Hey there my loyal band of sea changers… I hope you are all well. So today I am going to discuss another, if not at times controversial method of making money online with Multi Level Marketing – a.k.a MLM. Can you make money with multi level marketing? Yes you can. Is it an easy path? No, it is not, and it is certainly not as straight forward as plain affiliate marketing but if you are willing to work at it, you can definitely make enough to earn a decent living for sure.
So if you are interested in this area as a means of funding your sea change then I have your back/ We will check out the following:
- What is MLM?
- What is good about it?
- What is not so good about it?
- How do you pick a good one?
- Can you make money with MLM?
Before we begin, it is important to note that different platforms and programs can differ greatly in terms of payout arrangements, commission levels and product purchase prerequisites. For the purposes of this post, I have decided to keep it generic in terms of what it is that constitutes MLM but as always, I strongly suggest doing some good research before joining any MLM program.
Now, let's see what it is all about…
What is MLM?
Multi-level marketing (MLM) programs are the mainstay of the ‘party plan' world of products such as Tupperware, Mary Kay and Amway etc. and within the essential oils market. The multi level aspects of MLM come from its hierarchical nature in which you make commissions based not only on those that you sell to, but also the sales of those whom you ‘sign' into membership arrangements as well.
In short, the process works as follows:
- You join the program, either via referral from another person (known as your up line) or directly through their website.
- You promote the products of the company via parties, workshops or online.
- As you make sales, you offer incentives to your customers to sign up as a member of the program (there are different names for this but they all mean the same thing).
- That new member is then placed ‘underneath' you in a hierarchical arrangement (known as your down line).
- You, and a number of levels of your up line, then gain extra commissions for everything they sell as well.
- If they manage to refer their customers into memberships, they also become a member of your down line allowing you to make up line commissions as well.
The number of levels of your up and down lines will vary depending on the program you have joined. Commission rates will also change as your down line grows or contracts and many will also offer other incentives such as total company sales percentages and/or access to membership prizes as your own business grows.
As I just discussed, once you start to make sales and your down line grows, some MLM companies will start to offer more incentives and bonuses. Now of course each program is different and some pay a flat percentage for down line referrals regardless of the number of people involved. The ones that do offer extras for larger down lines (and income) generally do so by assigning a ‘score' to each product that you sell. Usually this is a score of around 1 ‘point' per dollar spent – often based on $USD which is adjusted for different currencies around the world.
An example of this – taken from an essential oils program – is as follows:
As you can see from this graphic, the more down line referrals that a person can attract and sign up, the more levels of commission they can receive. As they grow through the levels, they also receive bonus commission shares based on a percentage of the sales of the entire company. In this case, the movement through the rankings is regulated by a Personal Value (PV) – we will discuss this later – and Organisational Value (OV) which is assigned to every product that their down line purchase.
How this works for example is that a $40 bottle of essential oil might be worth 25PV whilst a $60 tube of natural face cream might yield 45PV. This allows the companies to manipulate the items that they want to promote by adjusting the PV score for each item.
Is it a pyramid scheme?
I mentioned earlier that MLM programs can at times be controversial for a number of reasons – many of which I will discuss soon – but one of the main ones is that this method of commission based selling is often referred to as pyramid scheme. This is technically correct as you any simple diagram that you draw based on my outline above really does look like a pyramid.
However, in terms of what a real, and illegal, pyramid scheme is – then MLM is not one of those. The illegal schemes are those where you simply give someone some cash, who then in turn will give you two names who will give you cash and then three names who will give you more cash so on. They are banned in most countries around the world due to the fact that as recruitees dry up, the schemes tend to fail and fall apart before those last in can see any return on their investment.
Now again, technically MLM programs are also pyramided schemes due to their hierarchical nature but are allowed to function in most countries around the world – mainly because there are physical products involved, meaning that the person whom you refer is actually getting something for their purchase and you are making a commission – they are not just gifting you cash. Another stipulation is MLM programs generally must be free to join.
What is good about them?
Regardless of the hierarchical or pyramid structure that we discussed above, at the end of the day, MLM platforms simply pay commissions to those who manage to sell their products to others. There are some real advantages to this type of online business including:
The model works – At the end of the day, if these types of program didn't work, they would not exist. As with affiliate marketing, it is not something that will make you rich overnight, but with some hard work and dedication, there is definite income to be earned.
Low barrier entry costs – For those looking to get into MLM, the entry costs are minimal. Most programs are free to join – in fact I would be wary of any that have a joining fee – however most will expect a purchase before any commissions can be earned (see next section). Apart from that, most other requirements, such as a website or social media for marketing, are generally free, or close to it. In most cases, you will be able to get yourself setup to start promoting whatever product you have chosen for about $100 – $200.
Win/win factor – The thing that does tend to get missed here is that in many cases, you are selling a product that can actually solving problems for your readers. This means that you can market the products for your readers to purchase which helps them and you are make a commission from the sale which helps you. Again, hierarchical structure aside, this is no different to any other sales process on the planet.
Harness the internet – Another of the controversial aspects of MLM stems from the pre-internet party plan business models where the ‘host' would spend more time trying to get attendees to hold their own parties than actually discussing the products being sold. With the invention of the all things internet with its website and social media, there is a whole new range of platforms with which to promote these products without alienating all of your friends and family. This has not only led to greater exposure to potential sales and down line recruits, but a rapidly growing number of MLM platforms to choose from as well.
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What is not so good about them?
Now, of course some of the sticking points with MLM also need to be highlighted and whilst I personally don't believe that they should deter you if this is a line you wish to go down, they are certainly things to be aware of. They include:
Low success rate – I have done a lot of research on this and the general consensus is that less than 1% of those who join MLM programs will make enough to make it their only source of income with 0.1% getting to the highest level available within their relevant program. Most – around 60% – only ever make enough to cover their own costs and 90% drop off within the first year. So on the plus side, with some patience, most of your competition will drop away leaving you with the spoils…
Success takes a while – I mentioned this earlier, success takes time – generally a longer time than many other online business operations such as affiliate marketing or dropshipping – meaning that unless you are patient and work hard, you may start to question whether it is all worth it.
You need to purchase every month – One sticking point for many – and a major contributor to the 90% drop out rates mentioned earlier – is that most MLM arrangements require a minimum spend per month in order to qualify for commissions (commonly around USD $100 worth per month) for other sales that you, or your down line refer. This can make things a little tight if your site is new and not making any money as yet.
You can get hassled – This may be a call back to the party plan days (we all had that friend who sold cleaning products that we avoided at parties) but with some programs, you may start to feel some ‘heat' from your up line of you are not constantly making sales or bringing in fresh underlings. Whilst this is certainly not as common nowadays (some platforms actually forbid it), if your up line is a little ‘over zealous' then you may find yourself on the receiving end of a little sales rev up!
Exclusivity – As with sales related hassling, the instances of this happening is not as prominent as it once was but some programs insist on exclusivity with their product types. This means simply that if you are in one program, you cannot join or promote another.
How do you pick a good one?
Depending on the niche that you are in, there is usually a large number of both large and small MLM programs for you to choose from. The larger, more well-known programs can give you good traction with brand recognition and well-established commission and payment structures. They do however also come with a lot of competition.
The smaller programs on the other hand are often a little simpler in their application and can provide some good opportunities to promote some very specific or niche targeted products. These however can be a little slower in paying commissions or enforce higher payment thresholds.
To find MLM programs within your niche, simply type “MLM: niche” into your search engine (where niche is the specific area that you are working in). Below is an example for MLM programs available within the clothing niche:
Note: search results tend to be geographically based to search results will differ depending on your location.
As you start to look through them, you will need to ensure that they not only match your brand, but their structures and commission payment schemes match the setup of your website and promotional strategies as well. So as you check out the setup of any potential MLM program, keep the following in mind:
- Ensure that the program and the values of the site relate to your niche/problems that you are solving – remember that your brand is everything and if the MLM program seems a little unethical or does not match the values that you portray on your site then your readers will see that as well and you will be the one to cop any backlash.
- Check that they have quality products – As above, your brand can be severely damaged if you promote poor quality products.
- Ensure that they have solid payment and customer service arrangements – as with affiliate marketing, all of the sales, shipping and post purchase processes are managed by the company themselves. And yet again, if this is poor, your brand will suffer.
- Do you like the commission structure? – This is a big one obviously and as we touched on earlier, commission structures, terms and reward levels can change dramatically from program to program. Some pay lower commissions but make up for it via membership deals and rewards, others pay higher commissions but only at certain levels. Do your research here and ensure that the payment system is one that you are comfortable with.
- Do they have a good name? – Some products, even though they may be of high quality, have a name that is not so good when it comes to their sales processes. Check out what people are saying about the program you are thinking about. Do they have good testimonials? What are people saying about the issues we mentioned above?
In most cases, you will need to apply for the program before you are allowed to promote their products – don’t take this step lightly or you will be rejected. MLM programs may want to know:
- Your website name.
- Traffic levels.
- Why you want to join
- How you plan to promote their products.
Most platforms however will provide you with a good amount of promotional materials such as text links, ad banners, posters, guides, e-books and so on.
Can you make money with MLM?
Look, it takes time and a lot of dedication and continuous work, but if it is in a field that you are passionate about then there is absolutely no reason why you cannot make money out of multi-level marketing. In fact, if you are able to manage it well and take advantage of the support mechanisms that most of these programs provide, then as long as you are solving the problems of your readers as part of your online processes, then I cannot see a reason why you should not at least consider MLM as part of your online business processes.
And there it is – my honest opinion on whether you can make money with multi level marketing. I hope it has been helpful and as usual, please do not hesitate to comment below if you have any questions, need some advice or have any experiences to share.
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Until next time
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