Your own business: how to open a tea shop. Knowing your own character. Types of MLM: what schemes work according to

*Calculations use average data for Russia

It is unlikely that anyone now does not know what MLM is, also known as network marketing, from the English multilevel marketing, which can also be translated as multi-level marketing. At its core, MLM is the concept of distributing your product, that is, virtually any enterprise can engage in network marketing, regardless of the scope of its work. However, distributing services in this way is not entirely convenient, so this principle usually applies to the sale of any goods. In civilized countries, where MLM originated a long time ago, and then through thorns came to an adequate organization of its work, there are special laws that regulate this very specific method of product distribution, which has its own unpleasant characteristics. In the same country, no similar legislative acts were found, and when imposed on Russian mentality and the economic situation, this had an unexpected effect.

It must be said right away that MLM, in general, is a very progressive concept, which has its own not only disadvantages, but also important advantages, it’s just that in the end they began to implement it crookedly, and in Russia, in general, there was a particularly obvious stratification of the “top” and “ referrals”, when the former, rubbing their hands with contentment, received huge profits, and the latter were forced to spend their own money on a product they did not need. But first things first. So, network marketing is the concept of distributing goods and (much less often) services, when sales are carried out by attracted employees who also have the right to attract new people to expand the network and transfer similar rights to new members. However, the foreign definition is somewhat more accurate, because in the end what is built is not a network of interdependent and equal participants, but rather a pyramid, at the top of which the leader has a good income, and employees at the very bottom are forced to resort to all possible methods and exclusively at their own expense to sell the goods. They are proudly called distributors, less often sales agents, and therefore the latter consider themselves almost independent businessmen. To some extent, this is true, only the principle of operation is slightly different.

For a Russian person, MLM is warningly consonant with MMM, both are pyramids, only the genius of Mavrodi went too far, and therefore failed. However, at present, people are entering the labor market who simply heard about vouchers from their parents, and therefore have little idea of the dangers of financial pyramids. Especially if the pyramid is headed by a person focused only on his short-term profit. This is the primary problem of many modern MLM companies, although from the outside it may seem that the company has its own corporate style and employee support. In fact, everything is different - it’s just marketing... aimed at its own employees in order to deceive them. Moreover, it came to the point that a very negative image was created for network marketing, and on both sides at once - both the population disliked the meticulous referrals who were trying to almost forcefully force the purchase of their miracle powder, and the disappointed referrals themselves, who had spent all their savings and a lot of time, Having sat surrounded by purchased vacuum cleaners and understood the essence of the deception, they began to quite naturally be indignant against such a marketing concept. It all started back in the fun 90s, when Zepter pots and Herbalife dietary supplements appeared, then the unprepared market saw unreasonably expensive Kirby vacuum cleaners, and currently the negative image of network marketing is supported by a huge number of Chinese companies that operate exclusively in Russia and some other countries. countries, because in China there is a serious prison sentence for MLM. In connection with all this, a company that decides to engage in direct sales and MLM in particular will be forced to face a huge number of problems and mistrust of both consumers and potential employees. Although many of similar organizations are thriving to this day, using the same dishonest methods of selling their miracle goods, because a certain contingent of people are not mammoths and are not dying out.

Let’s try to consider the possibility of organizing our own MLM concept, which will use only “honest” methods, work the way all progressive humanity works now, but taking into account Russian realities. In principle, any company that is focused on selling its products to a large number of consumers can use the concept of network marketing. The simplest and most striking example of the use of network marketing is in large manufacturing companies, but at the same time producing a mass consumer product. If you do not take into account long-suffering vacuum cleaners (because trade in equipment is generally more complex process), then most often through MLM they sell cosmetics, non-medicinal products that are presented as medicinal supplements (dietary supplements) and other things. That is, this is a product that can be bought, in general, spontaneously, without planning the purchase initially.

So, the owner of the company produces a product and decides that cooperation with distributor companies, retailers and other usual market participants is not profitable for him or is simply impractical, and it is much easier to use the direct sales method. An entrepreneur attracts employees to his staff who should be engaged in these very direct sales, that is, in fact, he needs sales agents. This is where the differences begin. In a simple case, the sales agent receives a percentage of products sold, often has a small but fixed salary, receives all social benefits and is fully employed at the enterprise. He's protected. In a company that practices MLM, the sales agent quite often does not even get a job, but is simply listed as an external employee. Therefore, he is initially deprived of all his rights according to labor code Russian Federation. If a company does not hire its sales agents, then they are at great risk because they are actually engaged in illegal entrepreneurial activity, because it’s unlikely that any of them, after starting work in an MLM company, go to register as individual entrepreneur and at the same time I am generally ready to pay taxes. At the same time, the parent company itself legally acts legally - it transferred its goods on a reimbursable basis and paid the profit from this. At the same time, she does not keep employees on staff, to whom she has to answer and generally pay them money.

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This is the essence of MLM - all referrals in fact work only for themselves, providing their managing manager in the process of their work. The fact is that today the vast majority of companies that work on the principle of network marketing require paying for a shipment of goods out of your own pocket to get started. That is, the manager does not give it away for sale for a fee, he literally sells his product to his own employees. In critical cases, there is also a “validity period” for this trial batch (usually a month), that is, if during the reporting period the agent did not sell anything, this becomes exclusively his problem, because he paid for the product with his own money, and is obliged to ( Yes, I definitely have to) buy a new batch. Sometimes in the first month they offer a “trial” batch, which costs him a little less, but subsequently the amount increases. So it turns out that the employees themselves buy the goods. “Black” MLM companies make money from this. In principle, they are not interested in promoting their product to the masses, they do not need to engage in marketing in general and maintaining the image of the company and product, because income is generated exclusively from sales to their referrals. This is how, in general, the implementation process takes place in “normal” MLM companies, the only difference is that a normal one tries to push a product onto the market and support its employees, and does not make money solely at their expense.

A logical question is - if no one buys products, and a person is forced to buy what he does not need and what he cannot sell, then where does the income come from, because even in the most advanced cases, after 3-4 months such people simply leave. This is true, although there is a percentage of those who are confident that “from next month everything will be very good,” but in most cases the income is generated by neophytes. Huge number students, housewives and other similar elements want to find a simple job with a flexible schedule (and you don’t have to sit in an office with a nasty boss), for which they would also pay well. Network marketing promises it all while hiding some important details. Therefore, it is often enough for a manager to conduct interviews monthly (or even more often) in order to attract newcomers who will simply pay once and then leave; anyway, in the new month there will be more people hungry for easy money.

A normal company (of which there are practically none on the Russian market) acts differently. The founder attracts direct sales specialists to his staff, formalizes them in accordance with the Labor Code of the Russian Federation, and then instructs them to find people who will also sell goods under the same conditions. This way, similar rights are formed for all network participants, that is, even the founder is actually equal to his employees, his only advantage is that he receives the goods directly. At the same time, no one obliges anyone to buy the product right away; a person is hired precisely as a sales manager, and not a “distributor” who is promised huge profits literally tomorrow. It is very important that the founders are experienced and competent people who are engaged not only in sales, but also in training new employees.

It may seem that providing employees with free (and in a normal company it should be free) training, social benefits, and support, combined with equal rights, will entail losses, but in fact this is not the case. Here you need to know what TQM is, which generally goes very well with MLM, but due to the fact that TQM (total quality management) is focused on the long term and requires a lot of investment, which, although it will pay off many times over, is not very widespread soon. It's simple - network marketing was perceived precisely as a tool for quick and not entirely honest profit. The modern progressive concept has fallen victim to human greed. In this regard, you need to develop your network marketing only in combination with even more advanced economic and management solutions (not only TQM, there are other good ideas), because all this will lead to an increase in the organization’s income, and in the end it will be possible to receive even greater profits, but only in an honest way. Unprincipled entrepreneurs need to remember that this will allow them to earn, albeit a little later, more money, and the company will enjoy a good reputation among the population, and therefore among potential employees.

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There is an important thing to note here. In most cases, MLM is used by companies that produce, to put it mildly, not very high-quality or simply unclaimed products. Unpopular products can sometimes be sold only in this way, because several advertising laws that are inconvenient for a dishonest enterprise do not apply, but more often it is low-quality products that are sold through network marketing. Which are sold at a price sometimes several times higher than more high-quality analogues. Of course, it’s easier here to deceive your employee, force him to buy something of his own, and then send him by hook or by crook to sell this something to at least someone. In particularly advanced cases, referrals at lower levels go so far as to simply call every apartment and literally try to sell their product on the doorstep. This method of selling has a number of disadvantages (any person with even a little understanding of marketing knows this), but in the case of MLM, it shifts all the problems onto the shoulders of the referral. Some of them try to sell goods via the Internet; strictly speaking, the manager doesn’t care who or how the product is sold to, but given that a “black” MLM company focuses only on the number of its referrals (the more of them, the higher the income), then She hires absolutely everyone more often than always. And 99% of these people know absolutely nothing not only about marketing, but about the principles of simple trading in general. Moreover, MLM companies often conduct training on “personal growth”, “mastering sales skills” and other nonsense, which aims not at training, but at brainwashing. No wonder it's Russian Orthodox Church opposes network marketing companies - I realized that such companies form their own church with a messiah in the form of the founder. In general, the bread is taken away. And in many cases, this is true; during trainings, stories are told about successful referrals (most often fictitious) who eventually built their own business, because in fact, only the founders who were good at driving the ideas they needed into other people’s heads were able to make a profit. Yes, meetings of MLM employees who are really inspired by the idea, have worked for several months and still cannot afford to be disappointed, are similar to a gathering of witches and even more like a gathering of religious fanatics. Here it is impossible not to note the good psychological skills of managers and employees who have nevertheless achieved some results (these are those who were able to attract many of their own referrals), because not everyone can brainwash this way either.

As a result, the chain is simple - the leader is at the top, smart psychologists a little lower, even lower are those who were able to do disgusting work with the wrong hands, and at the bottom there is a sea of despair and believe that if you buy a product that no one needs every month and force it on everyone in every possible way, then success will definitely come. Due to the fact that the product is being sold, its price increases many times at each level of this rotten pyramid. Especially advanced cases, when in this chain there is no way to rise to a higher level, but you can only form levels below you. You don’t need to have an economic education to understand that at each subsequent level the price of a product will increase, and the end consumer (if there is one) will receive it with a markup of several hundred percent, or even more than a thousand.

Thus, a company that wants to engage in network marketing must produce a truly high-quality or at least liquid product. The product must be bought, and bought constantly, but what is very important - it must have competitive advantage. The MLM scheme itself allows you to save in many ways. The first is the absence of the need to maintain your own trading platforms; in some way, the need for advertising is reduced, because a positive image of the product is formed by agents, and this image is reinforced by the positive experience of using it by the consumer. Hence the good reputation and demand for the product.

Through network marketing, you can sell even an elite product that can only be obtained “through friends”; this will generally create an excellent perception of the product and, ultimately, may even lead to the fact that the price increase will not come from the manufacturer, but from the consumer, who I am willing to pay more for a unique item. Such marketing techniques are much more effective.

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But the most important thing is the high consumer value of the product, even if it is a completely new product on the market or even innovative. But it must be innovative not only in words. Next, the company itself must engage in marketing not only online. That is, there must be information about the product on the market, formed good image of your product, presentations and some kind of advertising campaigns should be held. Then the person will know that the Internet offer from the referral includes the sale of a really good, high-quality and proven product. If you have your own recognizable brand (recognizable with a positive connotation), then it will be much easier for the referrals themselves to sell the product. And hence the profit of the organization itself. As for trainings, maintaining the loyalty of your employees and other work with personnel, then again, everything is described in the TQM concept. Then you can get people no less zealously serving the company’s goals, only not zombied by empty promises, but motivated by real results. And you need to constantly train people and, yes, do it for free. This is the company's own money.

Correct use of MLM will lead to the fact that the manufacturing company will form a chain of relatively independent distributors who have good sales, perform some of the responsibilities independently, and build their own successful business, while at the same time being employees who act very effectively. The sales growth will clearly be many times higher than the level of sales growth of the “black” MLM company. At the same time, the social benefits are obvious - employment of the population, promotion of business to the masses, formation modern entrepreneurs who know how to trade. Yes, for this you will have to invest a lot of money, because this way of organizing a business requires much higher costs, you will have to hire competent managers and fully support your own development strategy, helping your employees achieve a common goal. Then we can say that this is a truly progressive company that was able to correctly apply the MLM concept. This is what can be called a network marketing company, and not a financial pyramid with empty promises, in which everyone works to achieve a common goal, and does not deceive and deceive consumers for the short-term profit of the founders.

Matthias Laudanum
(c) - portal of business plans and guides for starting a small business

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Before I tell you how I was recruited into network marketing, you simply must watch this humorous video about an MLM presentation, you will be rolling on the floor holding your stomach :)

How I was recruited into network marketing

The call from a friend came unexpectedly. After graduation, we communicated differently and this usually happened when we arrived in hometown to parents. The metropolis in which we lived at that moment was very large and the rhythm of life there was such that there was simply no time for visiting.

But despite the unexpectedness of the call, I did not have any suspicions. Sashka asked how things were and suggested meeting. I didn’t voice the purpose of the meeting, and I wasn’t interested in it, my mind independently thought of everything that was needed - let’s get together, drink beer, chat about life, politics, women (everything as usual).

It’s good that I didn’t take beer with me :) A surprise awaited me on the spot.

A crowd of people unfamiliar to me (about 10 people) gathered in the one-room apartment that became the meeting place. Several were dressed civilly - in suits. Since I was a little late, the celebration was already going on without me. Only instead of a cheerful feast there was a serious presentation of washing powders and miraculous cleaning products.

It turned out that they were recruiting volunteers for network marketing. I didn’t know what it was, and I was late for the main part. As a result, I was destined to listen to the presentation individually in the kitchen. In principle, I liked everything; according to theory, I should have become rich in 2 years.

As you might have guessed, we were talking about Amway. Later I found out that 99% of my friends already knew about it and no one was going to join my business. I was the only one so “dark” that at the age of 25 I didn’t know what network marketing was.

My wife was against it, but I was hooked by the idea and I started.

The result of the first experience

In short, my plans to conquer the universe were not destined to come true. I honestly worked for about 100 acquaintances, as recommended by the sponsors. The result is that some of my friends stopped answering the phone, several people signed up to stop calling.

I can’t say much about the product, I have no complaints, I’ve used a lot of them, but I’m not an expert, my wife said it’s normal, the price tag is about the same as for similar cosmetics in the store.

Everyone attended training events, but apart from “hurray” motivation there was nothing meaningful there - the same thing, without specific recipes and techniques for effective work.

Conclusions: Despite the assurances of sponsors, it turned out that Amway had already completely trampled the Russian market and took everything it could - the influx of new people is equal to the outflow of old ones. In chocolate only those who came a maximum of 5 years ago (before the official opening).

Second experience

Despite my failure, I did not blame anyone - this is a business, there are no guarantees and everyone decides for themselves whether to take it on or not.

I didn’t want to take on something like this again, since selling cosmetics and powders is not my thing. But I accidentally came across the ISIF project. Liked:

his niche is education in the field of finance (a topic that was interesting to me)
the people who represented him were not drawn to anything and it was interesting to just communicate with them
the project was new compared to amway
use of modern technologies (Internet)

It so happened that no one pulled me there, I wanted to go there myself. It turned out well - it was really my project. Within a year and a half I received a check of $1,900.

But not everything is so smooth with new projects. Financial education does not have such a wide consumer audience as cosmetics, and the company as a whole was unable to reach the turnover required for profitability - the project was closed.

In network marketing there are no restrictions on age, gender or religion. that is, theoretically anyone can succeed. Moreover, the speed of your development will not be greatly influenced by educational diplomas, but your skills related to sales, people management, marketing, psychology and other areas related to business can have a significant impact.

In this regard, when teaching this profession, special attention should be paid to personal growth and the art of communication. Technical skills go by the wayside. They will not cause harm, but they are unlikely to determine the level of success.

Why come to network marketing?

Most often, people come to network marketing for the money, but usually stay for other reasons. This environment, this opportunity to travel, this free time, this feeling of self-sufficiency and constant personal growth. Gradually, money fades into the background, although it is an indispensable attribute of any business.

Anyone who has been able to make their first income from MLM realizes how much more pleasant it is to receive passive income than from being hired (even with a higher salary). There are no bosses, no responsibilities, no time or place of residence.

Naturally, each new distributor has their own reasons for starting a business, but over time, each has a few common elements. First of all, this is the desire to help others succeed, those who believed and followed you into this industry.

What costs are needed to start in network marketing?

If you look at network marketing as a business, and this is how you should look at it, then you can start creating your own business for mere pennies. no need to open an office and rent warehouses, no need to pay salaries to sellers, couriers and loaders.

All that is required of you is to enter into an agreement with one of the companies and pay the mandatory start-up fee for the right to use the trademark, for servicing your accounts, etc. (in big business this is called franchising). In different companies, the amount can range from a few dollars to several hundred, but in any case, you can start much cheaper than in any traditional type of business.

Expenses can be divided into the following groups:

Purchasing products for personal use
Purchasing products for resale - these funds must be returned in an increased amount, since end customers pay more than the purchase price. On initial stage This is the main income in the business and should cover most of the expenses.
Training costs – this includes training materials for self-study(books, CDs) and costs for attending educational events (seminars, trainings)

When will I earn my first money?

Unfortunately, network marketing is not a job and there is no salary. You will receive your first money when the first volume of goods or services arrives to the client based on your recommendation. For some it will take several minutes, for others several months (there have been cases where it took several years, but this is rather the exception).

To speed up the time you start earning money, start developing your skills. Sales - for personal promotion, presentations, to attract new distributors, training - to effectively build a structure in depth.

As soon as your level of development becomes in demand, the market will immediately respond by increasing your income.

In generating distributor income in this industry main role The human factor plays a role, which cannot be assessed in exact numbers; one can only give general forecasts based on the experience of other people. These forecasts may be very far from the reality of each individual person.

Advanced Technologies

With the advent of the Internet era, new opportunities for business development have appeared. Now, the Internet allows you to significantly speed up the construction of a structure. Although, despite the many advantages in modern technologies, there are also a lot of disadvantages.

The main problem preventing you from promoting network marketing on the Internet. It's about trust. In the traditional model, most of the partners joining the team are friends and acquaintances. On the Internet, by default, there is no trusting relationship, since every offer may hide deception.

In addition, building a structure via the Internet is very difficult to scale, since most have limited resources and cannot accommodate tens and hundreds of thousands of advertisers at the same time. The introduction of the Internet model into online business leads to a rapid increase in competition and a sudden increase in prices for promotion.

If you need advice on this type of business, don’t hesitate to ask.

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Network marketing is a business based on partnerships. Another name for it is MLM or multi-level marketing. The difference between network marketing and traditional business is significant.

Let's take a closer look at what MLM is. Its essence is that the company organizes trade turnover by creating a network of partners who perform the bulk of the work. In this case, people involved in promoting goods are at the same time clients of the company, since they make purchases at wholesale (distribution) costs. They then resell the products at a higher price. The company spends less money on advertising, its customers themselves take care of selling products to customers.

Isn’t a percentage of sales the only plus when working in MLM? This is, first of all, own business company distributors. Network marketing is beneficial to partners because they receive good compensation for their work. Thus, for attracting new people to the company, active distributors are paid an additional remuneration for turnover from their entire team. Such income is called passive income, since, having once invited a person, registered him and trained him, the partner now receives constant deductions from his work. But often the structure of such a leader grows to tens, hundreds, thousands and tens of thousands of people. In this case, the income continues to flow to the founder of the structure. Thus, in a few years, any person can secure a comfortable future for themselves.

Many people ask the question: “What is an MLM business?” First of all, this is a huge job of promoting products and recruiting new distributors. But the reward for the effort cannot be equal to the payment for ordinary work. It is in the field of network marketing that now a large percentage concerns not only European countries or America. There are a huge number of MLM leaders in Russia.

Let's consider network marketing - what is it, what terms are used in this business? A marketing plan is the rules in accordance with which all payments to the company’s distributors occur. It outlines everything and the conditions under which they are received.

A check is a monetary document with payment indicated on it. The partner to whom the payment is made and other necessary data are also indicated here.

Auto concept is a term that is increasingly being used in network companies. Particularly active partners have the opportunity to receive a car upon fulfilling their turnover plan determined by the structure.

What is MLM for the majority of the Russian population? Many people believe that network marketing is a deceptive activity, thanks to which particularly impudent people want to collect more money in their pockets. In fact, MLM is an opportunity to have your own business for people who cannot open their own company. Any network company is absolutely legal. The negative opinion is formed by the fact that distributors promise “mountains of gold” to new partners. Yes, the opportunity to make money in an MLM company is huge, but people forget that they first need to put in a lot of effort. Moreover, for the first few months the newcomer will mainly hear refusals, ridicule and unpleasant statements. But if he crosses this line, gains confidence that he will continue to follow the right path, the opinions of other people will not matter to him. A person will strive for his goal because he knows that he will succeed in the company. And in the future, people who are now mocking will simply envy his victories and perseverance.

So what is MLM? This is an opportunity that anyone can take advantage of. Network marketing leads to financial independence, free disposal own time. Whether to choose a business in an MLM company or stay at your previous job is the right of every person.

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 goods, as well as disseminate information about them, the manufacturer attracts the consumers themselves (agents, distributors), who are offered in return various types rewards. 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 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.

One more important advantage is to protect products from counterfeiting and maintain 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 aspect network business became less pronounced.

Network marketing from a distributor position

By joining an MLM business, the average consumer receives three possible options cooperation:

Attracting new sales agents (network expansion) and receiving bonus compensation;
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, or 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 goods 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 such types of activities can be implemented as active distribution of offers about the opportunity to earn money in the MLM business, selling goods, publishing advertisements in thematic and popular groups, interaction and work on motivation with already attracted distributors.
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 only get an acceptable income 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 to a greater extent They are not engaged in sales, but in forming a network, building 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 numbers 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).

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.

The scope of MLM is growing every day, the number of such companies is multiplying almost geometrically. It seems that everywhere people are just waiting for the opportunity to join such a company. Accordingly, the impression is growing that MLM is nothing more than the “wave of the future” - that is, a form of business that is growing in its development and dynamics. They even say that MLM will replace all other forms of distribution. They also assure that every person can achieve success if they persistently and constantly follow the company's methods and that, in the end, we will ALL trade and buy only in the MLM system.

Analyzes and studies show, however, that the basic business idea, which is what structured firms use, is nothing more than a trading trick. MLM companies are aimed at constantly recruiting new traders; only a small share of the products reaches the end consumer, who is not a member of this structural organization.

In general, all the promises and conversations of the MLM industry, all their visions of the leading role of this form of trading in the future, contain as much economic truth as reports of a UFO landing. In a financial sense, the chance of making money on MLM is approximately equal to the chance of becoming rich when playing roulette.

The money side of MLM is richly marked by gigantic losses for millions of consumers. The system itself, which implies limitless growth in the number of employees in any economic space, is already condemned from birth to instability.

The main area of activity of multi-level marketing - “personal retail trade” is the opposite of the direction of all effective economic models, the development of new technologies (the Internet has not yet been canceled!) and basic consumer habits. Such “retail” activities serve as a cover for the main activity - attracting new investors to the pyramid.

As in all pyramid organizations, the income of traders and managers at the tip of this pyramid directly depends on the continuous influx of “fresh” investors at the base of the pyramid. The structure works until it collapses itself or is stopped by the state (or even legal) apparatus.

The rise of multi-level marketing can be attributed to a clever game of cultural traditions, social and personal needs, as well as some economic vices in a particular country, but in no way the ability to provide any customer need. MLM marketing plans are “grown” without any professional evaluation from any reputable organization or independent expert. The popular deception is that MLM is a future-oriented investment model or a way to build a career, and that the risk of such an enterprise is lower than an ordinary job or other business.

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The true circle of people who are interested in another MLM company is not the consumer or society, but new and hopeful investors. The marketing pressure of such firms is less aimed at introducing the product or the end consumer, but is more focused on future merchants. The true product is not the pills or lotions, but the investment of resources (money and time) into the trading community.

Deceptions small and large permeate the world of network marketing.

First lie: MLM is a business that offers the best opportunity to make big money.

Is it true: Almost everyone who joins an MLM structure loses money. And this is not an assumption, but a historical truth.

At Amway, the largest company, only 0.5 to 1% of all salespeople reach the next highest level of "direct" sales sales; the average income of all Amway representatives is about $40 per month. And this is without taking into account expenses and before paying taxes! The marketing system of companies based on the MLM system itself can produce only a small group of financial winners. If one manager needs a structure of several thousand representatives just to receive at least some significant income, then these representatives themselves already need a subordinate group of a million people! And this is just to at least copy the success of their leader. How many people can you really recruit? What is declared as “company growth” is nothing more than cutting money from new and new members of the structure.

MLM: How beautifully they describe your “rapid career”!

Most of those who lose their money and time drop out of MLM within the first year of activity. Official statistics say that approximately 60-70% of all consultants (as they like to call themselves) leave the firm in the first year. These data are based on a report by the American Securities and Exchange Commission (SEC). It also reports that about 2/3 of the total premiums paid by NuSkin were received by 200 participants of the pyramid at its top, with 63 thousand (wow!) “active” distributors!

Second lie: Network marketing is the most popular and effective way to present products on the market. The consumer loves to buy from an MLM company.

Is it true: If you check the background of network marketing, you will find an unproductive and ineffective distribution system on which the entire structure of many of these companies is based. The personal retailer is a model of the distant past rather than the future. Selling directly to friends and acquaintances means forcing them to change their purchasing habits, limiting customers' product choices, forcing them to pay more and getting involved in stupid business models. All the inconvenience of such network marketing leads to the fact that it is not so much the product that is sold as the opportunity to hire other traders.

Lie three: In the end, all goods or services will be sold through MLM. All trade will soon be on MLM tracks.

Is it true: It's not that new. MLM firms, in their current form, emerged in the late 1960s. And even in the homeland of MLM - the USA, all these companies in total did not reach even one percent of turnover retail!

Lie four: MLM is new style lead a life that contains joy and happiness. This is the way to achieve everything in life!

Is it true: Motivational MLM slogans promise wealth and life in complete luxury. At the same time, most people are in search of meaningful activities in which they can demonstrate their abilities and personal talents. Not everyone and not everywhere is eager to sell some worthless or dubious product to their relatives.

Fifth lie: MLM is the best thing there is to maintain peace of mind.

Is it true: The use of spiritual concepts and the interpretation that when working in the MLM system you get satisfaction from helping your loved ones is already from the realm of the Christian religion. The presence of supposed “moral support” from the structured firm is based only on its income from new members of the pyramid. And support will end as quickly as new customers stop coming. Many MLM firms directly talk about their Christian benefactors, but this can also be explained by the fact that a large number of network firms originated from the state of Utah in the USA. And it is difficult to surpass this state in terms of piety. That's why they are Mormons :-).

Lie six: Achieving success in MLM is easy! Your friends and family are your natural clientele. Those you love will be your customers for life!

Is it true: Turning friends or family into a tool for personal commerce destroys relationships with others. Marketing pressure can lead to a basic loss of loyalty on the part of friends. There is a chance to simply “get” everyone with your products. Is the thirst for profit worth it? And there are few people who will buy your product from you.

The seventh lie: You can sell in your free time. Working for an MLM company provides the greatest flexibility and personal freedom regarding the time invested. In just a few hours a week, it is possible to create significant additional income and develop personal income to such a size that other work becomes redundant.

Is it true: Decades of personal experience of millions of people have already proven that making money in MLM requires an unusually high investment of time, personal active participation, patience and the ability to fool others. In addition to the hard work required and special personal qualities, this marketing model also takes over numerous aspects of personal life at different times. For MLM, any person is a potential buyer interested in the product. Every moment in life is an opportunity for a sales pitch or presentation. There are no forbidden places, people or times to sell. Consequently, there is no free space or free time left as soon as a person enters such a structural organization.

By virtue of the fact that employees allegedly create their own income, the MLM system achieves control or even dominance over a person’s entire life and requires that person to comply with the system. Many people are so drawn into this system that they become socially dependent and cannot maintain the same contacts with their environment.

Eighth lie: MLM is a positive, new business that supports its employees. MLM strengthens the spirit and personal freedom of a person.

Is it true: Multi-level marketing spreads messages of fear, deceives potential employees with promises of high earnings, but adds to this predictions of the collapse of existing forms of sales of goods or services, scares with the prospects of unemployment and even the collapse of entire states. Professions or forms of labor familiar to everyone are put on display for amusement, because this is nothing more than “slavery” without the chance of unlimited earnings. Phrases like: “only losers work for their uncle” are very common in the speeches of trainers at MLM seminars. The multi-level marketing system itself is elevated to the rank of the last hope of all humanity. A solid business model is never based on negative forecasts and intimidation of naive people.

Ninth lie: MLM is the most best way develop your business and become independent.

Is it true: MLM does not give you independence. It is a complete illusion to be a member of an MLM as a “free” trader. Many MLM firms directly prohibit their salespeople from collaborating with other firms. Most employee agreements provide for simple immediate termination, and many sponsors can easily be stripped of their own structure for various reasons. Salespeople ("consultants" as they call themselves) are just part of a complex system of hierarchies over which they have absolutely no control.

Lie tenth: Network marketing is not a pyramid scheme because it sells a product.

Is it true: Selling a certain product does not at all protect the company from the application of “anti-pyramid” laws to it, which exist in many countries of the world. In the United States, federal authorities have successfully closed down some firms that sold much-needed goods. The liquidation of the firms was caused by violations of legislation regarding financial pyramids. Many MLM companies constantly violate current legislation, but are not prosecuted by the authorities, since they operate in the semi-legal sector.

Personal conclusions

Most MLM firms are not worth the attention of potential employees. The very system of pressure on traders leads to the fact that people are forced to sell their clients either absolutely worthless or overly expensive goods. IN lately, many MLM firms have massively “moved” to the Internet. But even there they remain nothing more than a system of pumping money out of their fellow citizens.

I hope that somewhere there is a fair and honest structural company, but I haven’t seen it myself yet... And those organizations that caught my eye were engaged in simple deception. I would be glad to know about an honest company.