining all the usefulness of the new product.

It is interesting that out of the kindness of his heart (this cannot be explained by other reasons), Karl gave away goods just like that, without demanding any money in return.

Do you think there was an effect from promoting free useful products?

No. Nobody believed Karl. Everyone was very confused that a person could simply give away a useful, worthwhile product.

Carl Rehnborg came to an unexpected conclusion: if a nutritional supplement was sold at the average market price, and not just given to friends, demand would appear.

And he hit the nail on the head!

Karl began to use this business scheme, giving birth to one of the main tenets of MLM - mutual assistance and team support.

Rehnborg's friends began buying his product. They no longer thought it was a cheap deception for one simple reason - it was no longer cheap.

Then Karl began to look for new ways to expand his network of buyers. And again I came to the correct conclusion!

They consisted of a percentage of sales of the dietary supplement. Now do you recognize how a standard network company works? That's how it all started.

The result of the work of Karl Rehnborg:

1934 - Carl founded the California Vitamins company, thereby expanding the range of products sold.

In 1934, Rehnborg renamed the company Nutrilite Products.

The operating principle remains the same.

A whole network of product distributors, so-called partners, has formed.

Each partner attracted new employees by offering a percentage of product sales and dividends for quality organizational activities.

Karl Rehnborg is known throughout the world as the “father of network business.”

After a short historical sketch, it’s time to turn to the realities of modern MLM business.

What is modern network marketing: terms and definitions

Network marketing- This is one of the types of retail sales of products, based on immediate, direct interaction between sellers and consumers.

A feature of network marketing is the opportunity for each client to become a marketer.

It would be most correct to compare a network business with a multi-level dealership. MLM also consists of several levels.

It’s not for nothing that such organizations are often called financial pyramids!

Let's look at the main components.

The first stage of the pyramid: manufacturer – distributor

The first stage of activity under the MLM scheme is that the manufacturing company provides its products to the partner.

A partner is an individual who enters into a cooperation agreement with a supplier.

In the CIS, this agreement is not included in the labor format, i.e. does not provide you with social guarantees and has a special form of taxation.

The terms of the contract have similar clauses in any area of network business:

mandatory use of the manufacturer's products by the partner;
attracting new partners to the organization;
work according to a clear scheme defined by the organizers;
unquestioning adherence to the moral principles and policies of the company;
minimum monthly sales volume.

Subject to fulfillment of each clause of the contract, according to the MLM company, you get access to unlimited earnings.

Second stage: second-order partners

The whole essence of the MLM activity scheme begins with the second order.

Each partner who was invited by a participant of a higher level (1st level) performs all the same functions as his supervisor.

There is only one difference - part of the income from sales remains in the pocket of the superior curator.

Each participant, in the end, strives to form his own structure, since this brings real income in the form of dividends from his own sales and the activities of his “subordinates.”

P.S. The word “subordinates” is deliberately placed in quotation marks: in the structure of network marketing there is no concept of line management.

All relationships between colleagues at various levels are based on mutual assistance - this is simply beneficial for all partners.

Third stage: entry-level partners

Lower-level partners differ from founders only in that they have less income. At the same time, functional responsibilities, as units of MLM, remain unchanged.

Work at the first or second level involves manifestations of maximum activity not in selling products, but in promoting and forming one’s own structure.

An interim summary should be made:

The interaction pattern of network sales involves the development of the structures of each employee.

The explanation of this process is very simple - each subsequent seller receives a percentage of sales + dividends from the entire network organized by him, in the form of a percentage of the profits of “new” participants.

Network marketing - is it that simple?

The concept of network business and MLM structures has negative associations, especially in the CIS, where people have learned from the bitter experience of financial pyramids.

This section provides the reader with a comprehensive overview of how network marketing works - an unbiased assessment of income opportunities.

Positive aspects of network marketing

Lack of a linear management system.

You work for yourself, which is very similar to entrepreneurship.

Close-knit team.

Each partner is interested in supporting “junior colleagues”, as this brings him financial benefits.

There will always be someone who can help organize your networking activities in the right direction.

Supervision is the basis of a network business.

Possibility of constant growth.

Another positive aspect of MLM.

Everything depends only on your abilities, including earnings.

Very significant experience in interacting with people.

This is a useful skill for everyday life and the development of your own entrepreneurial project.

A network business can be considered as a platform for the further implementation of your own.

Flexible schedule.

Representatives of MLM structures can devote from 10 to 30 hours a week to work, thereby combining it with work or study.

You must understand that an online business cannot replace your main source of income.

At least in the first stages of activity.

Negative aspects of network marketing

Possible destabilization of the network structure at any time.

This process may be triggered by the activities of individual partners, which will not meet the company’s standards.

You should consider the possibility of the collapse of the entire structure, since many years of experience of MLM participants proves this possibility.

Uncertain payment standards.

An example is the American company Starcom, whose representatives promised high payments to each participant.

The result is that the partners took out loans, pledged property, and the company paid less than 25% of the announced amount.

It is not difficult to guess what kind of material damage the clients suffered.

Opportunity to get into a financial pyramid.

Imagine a situation in which you invested in an MLM structure by purchasing an initial package of products.

Several months pass, the customer structure expands, they also make deposits and purchase products.

Another month passes, you have not yet been able to cover even your own expenses, since the product is not in demand.

The company is closing...

In this situation, approximately 50% of participants remain without profit.

They were unable to sell the product, but made a significant investment.

If you have never dealt with entrepreneurship, it will be very difficult to “stay” in the MLM operating mode.

The specificity of the activity lies in the constant moral tension, since you are responsible for your sales and the entire organized structure.

After analyzing the pros and cons of network marketing, we can assess the degree of risk of such business activities as quite high.

A special feature of working under a network scheme is constant responsibility for one’s own work + training and control of lower-level partners.

You already know what network marketing is and can independently assess the prospects for development in this direction.

If you are confident in your organizational talent, as well as the abilities of a manager and financier, it’s time to move on to choosing an employer.

Network marketing: choosing an employer

Your network income and confidence in stability depend on the right choice of employer.

First, we need to consider possible options for the Russian business space.

Top 5 Russian MLM market

Network company name	MLM market share (%)	Description of activity
	~30	Sale of cosmetics, pricing policy - acceptable for the middle class. Be prepared to meet a huge group of women and find your place in it. Networking activities at AVON are more suitable for girls.
	~30	Marketing area: cosmetics, souvenirs, healthy food. One of the leaders of the Swedish MLM market. The advantages include increased loyalty to your employees. Working in this network company will allow you to have a small but stable income.
	8	Stability is the most suitable word to describe the activities of the AMVAY company. The scope of marketing is from household utensils to dietary supplements. Unlike the companies mentioned above, it provides equal chances for development, regardless of the gender of the employee. This fact is derived from the wide range of products offered.
	5	A company that only accepts women. Specialization: cosmetics, beauty care products. One of the most experienced network organizations, but still not widespread on the Russian market.
	4.5	Large manufacturer of natural cosmetics. It is one of the most progressive companies on the Russian market and has a strong base for network marketing.

The main criterion for choosing an MLM company is experience in the market. The explanation is very simple: you will get the expected result, verified by others.

Working for “newbies” in the MLM market is dangerous, because you cannot be 100% convinced of the veracity of all obligations.

You can learn about the many benefits of network marketing from the video:

What is network marketing? After reading the article, you are already able to independently determine the meaning of this term.

Network marketing evokes a subjective attitude in every reader.

Only one thing can be said with 100% confidence - it is possible to make money working in the MLM system and you cannot argue with that.

A completely different question: will you be able to do this?

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Why did I choose a cautionary title for this article? Because, unfortunately, lately I have come across deplorable stories of people working in network companies and having the same deplorable results of this very “work”.

Network marketing (or multilevel marketing; English multilevel marketing, MLM) is a concept for the sale of goods and services based on the creation of a network of independent distributors (sales agents), each of which, in addition to selling products, also has the right to attract partners who have similar rights . At the same time, the income of each network participant consists of commissions for the sale of products and additional rewards (bonuses), depending on the volume of sales made by the sales agents they attract.
Network marketing originated in the 1940s. The dawn of the network company industry occurred in the 80s and 90s. One of the founders of the industry was the well-known company American Way Corporation (Amway).

Myth No. 1. Network marketing is my business.

Do you seriously think that this business is yours? What if you think about it? Have you thought about it? No! Network marketing in 99.999% of cases is not your business. Network marketing is a business only for those (very smart and enterprising) people who founded it. Dot. This is the business of those people who speak to you at company seminars once a year and make motivating and “grand” speeches from the stage.

What's the problem here? But the problem is that those newcomers who come to the network company are “explained” from the very beginning that he will be engaged in BUSINESS. Yes it is. But not all newcomers clearly understand whose business they will be involved in. Understand that a business is yours only if you have the authority to make key decisions about how it is run. Can you make such decisions in “your” network company? Can you change the price of products? Can you change the range and suppliers? No. You only RESELL the products yourself or through attracted new sales agents. You are forced to obey and comply with all the conditions and rules of doing business that its founders dictate to you. Even if you have registered an enterprise or company and are engaged in selling the products of “your” network company, you have very limited freedom of action, unlike a full-fledged entrepreneur.

Understand that if you work for a network company, then this is NOT your business. In this case, your activity can only be called an alternative to working “for someone else” and self-employment, but not a full-fledged business, in the true economic sense of the word.

Myth No. 2. There is a lot of money in network marketing and you can get rich quickly.

Of course, the best option is, of course, to try and see the result. But, as many years of practice have shown, there is NO big money in network marketing. Sometimes there is no money there at all, let alone much. How can this be, since network companies make billions in profits? Yes, they do. The founders and those who head these companies and are personally close to the management receive it. Ordinary mortal distributors are content with small checks that barely allow them to make ends meet. You may object that you can become a leader! You're right. You can also fly into space. The whole question is who “will not vomit” on the way to this space, who will not lose consciousness and how long to fly to this “space”. And in general, do you need this space?

All that an employee of a network company does is search for those who would sell more and those who would sell more and who would be looking for the same thing.

People involved in network marketing (may they forgive me) are just intermediary sellers. Just INTERMEDIARIES. Of course, intermediaries can sometimes make good money, but the main profit goes to the owner.

There is no big money for an ordinary distributor in network marketing, it simply isn’t there. All the mountains of gold that your “mentors” and leaders draw for you are a farce and pure motivation with profanity. Getting rich in network marketing is very difficult. I won’t say that no one has made a fortune selling detergents, toothpastes or super horseradish cutters, but the pictures that are drawn to you are radically and sharply different from the harsh reality.

Think of network marketing as an alternative to regular work (and then carefully), as an additional source of income, but not as an easy and shortcut to wealth. I repeat, of course, there are people who, as distributors, became leaders and made a fortune for themselves. But these are tough, unceremonious people with pronounced leadership qualities, these are people who have gone through fire, water and copper pipes in this business, devoting a good part of their lives to it. There are one such “lucky” distributor in a million. Want to try your luck? That's your business.

Myth No. 3. My mentor is my friend, he will help me with everything, teach me everything and explain everything.

Hell no! Well, whoever, your mentor is definitely not your friend. Friends don’t bother each other month after month by constantly reminding them that they need to qualify this month and buy three and a half more super horseradish cutters for future use, they say. Friends do not benefit materially from friends, at least the good and true ones.

Your mentor is the one who is most interested in your success, eloquent people told you in seminars and meetings, he will teach and guide you. So it is so, but what is the problem in this situation? And the problem is that the wards begin, under the yoke of their “beloved” mentor (who, by the way, should have been sent into the dense forest long ago) to commit actions that contradict the actions of a person in a bright mind and good health. Such wards begin to take out loans, get into permanent and hopeless debts, and begin to make deliberate decisions that are not their own and not their own. This often leads to very unpleasant consequences that the mentees themselves have to sort out, without the “help” of mentors and leaders.

In general, in our lives we are constantly influenced by other people, whether we want it or not, and very often there is no awareness in our actions and decisions. In network marketing, distributors who are dependent on other people’s opinions, listening to the mentor’s motivation and looking at his painted pictures of golden mountains, lead their lives downhill (in a very bad case) without knowing it. This is sad.

Your mentor may be a good person and he may indeed be your friend, but this is in very rare exceptions and only if he is not very interested in your results in the network company, respectively, like his own. Understand that a boss will never have a true and sincere friendship with his subordinates - this is nonsense and is contrary to business.

Mentors, seminars, educational and entertaining group events in network marketing - their actions are mostly aimed at brainwashing, retaining distributors in the company and increasing the company's profits. They didn’t care about you, your life and your problems. Remember this. The first leaders of the company will never share with you the secret knowledge they have, since they are not interested in your growth to their level. They give you exactly the information and knowledge that you need to increase sales, nothing more. They are not interested in your true growth and reaching your potential.

Let's summarize.

Of course, there are quite a few positive aspects to network marketing. Working in network companies, a person learns a lot, goes through an excellent school of sales techniques and learns a bunch of interesting things. In the process of work, he can radically (possibly for the better) change his lifestyle, he can start traveling if he has not traveled before, communicate with interesting and successful people, he can discover a new side of himself, and so on. There are definitely advantages. But you don’t need to rely on MLM companies as if this is the only occupation worthy of you, that this is a gold mine and some kind of unexplored Klondike.

I repeat, you can consider working in a network company as a means and starting point for unlocking your potential, as a sales school, a school of communication and interaction with people. But those myths that you read above should not be forgotten. As one good person and coach Ildar Zinurov says: “There is no happiness in the network business.”

Yes, in network marketing you can earn money for a living, you can study, you can travel while working as a distributor, but the happiness that you are told about at the first and subsequent presentations is definitely not there.

We often do wishful thinking. You need to look at the results and draw conclusions. You need to use your precious tool as thinking. Use it! Think with your own head. Trust facts and results, not the words and pictures of your mentors and leaders. If nothing has changed for you for several (or even decades) years, then it is not prudent to believe that by continuing to do the same thing (for example, working hard in a network company), something will change for you and you will start shoveling money. You won't start.

P.S. Who am I to talk about working in network companies like this?

I have a direct connection to working in network companies. I had the good fortune to work as a distributor of Chinese goods, and in a not so simple way - wandering around organizations with a bag at the ready. I was engaged in cold sales. I consider this the most aggressive and difficult form of network marketing. I had a sales system, like in all similar companies, I had a mentor (and more than one), there was a lot of “washing” of my then still virgin brain, and so on. I went through all this and realized (fortunately quite early on) that this is NOT my business, that mentors are NOT friends, and that everything is NOT as sweet as they tell me. Plus, I have many friends and close people who are involved in network marketing in one way or another (some for more than 10 years). So I more than know what I'm talking about.