When talking from Multi-level marketing (MLM) is most of the time referred to as network marketing. The MLM is a type of business model that combines direct marketing with franchising.
The term business model describes a vast range of informal and formal business models that are used by companies to represent various aspects of business. That can be the following:
-- Operational processes
-- Organizational structures
-- Financial forecasts.
-- Organizational structures
-- Financial forecasts.
The basic function of MLM business is enrolling nonsalaried salespeople to sell products. But they also earn additional sales commissions from the sales of people enrolled into their downline.
This business type is an organization of people that includes direct recruits, recruits' recruits and so on.
This arrangement is very similar to franchises where you pay royalties from the sales of individual franchise operations to the franchiser as well as to an area or region manager.
Depending on the structure of the business there can be multiple levels of people receiving royalties from one person's sales.
Some companies require from their new MLM members to pay for their own training and marketing materials, or to buy a significant amount of inventory or products to start their career.
The compensation plans vary from one MLM company to the other, but there are basic plans in place. The Unilevel or Stairstep Breakaway plans are the oldest and most popular in the MLM business.
These plans features two types of distributors either managers or non-managers. The pay method of these plans includes Baseshop overrides where there are overrides of managers from their subordinate non-managers. This method is the same as any other type of sales organization. Generational overrides are overrides of managers from the baseshop of managers who were previously their subordinate.
Most plans compensate at least three generations of such managers. Executive bonuses are commissions for managers who exceed a posted sales quota. For example, 2% of the total company sales revenue may go to a bonus pool that is shared monthly to managers who exceed $10,000 in that month.
Commissions are based on the aspect of cycles, where a distributor is paid a fixed amount whenever both legs achieve a certain number of sales units each. Commissions are paid incrementally when the sales volume in each leg matches.
But in recent years, the MLM business has developed an image problem due to its resemblance to the illegal pyramid or other similar schemes.
MLM businesses operate in the United States in all 50 states and in more than 100 other countries around the world. Many pyramid schemes try to present themselves as legitimate MLM businesses. In the legitimate MLM companies, commissions are earned only on sales of the company's products and/or services.
No money may be earned from recruiting alone through sign-up fees, though money earned from the sales of members recruited is one attraction of MLM arrangements.Before joining an MLM Business one has to check all the aspects of how you get paid your commissions. In case you get paid only for recruiting would mean that you have to pay a sign-up fee or a monthly membership fee. You also can post questions in forums to see what experience other people had and take your decision accordingly.
A commonly adopted test of legality is that MLMs follow the so-called 70% rule which prevents members "inventory loading" in order to qualify for additional bonuses. The 70% rule requires participants to sell 70% of previously purchased inventory before procuring new orders.
There are however variations in interpretations of this rule. Some attorneys insist that 70% of purchased inventory should be sold to people who are not participants in the business, while many MLM companies allow for self-consumption to be a significant part of the sales of a participant.
The Federal Trade Commission offers advice for potential MLM members to help them identify those activities that could be scams.
Talk to you soon
Anton Winkler
No comments:
Post a Comment