Multi-Level Marketing is a billion-dollar global industry. It is a marketing process using a direct marketing strategy by an MLM company to sell its products or services to the end-users with the help of a network that is not made of their direct workforce but are independent representatives. MLM company workforce does not belong to the payroll of the Company and is compensated in the form of commissions for their sales effort.
The term Multi-Level Marketing is often interchanged with Network Marketing, Referral Marketing, and Pyramid Selling.
The last one, Pyramid Selling (often, “pyramid scheme”), was originally a straightforward reference to the participants’ network structure resembling a pyramid. The structure, however, lends itself to easy scamming, and sure enough, scams have erupted, giving the MLM model its undeserved stigma.
Referral Marketing is about incentivizing customers to bring in more customers through referrals. It may be done by conventional marketing organizations as well as by MLM businesses.
While some opine that Network Marketing is a part of MLM, and some others think the opposite, the broad consensus is that the two items are indeed interchangeable.
A Multi-Level Marketing company provides an income to their ‘agents’ by way of commissions earned for distributing its products to consumers. Becoming an MLM agent offers a relatively easy opportunity to budding entrepreneurs to get into the business. The MLM agent is sometimes trained to sell the products and targets other interested people who wish to be MLM participants as his consumers. This allows him to not only make commissions on his sale but
also an added bonus on the sales that these new MLM participants bring into the system. The new participants then further go on to repeat the same activity. For all future transactions, he will not only make money off his own sales but also a small percentage of the commissions on the sale conducted by the MLM participants that he directly inducts into the system, and through them, others as well. Genuine MLM Programs do not offer incentives to sign more and more participants but focus on sales of their product lines.
It is important to understand and not get confused with the word Pyramid, often used in MLM businesses. Since it involves recruiting like-minded people as participants or downline of the MLM program to widen the base and reach out to more and more users, the whole structure is represented as a Pyramid Structure. To be sure, there is nothing illegal – or even immoral – about a Pyramid Structure, but the term has suffered in public imagination due to past scams.
MLM companies can have even hundreds of thousands of members worldwide selling their products. Some examples of Multi-Level Marketing companies are Herbalife Nutrition, Amway, Avon Products and Mary Kay. Herbalife is said to have more than 500,000 sales associates worldwide.
What is a Multi-Level Marketing Software?
Now that we know the potential scale of MLM businesses and the size that their operations may achieve, one can see how tedious a task it would be to micro-manage the various business functions, starting from recruitment of independent representatives through to the disbursement of commissions.
A traditional Multi-Level Marketing Software should be helpful to carry out business functions like onboarding the workforce, training, marketing, customer management, inventory, distribution, logistics, sales performance management and sales commission management.
In a business setting where everything is getting digitally transformed, MLM companies are also challenged to migrate to a digital technology platform and adapt to the social media environment.
Network marketing is the big wave of the future. It’s taking the place of franchising, which now requires too much capital for the average person
MLM Companies are now challenged to migrate from person-to-person selling to digital channels. Customers have experienced digital channels and are happy with the experiences that big majors like Amazon and eBay provide, and hence MLM companies have to scale up their technology levels to bring in a collaborative software experience for their internal operations, network sales representatives and end-customers on the same platform by lending an e-commerce flavor to their platform.
MLM companies also want to use digital platforms to make use of their hundreds of representatives as social influencers to create eyeballs for their products.