What is mlm business. Network marketing or MLM - what is it in simple words and an overview of a project with real passive income. How to distinguish MLM from a financial pyramid

Business in Russia. Guidelines for starting a business in the regions.
We are trusted by 700,000 entrepreneurs of the country

* Calculations use average data for Russia

It is unlikely that anyone now does not know what MLM is, aka network marketing, from English multilevel marketing, can also be translated as multi-level marketing. At its core, network marketing 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, it is not very convenient to distribute services in this way, so this principle usually applies to the sale of any goods. In civilized countries, where network marketing has long been born, and then through the thorns came to an adequate organization of its work, there are special laws that regulate this very specific and unflattering way of distributing products. In the same country, no such legislative acts were found, and when superimposed on the Russian mentality and economic situation, this gave its unexpected effect.

Professional kit for creating business ideas

trending product 2019..

It must be said right away that network marketing, 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 it began to be implemented crookedly, and in Russia in general there was a particularly obvious stratification of the “top” and “referrals”, when the former, quite rubbing their hands, received huge profits, while 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 involved employees are involved in the implementation, 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 it is not a network of interdependent and equal participants that is built, but 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 ways and solely at its own expense of the sale of goods. They are proudly called distributors, less often sales agents, and therefore the latter imagine themselves to be 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 crashed. However, at present, people enter 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 first problem of many modern MLM companies, although from the outside it may seem that the company has its own corporate style and support for employees. In fact, everything is different - it's just marketing ... aimed at their own employees in order to deceive them. Moreover, it got to the point that a very negative image was created for network marketing, and from both sides at once - and the population disliked the meticulous referrals who were trying to impose the purchase of their miracle powder almost by force, and the disappointed referrals themselves, who spent all their savings and a lot of time, after sitting surrounded by purchased vacuum cleaners and understanding the whole essence of deception, they began to quite naturally resent this concept of marketing. It all started back in the merry 90s, when Zepter pots, Herbalife dietary supplements appeared, then the unprepared market saw unreasonably expensive Kirby vacuum cleaners, and now the negative image of network marketing is supported huge amount Chinese companies, which work exclusively in Russia and in some other countries, because in China they give a serious prison sentence for MLM. In connection with all this, a company that has decided to engage in direct sales and network marketing in particular will be forced to face a huge number of problems and distrust from both consumers and potential employees. Although many of these organizations thrive to this day, using all the same dishonest methods of selling their miracle products, because a certain contingent of people are not mammoths, they do not die 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 just among large manufacturing companies, but at the same time producing a product of mass consumption. If we do not take long-suffering vacuum cleaners into account (because the trade in equipment is generally a more complicated process), then most often through network marketing they sell cosmetics, non-drug products that are passed off as medicinal (BAA) and other frying pans. That is, this is the product that you can buy, in general, spontaneously, without planning the purchase initially.

So, the owner of the company releases a product and decides that cooperation with distributor companies, retailers and other familiar market participants is not profitable or simply impractical for him, and it is much easier to use the direct sales method. The 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. The sales agent in the simple case receives a percentage of products sold, often has a fixed salary, albeit a small one, receives all social benefits and is fully employed at the enterprise. He is protected. In a company that practices network marketing, the sales agent quite often does not even get a job, but is simply listed as an employee on the side. 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 in fact engaged in illegal business activities, because it is unlikely that any of them, after starting work in an MLM company, go to register as an individual entrepreneur and, at the same time, are generally ready to also 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 the staff, to whom she has to answer and, in general, pay them money.

This is the essence of network marketing - all referrals, in fact, work only for themselves, providing their managing manager in the process of their work. The fact is that today in the vast majority of companies that work on the principle of network marketing, it is required to pay for a consignment of goods from your own pocket to get started. That is, the manager does not give it for sale for a fee, he literally sells his product to his own employees. In critical cases in network marketing, there is also a “validity period” for this trial batch (usually a month), that is, if an agent has not sold anything during the reporting period, this becomes exclusively his problem, because he paid for the goods with his own money, and the next a month is obliged (yes, it is obliged) to buy a new batch. Sometimes in the first month they offer a “trial” batch, which costs him a little cheaper, but subsequently the amount increases. So it turns out that the goods are bought by the employees themselves. Black MLM companies make money on this. In principle, they are not interested in promoting their product to the masses, they generally do not need to engage in marketing in general and maintain the image of the company and product, because income is generated solely through sales to their referrals. So, in general, the implementation process is also going on in “normal” MLM companies, the only difference is that the normal one is trying to put the product on the market and support its employees, and does not profit solely at their expense.

A logical question is if the products network company no one buys, 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 neglected cases after 3-4 months such people simply leave. This is true, although there is a percentage of those who are confident that “everything will be very good from next month”, but in most cases income is formed at the expense of neophytes. A huge number of students, housewives and other similar elements want to find themselves simple job With flexible schedule(and you don’t have to sit in the office with a nasty boss), for which they would also pay well. Network marketing promises it all, hiding some important details. Therefore, it is often enough for a manager in network marketing to conduct interviews monthly (or even more often) in order to attract newcomers who simply pay once, and then leave, anyway, in the new month there will be another thirsty for easy money.

Ready-made ideas for your business

Normal company (which Russian market practically none) does otherwise. The founder attracts direct sales specialists to his staff, draws them up in accordance with the Labor Code of the Russian Federation, after which he gives them the instructions to find people who will also be engaged in the sale of goods on the same conditions. This is how similar rights are formed for all network members, 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 and no one in network marketing is obligated to buy goods immediately, 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 experienced and competent people who are engaged not only in sales, but also in training new employees stand at the origins.

It may seem that providing employees with both free (and in a normal company it should be free) training, and 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 is generally very well combined with MLM, but due to the fact that TQM (total quality management) is focused on the long term and requires a lot of investments, which, although they will pay off many times, but not very soon, have not received distribution. 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 decisions(not only TQM, there are others in the economy good ideas), because all this will lead to an increase in the income of the organization, and in the end it will turn out to receive even more profit, but only in an honest way. Unscrupulous entrepreneurs need to remember that this will allow you to earn, albeit a little later, more money, and the company will enjoy a good reputation among the population, and hence among potential employees.

Ready-made ideas for your business

There is an important thing to note here. In most cases, network marketing is used by companies that produce, to put it mildly, not very high-quality or simply unclaimed product. Unpopular products can sometimes only be sold this way, because there are several advertising laws that are inconvenient for a dishonest enterprise, but most often it is low-quality products that are sold through network marketing. Which are sold at the same time at a price sometimes several times higher than higher-quality counterparts. Of course, here it is easier to deceive your employee, force him to buy his own something, and then send him by hook or by crook to sell this something to at least someone. In especially neglected cases, referrals of the lower levels reach the point that they simply call each apartment and literally try to sell their goods on the doorstep. This method of selling has a number of disadvantages (any person with even the slightest understanding of marketing knows this), but in the case of network marketing, it shifts all the problems onto the shoulders of the referral. Some of them try to trade goods via the Internet, strictly speaking, the manager doesn’t really care who and how the product will be sold, but given that the “black” MLM company focuses only on the number of its referrals (the more there are, the higher the income), then she hires more than ever, absolutely everyone. And 99% of these people do not know anything at all, not only about marketing, but about the principles of simple trading in general. Moreover, trainings are often held in network marketing " personal growth”, “mastering the skills of selling” and other nonsense, which aims not at training, but at brainwashing. No wonder the Russian Orthodox Church opposes network marketing companies - they realized that such companies form their church with the messiah in the form of a founder. Bread, in general, is taken away. And in many cases it is true, the trainings tell stories about successful referrals (most often fictional), who eventually built their 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 network marketing employees who really got into the idea, worked for several months and still cannot afford to be disappointed, are like a meeting of witches and even more like a meeting of religious fanatics. Here it is impossible not to note the good skills of a psychologist among managers and network marketing employees who have achieved some results (they become those who were able to attract a lot of their referrals), because not everyone can brainwash like that either.

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

Thus, a company that wants to engage in network marketing must produce a really 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 network marketing scheme itself allows you to save in many ways. The first is the absence of the need to maintain their 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 precisely by the positive experience of using it by the consumer. Hence the good reputation of network marketing and the demand for goods.

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

Ready-made ideas for your business

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

The correct use of network marketing will lead to the fact that the manufacturing company will form a chain of its relatively independent distributors who have good sales, perform some of the many duties on their own, build their own successful business, while at the same time employees who act very efficiently. Sales growth will clearly exceed the level of sales growth of the “black” MLM company many times over. At the same time, the social benefits are obvious - the employment of the population, the promotion of business to the masses, the formation of modern entrepreneurs who know how to trade. Yes, you will have to invest a lot of money for this, because this way of organizing a business is much more expensive, 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 concept of network marketing. It will be possible to call it a network marketing company, and not a financial pyramid with empty promises, in which everyone works towards a common goal, and does not deceive and deceive consumers for the sake of short-term profits of the founders.

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

3560 people are studying this business today.

For 30 days, this business was interested in 119399 times.

Profitability calculator for this business

Multilevel network marketing or MLM (multilevel marketing) is a popular type of business that almost everyone has heard of.

However, the knowledge of many is limited to only theoretical concepts. Someone thinks that network business- this is purely a hoax, and someone believes that building a network structure - the only way succeed in life and become financially independent.

Some, not wanting to delve into the study of this topic, perceive network marketing as nothing more than an opportunity to buy a good quality product if necessary. However, with the right approach this species business can become a source of income. Let's see what the essence of network marketing is and how to make money from it.

Network Marketing - General Information

In simple words, the definition of "network marketing" sounds like this - building an extensive distribution network and effective promotion product. Translated from of English language The abbreviation MLM stands for multi-level marketing.

Multilevel network marketing involves a special form of product sales. Sales are handled by distributors who sell the product and expand the network. The total income is determined by:

• own sales;
• the activity of attracted partners, the number of their sales.

It is important! Many do not see the difference between a multi-level business and a financial pyramid, however, there are several fundamental differences between them. First of all, the MLM business is a legitimate activity, which, with the proper construction of the network structure and close cooperation with a large, famous company guaranteed to make a profit.

Historical digression

The network principle of business development first appeared in the mid-30s of the 20th century. It was then that Karl Rehnborg, the owner of a nutritional supplement company, decided to entrust the distribution of products not to sellers, but to ordinary consumers of the product. After the introduction of this form of cooperation, the company's turnover increased to 7 million dollars.

In the middle of the 20th century, two employees of Carl Rehnborg decided to independently build a network business and organized the world-famous American Way Corporation (AMWAY).

Interesting fact! In the US, absolutely everything is sold through the MLM principle. There are about 4 thousand large network companies in the world, their total turnover is more than 300 billion dollars.

According to experts, the traditional form of selling products will disappear in the near future, and network marketing will replace it. However, on the territory of Russia and the post-Soviet republics, the situation is far from predicted. Of course, there are network companies, but they are clearly not yet able to supplant traditional forms of sales.

Principles of multi-level marketing

The principle of operation of the MLM company in some aspects is similar to the activity of the pyramid - income depends on the activity and level of sales of distributors.

A certain percentage is calculated from the income of each distributor in favor of the person who brought this particular distributor to the network. That is why those who are at the top of a kind of pyramid and have an extensive distribution network are more likely to become successful. The main motivation of distributors is financial incentive, which depends on the level of sales.

The main difference between the network business is cosmopolitanism, it has no geographical boundaries, however, doing business is subject to the laws of the country where the representative office of the MLM company is opened.

Principles of activity of network marketing companies in Russia

Such companies are prohibited from:

• announce wages because the client does not conclude an employment contract;
• attract persons under the age of 18;
• sell products without quality certificates, licenses, hazardous to health and the environment.

To become a distributor, you must complete the following steps:

• agree to the cooperation of a representative of the company or visit the office of the company;
• complete and sign the contract;
• receive training, usually several lessons from a consultant;
• purchase catalogs and product samples;
• start selling the product.

Important! Starting an activity in an MLM company, be prepared that you become a freelancer without social guarantees. In addition, working in such a company does not entitle you to a pension. The main reason why people are afraid of cooperation with a network company is the high probability that the representative office will be closed and the person will be left without work.

Types of MLM Marketing

Experts distinguish the following types of MLM marketing:

• stepped - the most popular;
• matrix - only 10% of MLM companies choose this form;
• linear;
• binary - suitable for beginners;
• mixed or flexible.

stepped

A popular type of marketing involves attracting distributors to expand the network in all directions. Payment depends on the number of sales within the branch. The consultant may separate with the group, provided that a certain level is reached.

matrix

The main difference is a clear limit on the number of participants in each matrix. The most common matrices are:

Where the first digit means the number of participants in the first line, and the second - repetitions of the first generation. As soon as one matrix is ​​filled, the next one opens.

Linear

With this form of business, distributors are equal, there are uniform prices for goods. With a linear form, only depth restrictions are provided. The lines created by the distributor are paid, incomes increase gradually.

Binary

This marketing scheme is the most convenient for beginners, it provides two branches on one line. The distributor can invite two people. Income is distributed by agreement - equally, 60% to 40% or 65% to 35%.

Mixed

It involves a combination of several types of MLM marketing.

Interesting fact! Women are more interested and enthusiastic about online sales than men. There are four women per male distributor.

Advantages and disadvantages

Among the advantages, experts highlight the following:

• There is always an opportunity to improve the level of education.

Serious network companies hold training seminars and meetings with mentors for their employees. Unfortunately, training is organized, as a rule, at the expense of employees.

• Free schedule.

You are not bound by a clear work schedule that is set for office workers. A person allocates time for work according to own will. The main thing is to be prepared for the fact that not every day will be financially successful.

• There is no income limit.

With talent, a competent approach and creativity, earnings will increase.

• Financial independence.

Working in a network company is, in fact, own business, it can be expanded. It is important to understand that the better the product will be, the easier and faster you will create own network and achieve financial independence.

• Close-knit team.

It is always very easy to work in network companies, there is no intrigue, newcomers are always helped and supported.

• Fascinating work.

You will communicate with a huge number of people, you will forget about the tedious sitting in the office.

However, online business also has its downsides:

• Unstable earnings.

Network marketing does not guarantee permanent high earnings and, moreover, the payment of a fixed salary. The larger the network, the more stable the income.

• The need for financial investments.

Any network business requires material investments. You will have to buy catalogs, product samples and even corporate clothing.

• Emotional loads.

As a rule, distributors of products cause irritation and negative emotions. You need to learn to treat this philosophically and choose for yourself effective method getting rid of emotional stress.

The pros and cons, as well as the whole truth about this form of marketing, is written in books that are a must-read for those who plan to professionally engage in this type of business:

• Don Fila "10 lessons on a napkin" - business basics for beginners;
• Yarnell Mark "Your First Year in Network Marketing" - how to build a business from scratch;
• John Maxwell "Leadership" - how to invite people from your own network;
• Tom Schreiter "Turbo-MLM" - the whole truth about network principle business;
• John Milton "The World's Greatest Networker" is an autobiographical book, simple examples of network marketing.

Network Marketing how to make money - 7 successful steps

Experts note that this direction in business is not easy, but promising. To achieve financial independence, it is important to adhere to certain recommendations.

Step #1: Company selection

The right choice of a reliable company is the foundation of your future business and success. You can trust a company if it:

• well established in the market;
• offers a quality, useful product;
• has been on the market for many years;
• offers several forms of earnings - active and passive.

Step #2: Education

If you think that you know everything, you will not succeed in the network business. As a rule, such self-confident people are disappointed in this form of business. Remember, practical attempts to realize yourself will be more successful if they are preceded by theoretical training.

The most common form of training:

• in the company on special courses;
• with a direct supervisor.

Step #3: Work in two directions

Activities should be carried out in two directions:

• active sales;
• attracting new network members.

In the first case, you provide yourself with current earnings, and in the second, you guarantee constant payments in the future.

It is necessary to strive to ensure that the income from passive earnings exceeds the profit from active sales.

Step #4: Website creation and use of social networks

The possibilities of Internet resources are endless. Permanent job over your own website and social networks will lead to the fact that potential customers themselves will begin to be interested in the product and earning opportunities.

It is most effective to contact a specialized company that promotes websites and products.

Step #5: Planning

Start every day with planning. Otherwise, soon you will start to rush, get confused, feel chronic fatigue. As a result, important things will be postponed until tomorrow, and this will inevitably lead to a decrease in profits.

Step #6: Development and self-improvement

All companies whose business is built on the network principle regularly hold seminars, trainings and webinars for their employees. Use every opportunity to develop your skills and experience, only in this case your business will flourish and develop. As soon as you stop developing and decide that you know everything, income will stop growing.

Step #7: Be better than others

Important! Be prepared to work hard and hard. Do not expect instant results, the path to success is long and difficult. However, if you show perseverance and leadership qualities, you will certainly achieve your goal.

How to effectively develop your own network

The skeleton and reliable foundation of business are partners. According to statistics, the optimal ratio is:

• clients – 95%;
• partners - 5%.

However, it is necessary to spend up to 95% of the time searching for 5% of distributors. Where to look for business partners? Here are some practical tips.

Before you start building a network, remember one rule - do not invite everyone to the business, but only those who meet certain criteria and are sincerely interested in distributing products.

Familiar

The traditional way of building a network in business. Start by making a list of people you know and then add to it regularly.

During communication with each acquaintance, be sure to ask to recommend 3-4 acquaintances who may be interested in products. Do not be discouraged if most of the acquaintances do not agree to your proposal, you always have the opportunity to return to this conversation after a while.

Media announcements

Statistically, this way has a rather low percentage of efficiency, while the method is quite expensive. Remember that the people who respond to your ad are looking for a specific job and are not interested in growing a business. When compiling ads, honestly indicate all the nuances and features of the work, in this case, people who are really interested in the network business will be interested in the offer.

Street announcements

Quite an effective way to find partners. Efficiency depends on several factors:

• text literacy;
• ability to conduct personal meetings;
• ad locations.

Internet capabilities

Look at the sites where people post their resumes. Select the most interesting options and call them. Tell the truth, don't hide that it's network marketing.

Place ads on the Internet on thematic sites, forums, in social networks. The more information on the network, the more people will respond to your offer.

It is important! A distributor who uses the company's products automatically attracts customers and partners. Just talk about the benefits of the product and show the results.

How to distinguish a pyramid scheme from network marketing

Of course, there are many network companies with a good reputation, but firms with a negative reputation have appeared that masqueraded as an MLM firm. Such companies with a negative history used the concept of a pyramid. At first glance, the two principles - the network and the pyramid - are similar. However, in practice there are significant differences.

• The finances of the MLM company are formed from the products sold by distributors, and in the pyramid - from the contributions of each participant.
• To become a member of the pyramid, you must make an initial contribution or buy completely useless goods for a large amount.
• The network company does not recruit people, but trains them. In the pyramid, the situation is completely opposite.
• The organizers of the pyramid are excellent specialists in psychology, in the process of recruiting they play on the basic human feelings - greed, fear, stupidity.

It is impossible to win in a pyramid, it is built on the principle that all losing participants pay for a comfortable life for several founders of the scam.

Features of network marketing on the Internet

Any business can be successfully developed online. Multilevel company in this sense is no exception. The Internet opens up almost limitless opportunities for promoting goods and building your own network.

Features are as follows.

1. No geographic boundaries. You can sell goods all over the world, for this it is not necessary to be present at the transaction.
2. Sales can be made anytime, anywhere.
3. All processes are automated.
4. Communication only with the target audience and interested parties.
5. Large selection of promotional tools.

Leaders in the network market

Summary

Undoubtedly, the MLM industry is promising direction businesses, since such companies easily survive economic crises without reducing profitability. According to statistics, 20% of billionaires started their careers in such a company, and the average profit per person is 4 thousand dollars a month . The statistics are attractive enough, but to come to success, you will need to work hard and communicate with people.

MLM ( Multi Level Marketing) or network marketing is a method of marketing products from the company that made them directly to the final 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 different kinds rewards. In turn, consumers who have become sales agents also attract new participants, which ensures the constant growth of the network.

Network marketing from the position of the manufacturer

A well-built MLM business is able to quickly capture the market and build a stable network. The basis for the success of promotion and combating competition is the creators of this marketing scheme called the reduction in the final cost of products for the consumer. So, the cost of production may differ from the final price in the store by 2-3 times. This markup is formed as a result of the formation of a complex structure of the traditional distribution channel, which includes dealers, stores and their service staff, Availability service centers and much more. By cutting them off, the network business reduces the market price without losing its own profits.

In addition, network companies do not have the problem of building and controlling a management system, as well as selecting qualified personnel and his motivation. Training in the necessary skills in the field of sales, attracting new employees and encouraging them to achieve high results has been transferred to the agents themselves.

Another important advantage is the protection of products from counterfeiting and maintaining the desired level of product quality. This is ensured by the manufacturer's ban on the sale of network products in brick-and-mortar stores or from mobile street counters. Thus, even if a fake batch is produced, it is unlikely to be sold without attracting attention.

Initially, network marketing was also based on the goal of providing more fast delivery goods to the end consumer, however, given the realities of the modern market, this side of the network business has become less pronounced.

Network Marketing as a Distributor

Entering the MLM business, an ordinary consumer receives three possible options for cooperation:

1. Attracting new sales agents (expanding the network) and receiving bonus remuneration;
2. Buying goods for yourself at a personal discount and without an agent's markup;
3. Selling products with a 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 steps:

• Conclusion of an agreement with the company;
• Acquisition of a starter kit of goods and promotional products;
• Search for buyers and new distributors;
• Conducting presentations and sales at home, in a rented office, in person in public places;
• Receiving commissions or bonuses from the company.

Relationships of the main company with distributors in network marketing are built according to a certain marketing plan, which determines according to what rules and calculation schemes remuneration will be paid. In practice, there are four main types of marketing plan:

• Classic or linear- all invited new members of the network (not buyers, but new distributors) are the main (first) line from which bonuses are accrued. From the agents invited by the first line distributors, the initial 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 which also invites only a couple of distributors. As a result, balanced (ideally) branches are formed, which are called "legs". Such a marketing plan allows you to speed up the promotion process, however, 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 formed by him. After reaching a certain level, the branch founder gets access to elite bonuses and bonuses.
• matrix- bonuses are paid only when a certain number of distributors are attracted to the first line and the specified number of levels is further built.

Also, in practice, combined methods can be used, which is determined by the strategy of a particular company.

Accounting registration system for agents

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 purchases, 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, it became necessary to create specialized automated systems(Ritos, B2B-MLM, OKsoft, Easy Accounting MLM), allowing you to work with a download of up to a million network members. Large companies with solid start-up investment often develop their own programs.

The difference between MLM companies and financial pyramids

Network marketing is based on the construction of a pyramid, in which each superior receives income from system participants located at lower levels. This principle is also used by fraudulent organizations that have received the name financial pyramids. The fundamental difference between them and network marketing is the emphasis of the policy of MLM companies on the sale of products that have real value, and not on attracting investment from new participants.

To distinguish network marketing from a financial pyramid, you need to pay attention to the following signs:

• The company offers a quality product that has value outside the company's activities and is in demand ( household chemicals, tableware, Appliances, clothing, vitamin supplements).
• You are given the opportunity to receive 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 the starter package of products, and not an investment for participation in the project.

What is online network marketing

Adapting to modern ways 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 a means of remote network management. The following channels are used for this:

• Social networks. Here such activities can be implemented as an active mailing of offers about the opportunity to earn money in the MLM business, the sale of goods, the publication advertisements in thematic and popular groups, interaction and work on motivation with already attracted distributors.
• Landings. This type of site allows both selling network marketing products and registering for presentation meetings for future distributors, seminars and sales training.
• Portals for registered distributors (online stores). Provide the ability to remotely form 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 - it is expanding significantly the target audience 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 the admission to the structure of all applicants who have shown interest, regardless of age, status, education and experience. However, when choosing network marketing for making money, few people really understand what it is, and therefore very a large number of frustrated 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 you sign a contract with a network marketing company, when asked about earnings, they will undoubtedly answer that the level of income depends only on you. Such a calculation is quite abstract, because your time and effort are limited resources. Starting a career as a networker is very difficult, and your sponsor (upstream 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% reach the $500 level, and only 0.5% have a chance receive 1000 dollars, after several years of painstaking work.

There is an opinion that you can get an acceptable income only in young MLM companies, since there is more chance to be at the top. But the truth is that the founders of the company earn the most, as well as the very first distributors, who are more involved not in sales, but in networking, building corporate culture, conducting trainings and seminars. The rest of the participants in this business is constantly updated. So, every five years in large MLM structures up to 90% of distributors can change.

This means that if you are not a manufacturer ready to build your business on the network marketing model and among your acquaintances there is no such entrepreneur who is ready to take you on as an assistant, there is no difference in when you start working as a networker for you. If at the same time 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 of the world, the activities of such companies are regulated by law. So, in the US, in the MLM business it is forbidden to set sales plans for agents and name specific numbers of possible earnings. Also, if they wish to exit the 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 does not even have a corresponding definition in the legislation. This huge minus complicates the work of both distributors and manufacturers who want to sell through the 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 indefinitely, IP registration is not allowed.
• Distributors are registered as agents (with payment of taxes by the manufacturer) or as individual entrepreneurs (with self-payment of taxes).

Considering the question of what network marketing is and how it works, both positive and negative sides can be noted. It is not an ideal product promotion mechanism 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 the participants in the system to put in a lot of effort and entrepreneurial savvy to stand out from competing distributors and partners.

The basis of MLM (MLM) business is a special sales organization. It presupposes no outlets, and attraction regular customers products of a certain company using active marketing.

The success of a distributor (distributor of products) to a greater extent depends not on their own level of product sales, but on the number of like-minded people involved in the business. On how wide a network a team member will build. MLM structure - classic look network marketing, which many have heard of, but are afraid to try.

Principal structure of MLM

MLM business - a pyramid? This question is asked by many, having received an offer to become one of the participants in the network structure. At first glance, it really looks like a financial pyramid. The lower links, connecting to the network, ensure the growth of trade and the well-being of those who are in the upper echelons. But the lower links earn from the first purchase of products.

1. Distributors buy goods at a 30% discount. It is beneficial to have high-quality branded products at a price significantly lower than the market price.
2. Selling goods at market prices, they receive a good trading margin (margin).
3. By attracting new people, the distributor generates passive income in the form of referral deductions from the sales of his wards. More people on your team means more money.
4. The company gives gifts to successful independent entrepreneurs who have reached a high level, organizes trips to seminars around the world, and pays passive income in the form of a reward for a stable network built.

The first two positions are low earnings. The third and fourth positions are the levels when the business begins to generate tangible income and becomes the main occupation in life.

Please note that business participants do not invest money and passively wait for income, as happens in a classic financial pyramid. Distributors work and receive remuneration corresponding to the level of sales.

The second difference is that money is not invested in the promise of interest. Real goods are purchased for subsequent sale. When a person understands this, he does not compare network marketing with a pyramid scheme.

Features of MLM business

The secret of the success of network companies is mobility, the ability to deliver goods to each consumer individually. Such an organization of trade provides strength to MLM structures. The financial well-being of the participants depends on the work of the team as a whole. The level of income of the upper links depends on the success of the work of the lower ones, so the former actively help the latter.

The condition for the stability of the network company's business is the benefit of its founders. They do not need to build shops, pay rent, utilities and other expenses for the maintenance of extensive infrastructure. It is beneficial for distributors that they are their own owners and builders of their own business and begin to receive income from the first steps in business. Small at first, then bigger and bigger.

Network Marketing Benefits

A variety of opportunities attracts new people to this field of activity. Business can be done online and offline. At your own discretion. Full freedom entrepreneurial activity is a big advantage of MLM.

The advantages include the opportunity to communicate on the margins of seminars. Dignity seminars is an opportunity to gain knowledge, to adopt experience in doing business, which will be useful in life.

At the first levels, an independent entrepreneur does not pay taxes, the company does it for him. Having reached high levels, a business participant registers with the tax authorities and pays taxes according to a profitable simplified system.

Entrepreneurship in the network marketing system - minimum employment, minimum investment and the opportunity to achieve financial independence.

History reference

The beginning of network marketing falls on 1927 and is associated with the name of K. Rehnborg, the creator of nutritional supplements. He was the first to attract a circle of close friends to distribute products, and this began to bring significant income.

Like-minded Nutrilite Products Lee S. Mitenger and William S. Casselberry created the theory of MLM marketing, which in practice has become an opportunity for many people to become rich.

The leaders of the current Amway company, which has been operating on the market since the 1950s, continued the work of the founding fathers. Today, Avon, Oriflame, Mary Kay, Faberlic work according to this scheme.

Criticism of MLM

From the earliest days of its existence, network marketing has been criticized. The main argument is that the bottom has to work like ants for the top to make a profit. This is true, but after all, the upper echelon at the beginning of their career was also “lower classes”, but they managed to build a subsystem that elevated them to the top.

What is network marketing - a path to success or a mythical way to make money? Historical facts about MLM + pros and cons + TOP-5 companies in the Russian Federation.

What is network marketing?

Most people agree that these are some kind of fraudulent schemes that allow only happy few people to earn money.

Such thoughts are connected with the main problem of MLM - these are extremely high promises to customers.

Today, after reading the article, you will learn what the essence of network marketing operations is.

And, of course, you will get an answer to the question: is it possible to get real income using such a business scheme.

What is network marketing: historical background

Network marketing (MLM) in its current form was not a separate business development model. It appeared as a manifestation of the need to sell goods.

Who was the first to discover such a scheme and become the founder of a network business?

The founder of the first network sales scheme is Karl Rehnborg.

If the thought occurred to you that this person built his policy for decades before starting a business, this is not so.

All complex things began with a banal approach.

Carl Rehnborg grew alfalfa on his property. At that moment, an idea hit his bright head:

“But what if all the beneficial substances from alfalfa can be converted into an edible form for humans, so that its intake can increase the vitamin tone of the body?”

Undoubtedly, Karl had a good purpose.

Later, he opened his own line of healthy food and began to offer it to friends and work colleagues, explaining the usefulness of the new product.

It is interesting that, out of the kindness of his heart (no other reason can explain this), Karl distributed goods just like that, without demanding any money in return.

What do you think was the effect of promoting free useful products?

No. Nobody believed Carl. Everyone was very embarrassed that a person can simply give away a useful, worthwhile product.

Karl Rehnborg came to an unexpected conclusion: if a nutritional supplement is sold at the average market price, and not just distributed to friends, demand will appear.

And hit right on the spot!

Karl began to use this business scheme, thus giving rise to one of the main postulates of MLM - mutual assistance and team support.

Rehnborg's friends started buying his merchandise. It no longer seemed to them that this was a cheap hoax for one simple reason - it ceased to be cheap.

Then Karl began to look for new ways to expand the network of buyers. And again came to the correct conclusion!

They consisted of a percentage of the sale of nutritional supplements. Now you know the scheme of work of a standard network company? That's how it all started.

The result of the work of Carl Rehnborg:

• 1934 - Carl founds California Vitamins, thereby expanding the range of products sold.

In 1934, Rehnborg renamed the company Nutrilite Products.

The principle of operation remains the same.

A whole network of distributors of products, the so-called partners, was formed.

Each partner attracted new employees by offering a percentage of product sales and dividends for quality organizational performance.

Karl Rehnborg is known throughout the world as the "father of the network business."

After a short historical study, it's time to turn to the realities of the modern MLM business.

What is modern network marketing: terms and definitions

Network marketing- this is one of the types of retail sales of products, based on the direct, direct interaction of sellers with consumers.

A feature of network marketing is the ability of each client to become an implementer.

It would be most correct to compare the network business with a multi-level dealership. MLM also consists of several levels.

No wonder such organizations are often called financial pyramids!

Let's take a look at the main components.

The first step of the pyramid: manufacturer - distributor

The first stage of activity under the MLM scheme is that the manufacturing company provides its products to a partner.

Partner is individual, which concludes a cooperation agreement with the supplier.

On the territory of the CIS, this contract is not included in the labor format, i.e. does not provide you with social guarantees, has a special form of taxation.

The terms of the contract have similar clauses in any area of ​​the network business:

• obligatory use of the manufacturer's products by the partner;
• attracting new partners to the organization;
• work according to a clear scheme defined by the organizers;
• unquestioning observance of the moral principles and policies of the company;
• minimum monthly sales.

Subject to the execution of each clause of the contract, according to MLM, you get access to unlimited earnings.

Second Stage: Second Tier Partners

From the second order, the whole essence of the scheme of MLM activity begins.

Each partner who was invited by a higher-level participant (Stage 1) performs all the same functions as his curator.

The only difference is that part of the sales income remains in the pocket of the superior curator.

Each participant, as a result, seeks to form his own structure, as this brings real income in the form of dividends from his own sales and the activities of "subordinates".

P.S. The word "subordinates" is deliberately put in quotation marks: in the structure of network marketing there is no concept of line management.

All relationships between colleagues at various levels are based on mutual assistance - this is simply beneficial for all partners.

Step Three: Entry Level Partners

Lower-level partners differ from the founders only in that they have a lower income. Wherein functional responsibilities, as units of MLM, are unchanged.

Work at the first or second level involves the manifestation of maximum activity not in the sale of products, but in the promotion and formation of one's own structure.

An intermediate conclusion should be drawn:

The scheme of interaction of network sales involves the development of the structures of each employee.

The explanation of this process is very simple - each subsequent implementer receives a percentage of sales + dividends from the entire network organized by him, as a percentage of the profits of "new" participants.

Network marketing - is it that simple?

The concept of network business and MLM structures has negative associations, especially in the CIS, where people have been taught by the bitter experience of financial pyramids.

This section provides the reader with a comprehensive overview of how network marketing works - an unbiased assessment of the income opportunity.

Benefits of network marketing

Lack of a linear system of leadership.

You work for yourself, which is very similar to entrepreneurship.

Close-knit team.

Each partner is interested in supporting "junior colleagues", as it brings him financial benefits.

There will always be a person who will help organize your network activities in the right direction.

Curating is the backbone of network business.

Opportunity for continuous growth.

Another positive aspect of MLM.

It all depends on your abilities, including earnings.

A lot of experience in interacting with people.

This is a useful skill for everyday life and the development of your own entrepreneurial project.

Network business can be considered as a platform for further implementation of one's own business.

Flexible schedule.

Representatives of MLM structures can work from 10 to 30 hours a week, thereby combining it with work or study.

You must understand that network business cannot replace the main source of income.

At least in the early stages of activity.

Negative aspects of network marketing

Possible destabilization of the network structure at any time.

This process may be triggered by the activities of individual partners, which will not meet the company's standards.

You must consider the possibility of the collapse of the entire structure, as many years of experience of MLM participants proves such a possibility.

Undefined payment standards.

An example is the American company Starcom, whose representatives promised high payouts to each participant.

As a result, partners took out loans, pledged property, and the company paid less than 25% of the announced amount.

It is not difficult to guess what material damage customers received.

Opportunity to get into the financial pyramid.

Imagine a situation in which you invested in an MLM structure by purchasing an initial package of products.

Several months pass, the structure of clients expands, they also make deposits, buy products.

Another month passes, you have not yet been able to cover even your own expenses, since the goods are not in demand.

The company is closing...

In this situation, approximately 50% of the participants remain without profit.

They were unable to sell the product, but made a significant investment.

If you have never dealt with entrepreneurship, it will be very difficult to “resist” in the MLM mode of operation.

The specificity of the activity lies in the constant moral tension, since you are responsible for your sales and the entire organized structure.

After analyzing the pros and cons of network marketing, you can assess the degree of risk of such a business activity as quite high.

A feature of working on a network scheme is the constant responsibility for one's work + training and control of lower-level partners.

You already know what network marketing is and you can independently assess the prospects for development in this direction.

If you are confident in your organizational talent, as well as the abilities of a manager and financier, it's time to move on to choosing an employer.

Network Marketing: Choosing an Employer

Your network income and confidence in stability depend on the right choice of employer.

To begin with, it is necessary to consider possible options for the Russian business space.

Top 5 Russian MLM market

Network company name	MLM market share (%)	Description of activity
	~30	Sale of cosmetics, pricing policy - acceptable for the middle class. Get ready to meet a huge female team and find your place in it. Network activities in AVON are more suitable for girls.
	~30	Marketing area - cosmetics, souvenirs, healthy eating. One of the leaders of the Swedish MLM market. The advantages include increased loyalty to their employees. Working in this network company will allow you to have a small but stable income.
	8	Stability is the most appropriate word to describe the activities of AMVAY. Marketing sphere - from household utensils to dietary supplements. Unlike the companies mentioned above, it provides equal chances for development, regardless of the gender of the employee. This fact is derived from the wide range of products on offer.
	5	A company that only accepts women. Specialization - cosmetics, products for the care of appearance. One of the most experienced network organizations, but still not widely spread on the Russian market.
	4.5	Leading manufacturer of natural cosmetics. It is one of the most progressive companies on the Russian market, it has a strong base for network marketing.

The main criterion for choosing an MLM company is experience in the market. This is explained very simply: you will get the expected result, verified by others.

It is dangerous to work for the "newbies" of the MLM market, because you cannot be 100% sure that all obligations are true.

You can learn about the many benefits of network marketing from the video:

What is network marketing? After reading the article, you are already able to independently determine the meaning of this term.

Network marketing evokes a subjective attitude in every reader.

With 100% certainty, only one thing can be said - making money working in the MLM system is possible and cannot be argued with.

A completely different question - will it be possible for you to do this?

Useful article? Don't miss out on new ones!
Enter your e-mail and receive new articles by mail