Facebook Page Best Practices
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MLM versus Traditional Marketing
“Leveraging the efforts of many”
Advocates of multi-level marketing describe MLM as the more efficient and effective means of marketing and generating leads and sales. But the traditional marketing companies feel reluctant to adopt new network marketing strategies in order to run their business. Also many people don’t even understand exactly the differences between both the strategies. This is the reason why you see so many identifying the MLM model and businesses as scams.
Lets’ explore the major differences:
- The most significant difference between MLM and the traditional marketing is the role of the marketer. In multi level marketing, initially an individual is hired as a sales representative who is required to market the company and its products and/or services and generate sales, which is fairly similar to any traditional marketing business. However, on the other hand, under multi level marketing, he/she is also required to identify and recruit additional sales reps as his down line. The new sales rep in turn can appoint another person as company’s sales rep or marketer.
- Under MLM, a marketer has the authority to get customers and recruits and trains another sales person to get customers. However in a traditional marketing company, a sales manager and/or sales reps are hired by the company itself.
- Under MLM, an unlimited number of sales reps can be hired no matter whether they generate enough sales or not. Under a non-MLM company, sales reps are hired based on the financial resources of the company. Also a new sales manager is only hired when the existing manager is overwhelmed.
- In a MLM company the structure of the distributing network expands vertically, however in a tradition marketing company there is generally horizontal expansion.
- The MLM marketers are usually paid commissions, i.e. their compensation is usually based on number of sales made by them or by the people in their down line. This is the reason why MLM enjoys rapid expansion as the marketers can recruit as many sales reps as they like and the company doesn’t have to worry about fixed salaries.
- Also MLM companies usually do not require high start-up costs as opposed to the traditional ones that require huge investments to set up a whole marketing and distribution channel.
- One of the other major characteristics of multi level marketing is that the parent companies are making plenty of money. Sales force under MLM is so vast that even if no single promoter is selling at high levels but the group as a whole is selling at a very high level, the company would still enjoy the profits. However under traditional set up if a manager is not performing well the sales of the company are adversely affected.
- Under MLM the high performers earn high and reach to the top and the rest (the low performers) cannot survive and leave the market themselves. The MLM Company, like any other traditional company, does not have to worry about going through the tedious procedures of appraisals, hiring and firing etc.
Hence the above differences clearly manifests the advantages associated with the multilevel marketing over the traditional marketing methods as MLM is not only the most flexible way of marketing but also due to its network feature it has the tendency of expanding rapidly in the market and if directed effectively it can earn huge profits to the company.
Not only that people who can join the marketing team under MLM can work any time they like and reap the benefits on not only the sales they make but also on the sales made by the reps they recruit. Hence MLM has the characteristics of enjoying leveraged income and greater market penetration.
What are your thoughts and comments? Any major differences I forgot to mention? I would love to hear your feedback.
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Laura Paulson
Laura is a marketer building assets that spin off passive, residual income.
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45 Responses
Hi Laura,
Thanks for this great post. I believe that the network marketing business model is awesome. I have some products that I use and love and recommend to anyone; however the marketing program is an affiliate program. When I referred someone and trained them and they got excited and told a lot of people, though, in this type of business model, I only made income from the personal purchases of the person I sponsored only. So,you see, the comp plan does not reward Leadership. Needless to say, I refer people in need, but I do not focus on that company for income.
I wish more people would understand the freedom that can be theirs with the right company, products, and compensation plan!
All the best, Linda
Well…not so fast…MLM’s do have several problems. One problem the parent company faces (with MLM) is they need to expend huge sums of money on staff who are experienced in running an MLM tree. Somebody has to understand and keep track of all those complex compensation payouts. I read several compensation plans and I still don’t understand them. How do you expect to manage that?
The second problem is while you may get an “unlimited” potential sales force, you also could suffer from an unlimited bad press if your product isn’t represented well or misrepresneted by an over-exhuberant sales force. This occured in the past with various products (NuSkin, HerbaLife, etc).
Third, is the differences in experience customers feel when dealing with different sales people in purchasing the same product.
And finally, increase Customer confusion and aweful customer purchase experiences. For example, who or where would the Customer turn to when a problem occurs? Few people want to deal with the sales guy, and instead opt to call the company directly. But who to call? The company doesn’t have a physical place of business people can drive to. The 800-number thing can get old.
Also, confusion during purchasing often occurs and which could anger or simply cause a Customer to “give up”. How so? Several calls to one MLM company brought me three calls from different sales guys who were competing with each other in the same area for the same product. They tried to explain to me “the rules”, of which I could care less. It was so complex, and so ridiculous that I simply went out to Nordstroms to buy a competing product. No fuss, No muss, no strange MLM sales guy calling me at wierd hours explaining me MLM nonsense.
So there ya have it…..
@Peter, You definitely bring up some good points Peter and I do agree that there are negatives – that’s with anything. The customer service aspect has a lot to do with the company. While I believe it’s to a distributors best interest to provide their own customer service “after the sale”, you also want to make sure that’s part of the support provided by the company (good support for your customers so you can focus your energy on building your business.) And like any company, some excel in this area while others are lacking so you need to do your due diligence.
The downside too is that anyone can become a distributor for a MLM. While that IS also a good thing (it levels the playing field for anyone to get started in business for themselves), it’s also a major issue for the industry because you have individuals out there who don’t take the time to educate themselves on how to market and conduct business professionally – which in turn hurts us who do because it gives the industry a bad name. But there again, with any type of sales organization (MLM or traditional) – there are good and there are bad representatives and fortunately there IS training out there.
Hopefully what you described here helps educate as to what can happen if you’re not operating with integrity and professionalism conducting business with the big picture, long term in mind.
Thanks for the input!
Hey Rat Race Escapeeeee Laura! 🙂
Great blog. Great content!
There is a clear difference in peoples mindset towards MLM vs Traditional business. Some people get it, some people don’t. And whats worse is the sceptics say that we don’t get it! 🙂 hey ho!
Wishing you all the best!
Aidan
@Aidan Gibson, Hey Aidan 🙂 Thanks. Some will,
some won’t and there is always someone next! Sort through the nay-sayers to find those who Get it!
Hello Laura,
What I love about MLM/NWM is everyone that goes to work building their business has the opportunity to reap the benefits of earning from the sales made by the company.
No matter how much the company I work for makes in profits, my salary is set for a certain term, usually a 1 year term. And then, maybe I may get a raise, and anymore that is not even certain.
MLM/NWM allows for those who put in the work, to give themselves a raise any time they desire.
Sell more prodcut, you’ll make more money, recruit others and train them to do the same, you’ll make even more income.
People call MLM/NWM a scam, yet they go to a job where they will never be able to get the position of the CEO, now that’s a scam.
Plus as an added bonus most MLM’s are big on promoting personal developement and growth, things you certainly do not gte from a job nor a traditional business.
Cheers
Hi Laura,
Thanks for sharing this very well thought out post.
You really took a thorough look at these 2 business models and this will help to illustrate to people that the MLM business model is an efficient model and is here to stay.
When you consider that traditional marketing moguls have thrown their hats into the MLM arena…that speaks volumes.
With the Global economy in such sad shape, the MLM model gives people hope for a secure financial future that traditional business no longer does and gives you the opportunity to call your own shots.
But, the biggest difference maker for me is in MLM, we can build a residual income compared to the linear income of most traditional businesses where you don’t get paid if you stop working!!
I think I prefer to build it once and reap the rewards for a lifetime.
Slam dunk!!
Keep living the dream,
Marc
Laura,
Great comparison. In my opinion, in MLM a person will train someone better to become a great sales rep for the company because he/she knows the more people you help succeed the more you will succeed. In traditional business, some sales rep just think of you as competition.
Jaden
Laura,
I love the breakdown. But more importantly, what MLM has done for the world is nothing but magical!
You see it every day.
Online, we have affiliations.
In the industry, we have new companies emerging everyday.
Main stream companies are now offering kick backs for recommendations.
But there’s more to it that than as well. Because now there is a switch in the method of marketing for Network Marketers as well. I spell it out in my blog posting OldSchool -VS- NewSchool Networkers: The Growing Pains.
The marketing world is changing and thanks to the Network Marketing Industry and the internet, it’s quickly becoming one of the most exciting times in our history.
@Dereck, Hey Dereck. Thanks for the comment. I agree, the marketing world and the internet is constantly changing and it is exciting. It can, of course, be overwhelming but nonetheless exciting!
Hi Laura – This is a great post for telling the differences in the 2 different marketing techniques. It always bothers me when someone asks me if I belong to “one of those multi level marketing” companies like they feel sorry for me. You know there mindset is telling them that it must be one of those pyramid schemes. LOL The fact is I feel sorry for them having such a closed mind and they will never know the freedom and satisfaction from being your own boss and belonging to such wonderful opportunities. Thanks for sharing this great post!
@Glyna Humm, Oh I hear ya, Glyna! Like they say, “the road less traveled….” Being a prisoner of the cubicle just isn’t the way I choose to live my life!
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