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Basic Concepts Of MLM Marketing System

Aug 1, 2008
In the past two decades, we have seen that companies around the world have continuously prioritized product improvement and cost control. The goal is to provide high quality products while keeping production costs low. This business philosophy has ushered in new innovations in product distribution.

One of the growing distribution systems that have helped both the company offering the product and the independent distributor is MLM marketing system. Over 80 percent of direct selling companies now use the network marketing distribution scheme. MLM marketing system has surely made an impact in the way products are brought to end-users.

MLM marketing system is characteristically a direct selling method where distributors are compensated in both selling the company's products and the business opportunity for customers becoming distributors as well. The distributors are independent contractors, so to speak, and not employees of the company; they function as the company's customer base as well as sales and marketing arm for the products the company is offering.

MLM marketing system significantly cuts the distribution costs of a company. There is no more need for media advertising because word-of-mouth marketing is emphasized. Warehousing and handling costs for the products are also kept to a minimum because, more often than not, the independent distributors help in shouldering these costs.

As these fixed costs are minimized, the company is able to reallocate the budget to pay for commissions of multilevel marketing distributors; which are variable in nature. Overall, the company is able to cut down on logistical costs as a whole.

MLM marketing system revolves around three areas. Unlike in a basic direct selling system, these three factors are uniquely present in the many forms of MLM marketing systems. The following factors also make an MLM marketing system hugely profitable for millions of independent MLM marketing distributors.

Firstly, an MLM marketing system is a perfect model for leveraging. Distributors earn commissions not only from their personal sales but also from the sales of their downlines distributors they have recruited. Upon reaching a qualifying level, rank or sales volume, a distributor earns a percentage from the sales of downlines.

Leveraging enables ordinary people to start on equal footing with everyone within the system. However, distributors have the opportunity to surpass the income of the same people they started with, or even those who started ahead of them, by retailing and sponsoring others into their organization. Therefore, distributors can be catapulted to star ranks in the organization by having more people who can sell within their immediate group.

Secondly, MLM marketing systems make geometric growth in income potential possible. Imagine a distributor being able to recruit five downline distributors; then those five downlines are able to recruit another five downlines for each of them. On just the third level, the upline or pioneering distributor will have thirty independent sales and marketing arms from whom a percentage of sales can be earned without additional work done.

To be able to maximize the benefits of a network marketing compensation system, a distributor must commit to stay in the company for at least a year and, aside from effective sales, do personal recruiting and help recruits sponsor new recruits.

Lastly, MLM marketing systems provide a good source of residual income. MLM marketing distributors have the opportunity to earn residual income each time customers buy products and each time their downlines make sales as well. Maximizing repeat sales potential can make distributors wealthy, this time without even working.
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