A Look at How Multi Level Marketing Works

Multi Level Marketing or Network marketing keeps spreading in all countries like a wave. It is quite likely that you will be approached by a friend or an acquaintance or your colleague who will talk to you about this fantastic opportunity to earn extra income without any investments.

Every individual who gets to hear the explanation provided about Network marketing and income generation is going to be perplexed and wonders if it is all true. The major question that people will wonder about the realistic chances of someone making the kind of money that is shown in the explanatory literature. Let us try and understand the concept of how MLM works very briefly from a macro point of view.

Signing Up

First and foremost you will be approached by an existing distributor who is trying to recruit you. On Signing up you will be entering into a contract with the principle company for whom you will be selling their products.

The distributor who introduces you will now be called your sponsor. You will undergo extensive training by the sponsor or the Company on the product lines as well as on selling methods and other processes associated with selling as well as recruiting and developing your distributor network. You will need to invest a small amount (appx around $100) to buy a starter kit for your use in selling.

Retail Selling

In MLM business, you will essentially have two main agendas that you will focus on.

First would be to buy the products for you and your family’s consumption. At this stage you will notice that if you buy for example goods worth $100 per month, you will be entitled to a rebate of 15% from the Maximum Retail Price. Therefore you stand to save $15.00.

Besides buying products for yourself, you might buy for your extended family and friends too and build up your sales volumes. As you increase the sales volume, your discounts keep increasing too as per the slabs and you can end up claiming up to 45% discounts on case to case basis.

Recruiting & Building Distributor Network

The next activity that you will focus on will be to recruit other distributors under you. As you start talking to known and unknown people and get them to sign up as distributors, you will become their sponsor.

As you start developing your network, you stand to earn income from the sales generated by your distributors down the line in the form of incentives, discounts, bonuses and royalties etc.

Let us say you have developed five distributors who place $500 worth of orders with you. You will be buying the products from your sponsor at a discount of 30% and each of your distributors will buy from you at 20%. Thus you will stand to retain 10% on account of each distributor.

As your network grows and the business volumes of your distributors and their networks under them grows, you start gaining by higher slab discounts. However there may come a time when your first level distributors and their network grows to a volume where they start claiming the maximum discount that you have been buying from your sponsor or directly from the company (When you grow bigger in size, you detach from your sponsor and deal directly with the Company), it is time for that group to detach from you and your next level distributor starts buying directly from the Company.

At this stage you will start earning royalty or bonus at a certain percentage as determined by the Company on the business volumes that each of your distributor groups that have delinked from you.

Though it looks very easy on paper, you will need to remember that to achieve bigger sales volumes and develop distributor networks you will need to invest that much of time and be dedicated to this job.

At this stage, it is quite likely that you will need to choose your priorities and decide if you wish to pursue MLM on dedicated and full time basis. Those who have gone ahead and invested their time in MLM on full time basis have become millionaires.

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