Multi-level marketing is a contentious subject for home-based businesses. Even though it’s been a thing since the 1960s, it?s still regarded by many as a scam or rip-off. And, to a certain extent, much of the industry involves hype at an almost cult-like level.
But is it a bad thing?
MLM vs. Pyramid or Ponzi Scheme
MLM is a business model that centres around a product. That’s the most important factor that separates it from illegal business schemes like pyramid or Ponzi schemes. You’ll often hear these three models mashed together, but that’s a mischaracterization.
A pyramid scheme is a form of buy-in or investment scam, wherein each member is asked to pay a certain amount to get involved. They’re then asked to recruit others in order to earn a commission. They’ll earn a commission on those people’s recruits, and so on all the way down. It’s called a pyramid because, as you can probably visualize, one person at the top recruits two people, who recruit four people, who recruit eight people, and so on. The lowest levels predictably have an unlimited number of people.
The problem is, the people at the very bottom make nothing, while the people at the very top stand to make the biggest profits. And there’s no product involved, so there’s not even anything to show for the investment, and eventually people quit, causing the whole structure to collapse. The vast majority of people will lose everything they’ve invested.
A Ponzi scheme is different. In a Ponzi, there’s not usually a set recruitment pattern. Instead, people are asked to invest, and aren’t required to enroll others. Their investment is purported to lead to huge profits. However, those profits aren’t derived from sales or investments of any kind. They’re only derived from the fees paid by new members. No new members, no new payments. And again, only the first people in make any serious money.
There’s an argument to be made that MLMs resemble these systems. After all, you join a company, and you?re asked right away to sell the “business opportunity,” usually to two or more people. Assuming the person who recruited you did the same thing, the structure very much resembles a pyramid.
But if you think about it, every company is structured that way: executives at the top, followed by senior management, then more middle managers, then store managers, then employees. Pretty well every company has some sort of pyramid plan to it. That’s not the defining feature of a pyramid scheme. The defining feature is the buy-in without a product. MLMs are specifically built around a product — or product line — and the best ones don’t even necessarily require an entry fee or recruiting. You can just sell the products and make a commission. That’s a business.
What to Look For in an MLM Opportunity
There are so many MLMs out there right now, it can be hard to narrow down a company that meets your needs. By far, the number one suggestion I can make is that you do your homework. Due diligence is an important step in any business undertaking, and MLMs should be no different.
First, make sure it’s an established company with a good track record of consistent payments. You’ll find dozens of these companies starting up every year, and they work just like any other bubble. Sometimes they grow too big too soon, and POP! If you’re just starting in this industry, you want the security of a company with some foundation to it.
Try to take “scam” and “ripoff” reports with a grain of salt, especially if a company has been around for more than five years. Those are often reports by people who didn’t follow the system (or create an effective system), put in too much money, and didn’t succeed. MLM isn’t for everyone, and even today there is a 97% rate of quitting, so there’s bound to be some negativity out there.
Next, make sure your chosen company suits your audience. There’s no point in joining a company that doesn’t match or support your existing branding. For example, a healthy living blog might want to match with a company that makes a high-quality nutritional supplement. Matching with a life insurance company might not make as much sense.
Next, make sure you know the company’s rules, and how it works. Don’t let your rep get off track with inflated talk about how big the industry is or how much it’s possible to make. Find out exactly how you earn money, and how much. Here are some other questions you might want to consider:
- What’s the cost to start?
- How much (percentage) do you make on each sale?
- How much (percentage or dollar value) do you make on each of your recruits? sales?
- Can you make online sales through referrals only, or do you have to process orders yourself?
- Do you have to recruit in order to “qualify?”
- Is it necessary to hold a “party” to generate revenue?
- Do you have to make a certain sales quota each month in order to maintain your payment level?
- Are you allowed to be involved with more than one company at a time?
- Are there recurring fees?
- Is an autoship required? (Autoship refers to a recurring monthly order that’s automatically sent to you. This is typically the biggest cost for new reps, and also the most common revenue system for companies themselves — sort of the way McDonald’s corporation doesn’t sell hamburgers; it sells franchise licenses.)
Knowing these things will save you a lot of time and energy later on, because you’ll know what to expect. Having clear expectations set at the beginning will save frustration as well.
Next, that point about being involved in other MLMs is actually more important than you would think. In the past, it was fair play to think you could join another company as long as it wasn’t selling the same kind of products. Right now, the trend in the industry is to introduce side products: jewelry companies are introducing cosmetics; cosmetics companies are introducing supplements; supplement companies are introducing cleaning products; and so on.
Those crossovers mean it’s getting more likely multiple companies will create multiple conflicts, and some companies have rules that flat out prohibit you from engaging as a rep with any other network marketing company regardless of the product lines. That makes it more and more difficult to create multiple streams of income, which used to be the key to survivability in the network marketing field.
While I still very strongly recommend you limit your MLM involvement to companies that complement your online branding, I do think it’s worth at least looking at a few different product lines, and then determining whether or not you can, at some point, join more than one as you build your audience and your teams.
First decide whether you’re fine with just one company or would eventually like to work with more. Then start with just one, so you don’t spread your messaging thin and lose focus. Only get into another company when you can leverage your earnings, and followers, to do so.
Finally, and most importantly, know and understand the product. Company literature will provide you with all the information you should need on what’s available and what it does. However, MLMs are notorious for overhyping, and sometimes overpricing, their products. There has to be a very good reason for people to buy it, and you will be associated with that reasoning.
Understand how the product works, and why it’s an advantage over products you can buy cheaper at the store. Know what the actual science is, and make sure you’re not doing a snake oil routine. There are no magic bullets, so look past the excitement and enthusiasm and focus on real impact.
How to Approach Multi-Level Marketing as a Blogger
The associations I discussed earlier with pyramid and Ponzi schemes are exactly why the MLM industry has been working feverishly to change some of its terminology. Many companies are now using different terms to describe their business structure:
- Network Marketing
- Social Marketing
- Direct Sales
These are all valid descriptions, and something you should keep in mind when looking at MLM opportunities. Why? Because they give a clue as to how you should approach your marketing.
Network. Social. Direct.
Typically, successful sales are done person-to-person; which is why parties are such an industry standard. You get a bunch of people in the room, demonstrate the awesomeness of the products, and go for the sale.
Network. Social. Direct.
However, bloggers have the advantage of having an audience, and with a successful campaign of building an audience comes a unique opportunity to become the kind of influencer who typically does well with network marketing. After all, you know your audience trusts you. You know your audience is into the same kind of stuff you write about. If your MLM has a product line that aligns with those values, you’re probably in a good position.
THIS is why it’s important to make sure the company you choose has an online storefront. You want to treat your sales in this category as affiliate sales. When you recommend a product, you link it to your store, make the sale, and get a commission. That’s where your kickstart sales are going to come from. Make sure, however, that you are 100% transparent about the fact that you make a commission from those products. You want to stay FTC-compliant, and company-compliant (do the same with social media promotions, if you decide to use those).
I wouldn’t ever suggest you start off by hyping up the opportunity. It’s true you build your business by building your downline, but studies show that the most effective sales force is one that’s made up of the happiest customers. You want your readers in your sales funnel first. You can work on recruiting them into the business later.
Many companies also host in-home “parties.” Some have even adapted this strategy to social media by allowing online parties to occur. You get the same advantages and perks without having the restrictions of geography and time. We’ve run parties ourselves that have lasted 24 hours, allowing people in different time zones to participate. This is exactly the kind of thing you can promote to your email subscribers in order to maximize sales.
How To Create a Downline
Everybody has this question, and I could easily create a course or two on how to actually build a downline for your business. However, there are a few simple principles you can probably get working on once you’ve started making sales.
First, don’t push your opportunity on social media or your blog. I know that sounds weird, but a lot of people will block your posts and stop reading if they think you?re only there to sign them up. Informative, useful content is why they follow you. Keep that as your most important guidepost.
Second, host a webinar. Make it clear that you’re going to be talking about how you make sales of products, and how you might be able to help them do the same. A good idea is to focus in on those people on your list you know have made purchases. With their contact info, invite them to your webinar. Use a separate email capture for the webinar itself, so you know who’s really in.
Following your webinar, you’ll have a good sense of who your key prospects are. With those key prospects, you’re going to provide very specific guidance: answer all of the questions you asked when researching your company. Make the product benefits as clear and honest as you possibly can, without overhyping things. Make it clear that you’re going to help them make sales (and then actually do help them make sales!). You’re now their team leader. Take on that role!
You can be a leader and a mentor to your team by providing training and motivation to those who join your business, either through a Facebook group, email newsletter, or even videos on password-protected blog posts. However you do it, always remember this:
- In MLM, you only make money if you sell products.
- In MLM, you only make SERIOUS money if your downline sells products.
Keep your team successful, and they’ll keep you successful.
Finally, don’t lose sight of this reality: when your team is successful, and they see you as a leader and mentor who helped deliver that success, they won’t just stick with you. They’ll tell their friends about you. If their friends sign up under them, great! But even if they don’t, your blog traffic will increase, your social media influence will increase, and even sales of your own products, courses, trainings, etc. will increase.
Multi-level, network, social, or direct marketing can open up a lot of doors for the home-based blogger. It’s a lucrative commissioned sales system, a fantastic side business, and a great opportunity for increasing authority and influence online. But do your homework, know what to look for in a company, and know your company’s rules. These are the tools that will serve you best as you make that leap into building additional income streams and becoming a true entrepreneur.