Make Money with MLM
Multilevel marketing (MLM) companies use a network of independent distributors to sell products directly to people in the community. Examples that most people think of when they hear about MLM companies include Avon and Mary K Cosmetics. If you become a distributor for one of these companies, you will make some money from selling the product. But the real way to make money is by recruiting a network of distributors who also sell the product, called your downline. You earn commissions on sales made by distributors in your downline. To make money in MLM, you have to know not only how to sell your product, but also how to build your downline.
Choosing the Right Company and Product/Service
- Look for a stable company. Find out how many years the company has been in business. Don’t work with a company that has been in business for less than five years. Go with a publicly traded company. Since they are required to disclose their financial condition to the SEC every 90 days, you can easily find information about their financial stability. It may be hard to find good financial information on private companies.
- Investigate the integrity of the company and its management. Research the CEO. Find out about his experience and background. Know whether he has been successful in other companies in the industry. Learn about his reputation. This information can be found on the company’s website and in trade publications.
- Find excellent products. Look for unique products that competitors don’t offer. Choose products that consumers need and will use. Look for products and services that are used continuously, which will ensure you repeat sales. Find a product for which there is a large untapped market. Steer away from fads or trends, as these may not support you in the long run. Sell a product that you yourself use and would recommend.
- You can also make money with services. For example, thanks to the deregulation of utilities, you can get in on MLM energy companies.
- Research the compensation plan. Find out how you get paid. Ask what percentage of sales gets paid back to the distributors. Find out how fair the distribution is between old and new members.
Familiarize yourself with the different types of MLM compensation plans. Research the type your company uses and evaluate how fair and generous it is.
- A unilevel compensation plan pays the same amount to all distributors. This pays well if you are a good recruiter.
- With a stair step breakaway compensation plan, your payments increase as your distributors’ volume grows. Once they reach a certain level, they break away from you. Many companies use this plan because it is tried and true. Be aware that once a distributor breaks away, you may need to replace her to make your monthly quotas if you have them.
- In a forced matrix compensation plan, the organization of distributors looks like a grid. This means that a certain number of people you bring in to the company will work directly for you, or be on your front line. But after that, any other people you bring in will spill over, or be placed underneath them. This plan encourages team work.
- A binary compensation plan allows you to have two distributors on your front line. After that, other distributors go beneath them. Sales volume must be balanced between the two distributors underneath you before you receive any commissions. This plan is simple to understand and offers fast growth. Be aware, however, that although binary plans are designed to operate legally, some companies do not run them as they are designed.
- If the commission is too high, your company may fail. The higher the commission, the less value the customer receives for her purchase.
- "Downlines" are the distributors beneath you. For example, if you are seller A and recruit seller B, seller B is your "downline." You will probably earn a percentage of seller B's sales unless you are operating on a unilevel compensation plan. Downlines greater than 5 may run into regulatory legal problems, since emphasis is on selling to distributors rather than the customer. This type of organization may be attacked as a pyramid scheme.
- Learn about the mentorship program. Ask about the training you will receive. Find out who will train you and for how long. Research the company’s business systems. Find out how distributors communicate with each other and those above them. You should be able to call those above you in the company if you need them.
- To succeed you have to listen to your mentors. Learn what they have to teach you. Find out what they did to become successful and duplicate it.
Selling Your Product
- Host home parties. This is what most people think of when they hear about MLM companies. If you have a product that can be sampled and demonstrated, this might be a good way to sell it. Invite 50 percent more people than you think will actually attend. Offer free gifts and special pricing on products. Have contests during the party where people answer questions and win prizes. Make the party fun. Encourage guests to bring friends so you can recruit distributors while you sell your product.
- Host team events. Get together with local distributors of your product for Friends and Family or Customer Appreciation events. Choose a festive location such as a winery, a boutique hotel or a party cruise boat. Share product stories, do product demos and have drawings and prizes. Offer special promotions to encourage purchases. Pack the room with friends, family, customers and their friends and family.
- Attend trade shows. Schools, churches and local networking events allow vendors to purchase booths for selling products. Have a raffle to draw traffic to your booth. Offer discounts and incentives to purchase. Engage customers in conversations. Collect everyone’s contact information. Generate product sales and collect leads for your downline.
- Stuff envelopes with promotional materials. Include promotional materials in everything you mail. For example, include product information when mailing bills, personal letters and product shipments. Send flyers to advertise new products. Include a calendar of special events. Send coupons to encourage repeat business.
- Send greeting cards. Keep a calendar of customers’ birthdays or anniversaries. Send cards for their birthdays, holidays and other special occasions. Don’t forget to include a coupon and other promotional information. Customers like feeling remembered and appreciated. A birthday card with a coupon is likely to generate a sale.
- Speak at social, business and civic group events. Establish yourself as an expert or authority. Educate attendees about an issue that concerns them. Don’t make selling your product the primary focus of your speech. Rather, mention your product and how it can help them. Distribute promotional materials that notify customers of upcoming events and tell them where they can purchase your product.
- Start a YouTube channel. On your channel, educate customers about the benefits of your product instead of just talking about the product itself. For example, if you are selling makeup, create videos teaching makeup techniques. Casually mention your products throughout the video, but keep the focus on the educational content. In the end, direct visitors to information about purchasing or finding out more about your product.
- Create a blog. Post product reviews on your blog. Explain what your product does, how it works and what the benefits are. Also, create educational content that demonstrates how customers can use your product. For example, if you sell home utilities, create content that educates people about how to conserve energy or reduce their monthly utility expenses. Include a sales page where customers can purchase your product.
- Create a Facebook fan page. Post product reviews, ads and educational content on the page. Include links to your blog and YouTube channel. Also, link back to the sales page on your distributor website. Start groups where customers can discuss how they use your products. For example, if you sell weight loss products, have a Facebook group that allows customers to post success stories, questions and product reviews.
- Devote time to selling your product. Don’t spend all of your time recruiting. Remember that the way everyone actually makes money is from commissions on products sold. If everyone did nothing but recruit others to join the network, nobody would earn any commissions. Just as you are counting on those in your downline to sell products, the distributors above you in your network are counting on you to do the same.
- Build a large network of distributors for your product. For example, if you are selling makeup, recruit others to sell the same products. Teach them to recruit distributors also. As distributors under you sell more makeup, you will earn commissions from their sales. The bigger your network, the more money you will make.
- Learn about different recruitment strategies. Talk with top earners in your network about their recruitment strategies. Read literature, listen to podcasts and participate in webinars to learn from people outside of your network. Choose different methods to try. See if they fit your personality and schedule. If so, use them every day.
- Recruit friends, family and coworkers. This is known as your warm market. Create a list of everyone you know or knew, and contact them to tell them about your business. Since these people already know and trust you, they may be more likely to invest in a business opportunity with you. However, since they won’t want to disappoint you, it can be awkward if they have no interest in your MLM business. Don’t alienate people you know by pursuing them too aggressively.
- Use a strategy called FORM, which stands for family, occupation, recreation and money. Engage your prospect in a conversation about these things, and note problems they discuss. Mention to them that you might have a possible solution to a problem area, and make your sales pitch.
- Understand the risk of pitching an MLM business idea to friends and family. The failure rate for distributors is enormously high. Recognize that you risk damaging important relationships in your life if the business fails. Carefully weigh the chance of losing the trust of friends and family with the promise of making money.
- Practice cold market prospecting, which is recruiting total strangers. This can be intimidating for some people, but the same principles apply as with your warm market. Build a relationship by finding commonalities and creating trust. Resist the temptation to give a long spiel about your business. Rather, listen more and talk less. Ask questions and let them talk about themselves. Find things you have in common to begin building a bond.
- Advertise for new recruits. Place ads in newspapers, business magazines or online job boards. Promote the benefits of working for yourself in the ad. Direct respondents to visit a website to learn more about your business. Write content for your website that generates interest. Put your contact information on the website.
- Create a personal business website or blog. Write relevant, SEO optimized content. Share your content on social media platforms. This attracts visitors to the site who are already interested in your business. Include a call to action in your posts that encourages visitors to take the next step in joining your network. Visit other blogs in your industry and comment, like and retweet their content. This will redirect traffic back to your site.
- Purchase leads from a reputable marketing solutions business. They do the advertising and prequalification to find qualified leads. Some companies give you a script that you can use when contacting leads. Many also offer training. Be aware that this can be risky and expensive. Some list brokers are not honest and just sell lists of names scrubbed from the internet.
- Promote yourself as an authority. Leads will seek you out rather than the other way around. This is called attraction marketing. One effective way to do this is with a funded proposal. This is a marketing plan where you sell inexpensive information products to attract high-quality leads. For example, sell webinars or e-books that give valuable information to prospects. This can be expensive and time-consuming, but it is a proven strategy for building your network.
- Support new members of your downline. Spend at least 30 days training them. Give them plenty of support during training so they can learn what they need to do to work independently. Build long-term relationships with the people you bring into the company. Teach them how to develop relationships so they can bring others in.
- Failure rates for MLM distributors is almost 99 percent. The support and training you offer your recruits can make the difference between success and failure.
Understanding the Difference between MLM and Pyramid Schemes
- Learn what a pyramid scheme is. A pyramid scheme is a fraudulent hierarchical scheme. People are recruited to invest money with the promise that they will receive a return on their investment if they recruit other investors. It is a deceptive money game with no basis in commerce. Typically no product is involved. Rather, people are deceived into investing money, although no product has been received nor service provided.
- Understand how MLM businesses are different from pyramid schemes. In a legal MLM business, you sell legitimate products that people genuinely want for a fair price. You can make money just by selling the product. You don’t have to recruit others into the business to make money, even though you may be encouraged to do so to earn more money. MLM businesses are not about taking advantage of anybody. Nobody has to lose money in order for you to make money.
- Realize that some pyramid schemes do involve a product. The product thinly disguises the scam. Usually, the product has no inherent value. Nobody would want to purchase the product unless they were joining the scheme. Examples of this kind of product include mailing lists, some kind of report or membership in an investment club. The only way for investors to make money is buy getting others to invest.
- Know what the experts say. Critics of the MLM business model, such as forensic accountants and fraud investigators, say that all MLM businesses are unfair pyramid schemes. The Federal Trade Commission (FTC) and the Direct Selling Association disagree. They say that MLM’s are legitimate. The difference comes down to products. If distributors can make money by selling products to end-users, then the business is legal.
- Understand, however, that just because a business is legal does not mean it is necessarily a good idea. MLM businesses, although legal, are extremely risky. Distributors invest their own money in products that they may or may not be able to sell. Building downlines is difficult and time-consuming. Also, you put others at financial risk when you bring them into your downline. Before becoming involved in an MLM, decide whether you are comfortable with not only risking your personal savings, but also with the ethical dilemma of making money off of others' financial risks.
- Exercise caution. Know the warning signs of a scam. If the focus is more on recruiting than selling, consider it a red flag. Consider the training offered. If you are offered little to no support and training on business tactics, it might be a scam. If you are being pressured into buying extra product, paying for training or going into debt to pay for the “business investment,” then think twice. If a recruiter is pressuring you to sign on right away without giving you time to ponder your decision, this is likely not a legitimate business deal. Finally, if it sounds too good to be true, it probably is.
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Sources and Citations
- ↑ http://www.entrepreneur.com/article/77700
- ↑ http://www.mlmlegal.com/sizing.html
- ↑ http://www.sarahrobbins.com/sellproductnetworkmarketing/
- ↑ http://lindacargillselfe.com/ten-lowcost-ways-promote-mlm-business/
- ↑ http://onlinemlmcommunity.com/how-to-sell-your-mlm-products-online/
- ↑ http://www.entrepreneur.com/article/170926
- ↑ http://phillipjstone.com/mlm-lead-generation/
- ↑ http://www.maadanconsulting.com/mlm-success-strategies/
- ↑ http://www.investopedia.com/articles/04/042104.asp