In past few days many people asked me What is MLM or What is Multi Level Marketing ? So I thought to write an article on same.
MLM or Multi Level Marketing is simply a medium a Company adopts to promote its Products, from person to person. In MLM the Company doesn’t spends on promotion of their Products.
Rather whatever Money Company saves by not spending on promotional activity, they distribute the money to the people because of whom the Product got promoted / sold.
Here you can learn more about What is MLM & all you need to know about MLM Business Model?
What is MLM or What is Multi Level Marketing ?
Let us be very clear that any company which comes in the market comes for the business, i.e. to make Profits. And that’s good, if the company makes profits (in legal manner) then only they will be able to survive in the market & serve people. To get profits obviously the products or services offered by the company need to reach consumers.
It’s not when you get into your MLM company, its when your MLM company get into you!
— Vineet Gupta (@vineet18del) July 20, 2015
Now to ensure the products reaches the consumers companies adopt various promotional activities, like Television Advertisement, Newspaper Advertisement, Online Promotions, SMS, Email Marketing, etc.
As discussed above, in MLM / Multi Level Marketing companies don’t spend money on promotional activity, rather they distribute to the people because of whom the sale of their product happens.
Now if you try to understand, MLM / Multi Level Marketing this is one of the best form of promotion of products, it’s beneficial for both Companies as well as Consumers/Prosumers.
In a Traditional Business, How a Product Reaches the Customer ?
Movement of the Product in the market in Traditional business:
COMPANY -> DISTRIBUTOR -> WHOLESALER -> RETAILER -> CUSTOMER
From the above example you can easily understand how a product reaches the customer / consumer. First the Company manufactures / produces the product. After product gets ready Company’s Distributor gets the product.
From Distributor Wholesalers take the product. From Wholesales, Retailers takes the product & finally from Retailers Customers/Consumers buy the Product.
In this process the cost of product increases a lot because every mediator involved will obviously have his margin, hence at the end consumer ends up paying high price for the product.
Not only that today Millions & even Billions are spend on the Advertisement of a product. As a result the final product price which a customer has to pay increases further.
How MLM / Multi Level Marketing is Beneficial for Companies ?
Movement of the Product in MLM / Multi Level Marketing:
COMPANY -> INDEPENDENT REPRESENTATIVE -> CUSTOMER
You might have noticed of late many companies have started promoting their products through MLM / Multi Level Marketing model because in this model companies don’t have to spend unnecessary money on advertisements.
If you see the Traditional Business model, companies FIRST spends Millions & Billions on advertisements, then they make some profit, only if the product gets sold. Even after spending Millions & Billions on advertisement it’s not 100% sure that the products will be sold. Hence it carries huge risk for the companies.
But if you closely study MLM / Multi Level Marketing model the companies who adopt this model get huge benefit, because companies don’t need to spend on advertisements. There are people who get associated with the company as Independent Representative (IR) for the company & those IR promote the products for the company.
But those people only get paid if the product of the company gets sold. Hence companies spend money on promotional activity after they generate the profit. Which is great way of doing business.
How MLM / Multi Level Marketing is Beneficial for Customers ?
In MLM / Multi Level Marketing there is no intermediary apart from an Independent Representative (IR) that could be your friend, and the product directly reaches to the Customer from the Company.
Hence unnecessarily the customers need not to pay the high amount for the products. This way the customers are served in a big way as they are not funding for those advertisements.
Check out these mind boggling statistics about Multi Level Marketing industry.
USP of MLM / Multi Level Marketing – Word of Mouth Advertisement
USP of MLM / Multi Level Marketing is “Word of Mouth Advertisement”. As yourself – do you purchase a product just because you saw its advertisement or because your favorite celebrity is endorsing it?
The answer is obvious NO! Before purchasing any product, most of the time you “consult”, “take advice” from, may be your friend, colleague, etc. then you finally buy that product.
Advertisement just helps to create the awareness. Even Harvard University stats tell us that 85% sale of products in this world happens due to customer to customer recommendation, i.e. “Word of Mouth Advertisement”.
Hence when the actual reason for sale of almost every product is “You & Me”, i.e. customer, common people, then why to pay to celebrities, who just for sake of money share false statements. The products those celebrities endorse in most case they don’t use themselves.
Are you thinking if you should do MLM? Check out if it fits you? Check Now!
In MLM / Multi Level Marketing a person buys the product from an Independent Representation (IR), then that IR can further promote the product. Hence a person buys the product from the person who is using the product & in most cases the person known to him.
Wikipedia Article on Multi-level Marketing
MLM or Multi Level Marketing is one of the medium company can promote their products without spending huge money on advertisements & this is the reason today some of the great organizations are getting into it.
Big companies are using this MLM / Multi Level Marketing model for promotion of their products. I hope this article will help you to understand What is MLM or What is Multi Level Marketing.
In the above discussing I have majorly shared about What is MLM or What is Multi Level Marketing from Product’s point of view. Read Here the continuation of the same discussion from Business / Income’s point of view: What is MLM? Article II