This business model is based on recruiting people into the company as salespeople and then paying them commissions for their sales and further recruitments. We will discuss this in great detail here. So, keep reading.
Each MLM company basically has some products which it claims to be life-changing. Then its salespeople (partners!) market those products with the same vision of changing lives.
Some big names which use this model of marketing are:
Note: Each Company has its own complex set of policies which it uses for undergoing its operations. Here, just to make the matter simple and help you understand better, we have referred to a mixed set of all.
How to get into an MLM?
You need to get recruited by a salesperson to become part of this business. These days, some companies are also accepting candidates on their online portal.
When you first enter into an MLM company, the salesperson who has recruited you is considered your Sponsor. He/She gets some part of the profit when you sell a product.
You can also sponsor other people to get into the business and they will be lined below you in the payment structure. Then, the people recruited by you can further recruit more people into the business. This keeps going on & on.
The beauty is that you will get some part of the profit made by the sale people below you in the payment structure i.e. your customer or even the customer of your customers.
How you get paid?
MLM salespeople are never paid a fixed salary. Their paychecks are based on the commissions they have got from their direct sales or sales of people in their downline.
Actually, if a product costs $20, then almost half of the amount is distributed to its salespeople through various commissions and bonuses which vary from company to company. The distribution of money depends upon the rank of that salesperson.
If Level 1 (Assist. Supervisor) sells a $100 product then it gets $5 as a commission, the supervisor gets $3, Assistant Manager gets $8 and Manager gets $13.
Here, only the assistant supervisor is selling a product but commissions are distributed to all the members of hierarchy based on the recruitment down line.
If Level 2 salesperson (i.e. supervisor) sells a product, then Assistant Supervisor doesn’t get any commission because its level is below the Supervisor. But, as the Assistant Manager is on a comparatively higher rank, it gets a commission. Same goes for the manager.
Why do you need to keep recruiting new people?
Simply speaking, your rank keeps increasing when you recruit new people into the business. To reward you for the recruitment, you also get commissions when your recruited people sell products.
This commission, as told earlier, varies by your level (i.e. supervisor, manager, etc.) and keeps increasing as you level up.
Is there any case when you won’t get commissions?
There is also a concept of an active member. Only an active member gets bonuses and commissions from the sales of its down line salespeople. To stay active, most companies ask you to spend around $150 on their products each month.
I think this is enough to clear the basics of MLM business.
Till last month, I too had no idea about MLM. But, one day a phone call changed everything. I have written a story on that. You can give a reading here.