Most people have probably heard of MLM. Opinions on multi-level marketing vary widely. Some people reject it, while others have built an excellent source of income from it. The fact remains that the industry has been thriving for a long time. In the last decade, it has grown by a full 91% and involves more than 60 million people worldwide. It involves students and pensioners, mothers on maternity leave, and employed people who want an extra source of income. It suits anyone who wants to work from home. In this article, we explain what MLM is and what to watch out for before you get involved.
What is MLM?
MLM is sometimes called network marketing or multi-level marketing. This legal form of marketing is based on the direct sale of products or services and on rewarding distributors. Sellers sell products to end customers and recruit new sellers below them. A seller earns money both from selling products and from commissions on the sellers they have brought into the system. So, in addition to a customer network, distributors also build a network of their own sellers.
A seller buys products and sells them to customers with a margin of 20 to 30%. Bonuses and commissions depend on the number of products sold and the number of sellers they have brought into the company. Put simply, the more sellers they recruit, the more commission they earn from their sales.
Everyone who has someone “below them” earns a commission. The products on offer are usually unique and have no competition. This is so that they can be sold with a high margin, which is not always a good deal for the customer. The most commonly distributed MLM products are vitamins, food, cosmetics and financial services. At the start, you pay an entry fee for training and for buying the products that you then offer to your customers.
One of the reasons people join MLM is to create passive income through their network of sellers, in addition to a regular income. Although you will invest a lot of effort and time in this system, achieving passive income is realistic and motivating.
By joining an MLM system, you gain access to proven, working know-how. It is a bit like buying a franchise.
MLM vs. pyramid schemes
Multi-level marketing is often compared to systems such as pyramid schemes, also known in Czech as “letadlo” (aeroplane). A pyramid scheme is based on recruiting new members. All new members must pay an entry fee, from which the participant who brought in the new member and other participants above them receive a reward. The only way to earn a reward is to bring more new members into this illegal system. It is an endless process. The products offered under this strategy are only secondary and serve merely as a “front” to make the activity look legal.
MLM works a little differently. The product is distributed through sellers who earn a profit from selling it. Recruiting new members is a secondary activity. Of course, everyone who joins last is at a disadvantage, just like a new employee in a new job who gets the lowest salary and only receives a pay rise and bonuses after some time. In MLM, what matters most is how active and sharp you are. Even a new member who is skilled can quickly build a network of customers and sellers and earn good money. You just need to want it and not give up after your first failure.
How can you spot an illegal pyramid scheme?
There are several signs.
- They promise high earnings for minimal work,
- they require high entry fees,
- complicated and unclear contracts that disadvantage new members,
- they target vulnerable groups, such as pensioners, the unemployed, students, etc.
- your main source of income comes from recruiting new members,
- the company offers no products.
Before you get into MLM
If you have an offer to join multi-level marketing, it is up to you to decide whether this work suits you. Do not get carried away by promises of high earnings, because they do not come for free either. At the start in particular, this work will take quite a lot of effort. However, it is definitely worth mentioning that you can earn decent money with this system and that it can work in the long term. It is one of the ways you can make money online.
Before you get involved, find out as much as you can about the company, its history and what your work will involve. Ask about the required entry fees and read the contract carefully. It may include high entry fees for training and an unfavourable price for your first purchase of products. Also read the conditions for leaving the MLM system carefully.
Companies such as Avon, Oriflame and Mary Kay have been using the MLM system for many years. These companies offer high-quality cosmetic products and give their members the benefits of membership.
If you choose this source of income, you must be prepared to take the initiative in offering and selling products that are not always cheap and are often not in high demand. The money will not come to you on its own. It is mainly about your own effort and initiative. Above all, you need the qualities of a good salesperson. If you are more of an introvert and do not like “selling” your opinions, it is better not to get into this work at all.
What questions should you ask?
Before you get into multi-level marketing, ask a few key questions.
- What is the company’s history and what references does it have?
- How long has the company been on the market?
- Are the products useful for customers? Do they have the potential to sell well?
- How high is the entry fee? How long will it take to earn the fee back?
- Is the fee refundable (for example, if I leave during the trial period)?
- What are the conditions for leaving the MLM? Will I pay any penalty?
- What obligations come with my membership in the company (for example, a certain number of products sold per month)?
- How long is the contract for?
In the Czech Republic, many people have a negative attitude towards multi-level marketing. This is due to a number of unfair sellers whose dishonest practices gave MLM a bad reputation. However, the systems used by these fraudsters had more in common with a pyramid scheme than with genuine sales.
This multi-level marketing is not employment but a business. This means you will have to invest in it from the very start, mainly time, effort and money. As with any other business, there is no guarantee that you will succeed or that your money will grow. However, if you do not do it purely for the money but partly for fun and enjoyment, success will find its way to you. This is especially true when you find the right driving force in it, such as your customers’ satisfied faces or being a good role model for your sellers. The key is to follow 4 basic rules: patience, a willingness to work, a willingness to learn, and advising, helping and motivating others. If you follow them, you cannot fail.
Ranking of companies operating in the Czech Republic
Here are some of the main ones:
- Forever Living
- TianDe
- Dedra s.r.o
- Jeunesse Global
- Herbalife
- Mary Kay
- Organo Gold
- Amway
- NuSkin
- Essens
- Avon
- Oriflame and others.
Do you know how to choose the cheapest compulsory motor insurance? Read an interesting article about it.
