People prefer to be independent and capable of providing for their loved ones. In this quest, they often go off track and engage in unorthodox methods of making money. One such unorthodox method is multi-level marketing (MLM). Many well-known corporations like Amway, Avon, Herbalife, Amsoil, etc., work through this model.
In fact, a survey conducted in 2018 revealed that more than 18 million Americans were involved in a multi-level marketing scheme. The industry generated around USD 192 billion in that year alone. Given the statistics, it is reasonable to infer that many people are unaware of what it actually means to engage in MLM schemes.
How Does an MLM System Work?
It is worthwhile to have a clear picture of what constitutes an MLM network. Affiliates associated with the company are charged with selling its products through word-of-mouth tactics.
The associate is also required to recruit a certain number of people – as per the given quota – under them. Suppose you are an associate recruiting people under your wing, then you can expect to earn commission from the recruits for the sales they make.
The structure of this marketing strategy creates a pyramid, where you get a commission from everyone who is under you.
Most multi-level marketing schemes require you to invest a significant amount of money to purchase their products. According to a study conducted by Magnify Money, a vast majority of MLM participants make less than 70 cents an hour!
The study also discovered that 32 percent of people used a credit card to purchase the inventory. The high cost of these products also makes it difficult to sell them, which is a big problem, as the only way to earn through MLM is by selling the product.
In the end, over 90 percent of people lose money, and a significant amount incurs debts. But it doesn’t mean that people do not make money from MLM schemes. If you have the talent and the contacts, you can make a lot of money.
MLM schemes depend on the ability of their affiliates to capitalize on their personal relationships to sell the company’s products. Many studies have revealed that MLM participants experience relationship troubles directly as a result of multi-level marketing.
The pressure of meeting sales targets can often leave you with no choice but to count on people closest to you to sell products. As a result, people may often spoil relationships by aggressively pushing merchandise to their friends and family.
Lack of Individuality
Companies using MLM schemes profess a strict guideline that needs to be followed by every affiliate. It means that you have to sell the way you are told to sell.
This may restrict incorporating creative advertising and promoting ideas to sell your products. There may, however, be a few exceptions to this rule, depending on the organization you join. So, before joining an MLM network, check with your recruiter about such conditions and regulations.
One of the most significant drawbacks of multi-level marketing is the lack of a fixed salary. Joining an MLM network is often like owning your own store where you have to sell products to make a living. At the end of the month, your revenue is going to depend on how much you sell.
Members of the MLM scheme earn a commission by selling products, recruiting new affiliates, and from the initial investment for the inventory made by people joining below them.
It is strongly advisable to contemplate long and hard before joining a multi-level marketing network. If you decide on joining one, try going for well-known, reliable companies like Amway, Amsoil, etc.