UNIT – II

Entrepreneurial OpportunitiesIn Contemporary

Business Environment

MULTI LEVEL MARKETING

MLM

MLM / Network Marketing / Referral Marketing / Direct Marketing - Multiple levels of people are marketing a product to consumers

A Distributor, member, affiliate, partner or associate - gets customers and recruits and trains another sales rep to get customers.

The products and company are usually marketed directly to consumers and potential business partners by means of relationship referrals and word of mouth marketing.

Sales rep gets customers and trains another sales rep to get customers.

“Refer a friend and you’ll receive a discount on your next purchase,” this is multi-level marketing.

The Traditional Company

In a non-MLM company, a sales manager and sales reps are hired by the company.

Once a sales manager is overwhelmed, the company can hire another manager or convert a sales rep into a manager.

Traditional companies (non-MLM) use “Multi-Width” Marketing.

The Multi Level Company

An MLM company “starts” by recruiting one person who gets customers and recruits sales reps with the option to become a manager.

The MLM company only pays commissions, not salaries.

This is beneficial to the company because of rapid expansion by the number of trained sales reps.

This is also beneficial to the sales reps because their income isn’t limited to only what they can sell - they can also earn commissions for having trained other sales reps.

http://www.firstclassmlm.com/wp-content/uploads/2007/11/multi-level-marketing.jpg

MLM is Organic

Organically, the MLM industry is a fantastic model. Here’s why:

In its organic state one person shares a valuable product or service with another

A person shares a business idea with anotherThe person who shares the business with another ONLY profits IF

the person they shared the business with succeeds.

These three steps are the organic concepts of MLM and are absolutely brilliant.

Criticism Of MLM

AMWAY was found guilty of price fixing and making exaggerated income claims.

MLM's are also criticized for being unable to fulfill their promises for the majority of participants

The exploitation of personal relationships for financial gain Prices are kept exorbitantly kept high

Advantages

Continuous Expanision of network to increase sales turnover

Low overhead Costs – No marketing infrastructure cost

Entry into new markets easily and quickly

Can introduce and demonstrate innovative products

Marketer can maintain high margin

Disadvantages

• Risk of Over and Under stocking

• Distributors may take over the control

• Company has no control over Sales Team

• Close relationships with customer is difficult

• No advertising, brand building difficult