Multi-Level-Marketing, now Network Marketing or Affiliate Marketing or Viral Marketing, is direct selling, where a group of associate sellers are combined so that percentages of the profits from any sale in the network, passes through the entire network. Individuals within the network receive a percentage of the profit as it flows through the group, based on whatever particular financial plan the Network follows.
What’s so good about Network Marketing?
a) The possibility of residual income. The ability to have income coming in even when you are doing nothing. In fact the opportunity to have your income consistently growing even though you are no longer putting any more time input into that business.
b) The ability to form your own business, with little or no start-up costs, and the entire infrastructure already in place. Infrastructure you do not have to buy or create.
c) Very little paperwork, no matter how large the volume you create (compared to a regular independent business).
d) And most important; the ability to ‘scale’. That is to create huge returns from only consistent incremental work output.
Well, an investment portfolio can give you a residual income, you say. Yes it can. But let’s say you build a network marketing business that makes you $4,000 a month for life. How much capital do you need to guarantee that return? Let’s say you don’t have that capital.
Multi-Level-Marketing or Network Marketing is a brilliant idea, in that it offers the best aspects of direct sales, (high profit, your own business, one on one customer contact and communication),and takes away a lot of the down side of direct sales – (endless cold calls, endless rejections to get to the one yes, huge time input, little return).
The basic benefit of M.L.M, is, to allow the individual to benefit from all aspects of marketing and distribution – thus multi levels of marketing. This is a big factor when we are talking about hard goods sold through brick and mortar outlets.
When you buy a product in a store, outside of clothing (they have extraordinarily high retail profit margins) or fresh food (almost zero margins) the distribution costs are about 60% of what you pay at retail.
So if you take an average mark-up (across all types of items) of say 25% profit at the retail sales end, plus 60% distribution cost to get it to the retail store, then the average manufacturing costs are 10% of what you pay.
Therefore, ideally in an M.L.M. you can access 85% of the profits. In real terms, even in M.L.M. there is some distribution of course, but an M.L.M. company can take 20 to 30% distribution and mark-up and therefore you should be able to access (including the retail profit) somewhere around 55 to 60% for income.
To take an old standby – Amway Corp – which notoriously kept a large slice for itself from its own manufactured products, nevertheless offered around 60% back to distributors (now I.B.O.’s) in profit and residuals.
In any direct sales business the game plan is to eventually build up a network of repeat customers, so that you can have ‘warm’ sales for any new product that comes into your selling channel. Now usually that network of customers (not prospects, actually buyers) has to be in the hundreds for you to maintain any kind of direct selling profitability. A Network Marketing System or M.L.M. you should be able to make a decent residual income with a network of less than 100 people in your network.
The 7 Keys to Look for in a M.L.M. System or Network Marketing Company:
1) History – does it have a track record? Or at least does the type of product or service have a track record? The more history for the product or service or company, the more you can check for legal issues.
tip 1; don’t get involved if the product is ‘coming soon’ or in development
tip 2; watch out for outlandish product claims. Something that cures cancer and will enable you go faster than the speed of light is suspect.
2) Does it offer a long-term income structure? And are you able to have income from every level you create. Remember you are the one creating the network, that is the customer base from which the MLM company benefits, so you should be rewarded. Every person in your network, is a person the company didn’t have to find, so they should pay something for sales in any part of your network, no matter how far down the network they are, and most important no matter your level of activity. If it wasn’t for your initial work, your MLM company would not have that customer
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