What is Multi Level Marketing?
Multi level marketing is a form of marketing of products and services that allows people to build teams under them at multiple levels (more than one or two) and compensation is shared between these levels (based on a plan) when products and goods are sold and more people are brought into the sales team.
How does multilevel marketing work?
Multi level marketing is based on sales: to sell the company’s products or services and expansion of the sales team: to recruit more people as distributors to sell a company’s products and services.
Each new sales person into the team, can bring in turn more people who like the products and want to take up the opportunity to sell. Usually an active DSA creates a downline and is paid on the performance of the same. Usually MLM companies pay their DSAs upto unlimited levels.
Each person is paid on his orher own sales and the sales of their team. Obviously to keep the team motivated he or she has to conduct meetings, hold discussions and make sure that the information is freely available to the downlines in an MLM structure so that everyone is as motivated as their upline. Once the uplines successfully create success for their teams, they are paid handsomely for the same and given various incentives by MLM companies such as MLM company trips, nights of recognition and so on a so forth.
Therefore in an MLM structure, the people get the advantage of leverage. In MLM people are paid not only for the effort of their own but also the effort of their teams and the people they manage as their downlines. MLM is the only solution that offers such an advantage. That is one of the reasons why Multilevel plans and companies are getting more success and recognition all over the world.
MLM companies become successful because of the kind of compensation plan they choose. There are various kinds of plans in the market today and many softwares that support
The main objective of a company should be clear while starting or choosing a MLM or Multilevel compensation plan. The behaviour of the people who will join the companies and the values they carry will be the same as that of the company and its owners or promoters. If the Multilevel plan encourages servicing and rewards the same, the people who are attracted into the plan will be of those kinds. If the MLM plan is driven towards money only then those kind of people will come in. Therefore, while choosing a multilevel plan a owner or promoter needs to give some thought to the same.
The amount paid on a sale or recruitment and the methodology of the same in a MLM company is called the ‘commission’. It is mostly based on some volume of sales, within a downline group. Sometimes all kinds of payments incentives and rewards are termed as ‘commissions’ but that really depends upon the multilevel company. A plan will usually have targets and rules the achievement of which will lead to benefits and rewards and commission types.
A rule or a requirement in a Multilevel marketing company gives the qualification that needs to be achieved to get some form of commission. This may or maynot include the downline results and activity in a MLM company. The requirements may be driven towards sales or take off of the product or they may be towards getting the team to expand – recruitment. For each Multilevel marketing company, based on their philosophy such requirements are set. A requirement will also describe how the distributor levels will have to be maintained for how long to get certain benefits. These are typical requirements of a multilevel compensation plan.
A outside structure of a MLM plan is determined by the rules or requirements laid down. It could be a multilevel plan, a binary plan, a single level plan etc. That structure will determine how one can build downlines, how they organization will look like.
A plans will usually describe ways to compensate the different levels. How effective will the the motivation, payout, distribution, and so on be when the company grows are questions that will be answered by the structure team.
There are many compensation plans in the world and all vary from one to the other in some form depending upon the company that runs it and their ideas. These variations make it interesting to note how different companies attract different kinds of people and yet there is something that attracts everyone in a MLM company plan. In some Multilevel companies it’s the plan, in others it’s the system, in yet others it’s the structure and the ease.
For the success of a company and a distributor it is important that the Multilevel company helps understand its people, its compensation plan which is is MLM.
Principal Partner, Arrowhead Consulting Inc