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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 Paulson

Laura is a marketer building assets that spin off passive, residual income.
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45 Responses

  1. Well this blog post makes it clear why the financial high rollers like Warren Buffet and Donald Trump own their own multi-level marketing companies. You’ve done an excellent job of dissecting the advantages of this business structure.

    The other advantage I see is in distribution costs. MLMs are generally run as mail order companies providing drop shipping of their products for their distributors. This reduces the overhead dramatically. Plus, there is no need to allocate office space to sales people… more savings!

  2. Very interesting post, Laura!

    Thanks for sighting the differences of MLM and the Traditional Marketing. As what has been mentioned in the previous comments, this is indeed a great comparison. MLM has really taken marketing into the next level. As compared to traditional marketing I prefer MLM, takes you where your going faster.

    Thanks for sharing and best regards,

    Jans

  3. Laura-
    Fantastic comparison! I have been a part of both business models and I am definitely on the side of multi-level marketing, if for nothing else, the residual income is awesome. Thanks so much for the post, I am definitely going to pass this on!
    Cori

  4. Great article. I’m a big fan of MLM, as traditional marketing business models don’t provide residual income. If you work with people that know what they’re doing and how to TEACH what they’re doing, it’s a great thing to get involved with.

  5. MLM is indeed a way for a company with the right kind of product and know how to quickly extend its marketing reach. The distributive model has proved its worth many times over.

    However, its scam reputation is somewhat well deserved because so many have been mislead about the ease of making money, and often saddled with a garage full of mandatory product purchases. The reality is that it takes the same level of commitment and talent to succeed in MLM as for the regular sales model. Hence, the typical 3-4% success rate for MLM.

  6. Great post Laura!

    This is a great thought to compare the marketing sides of MLM and traditional businesses… I could throw in as well that when consider to run a traditional business vast amount of money needs to be poured into getting the message of the product and services out to the market, like: newspaper ads, TV comercials, billboards, sponsoring events (just to name a few)… and this investment is going obviously to other firms who produce this awareness. In correlation to the MLM business all these funds needed for these kinds of advertising are not needed because word of mouth marketing is on the go and even better funds which would be allocated for this activities can be better spread for producing better products and paying higher commissions to the distributer in MLM.
    Again, excellent post to compare the marketing of MLM and traditional businesses.

    All the best,

    Alex

  7. Laura – this is such a valuable article. Once people see this list, they can make an informed decision. Tremendous work.

  8. Hi Laura, you mentioned this point a little but it’s a huge thing! MLM independent distributors have the potential to make a lot more money than sales people in a traditional marketing company. They are business owners in their own right, where as a sales person in a traditional company will only ever be a sales person.

    Great comparisons Laura!

    bye for now, Julieanne

  9. You know you make a lot of good points about traditional business being reluctant to use network marketing strategies that do indeed work and I know the power they have.

    I know of one business that has it has basically let the network marketing arm of the business do it’s advertising and it has taken off. more proof that it works.

    Steve

  10. Hello Laura,

    MLM is truly a great business model. The insurance industry used to have many of these feature in their marketing. The General Agency system was very similar except if I was the General Agent and you wanted the same commission as me you would have to leave and become my competitor. Personally I have never understood why MLM gets all the negative press.

    Thanks

    Perry A Davis Jr
    Music City USA

  11. This is a great comparison between MLM and the traditional marketing approach using a marketing firm. I never thought about the fact that when someone in a firm isn’t producing results their job is in jeopardy whereas in MLM people can work at any level that they desire. It’s almost like a bottom up approach (like a voting system by more people like at Digg.com) instead of a top down one (a handful of people in a position of authority).

    I feel like MLM is a pure meritocracy. Everyone starts with a different level of skill and various numbers of contacts, but everyone in a company is given the same comp plan and the results are purely what the individual chooses to do with it.

  12. Hi Laura, thanks for breaking down some of the most important aspects of MLM. The MLM industry is evolving at a very fast pace right now. People really can recruit sales reps into a business and choose to join it later when they get rolling. Their position in the genealogy is always protected and can activate it at any time. Great for people that have little or no money to get started in an MLM. Big MLM companies are actually starting to adopt new network marketing strategies with some great training in one place. Buy yes, It will take time to see how big the downlines grow because it just started. Glad you shared this post. I always stop by and read your posts and learn something new. Thanks for talking about the advantages of the Multi Level Marketing industry because it will only get better.

  14. Hi Laura

    Great post and thanks for sharing all these benefits to the MLM business model! I am sold and I’m sure your article will benefit many who were sitting on the fence.

    Thanks

    Sue

  15. Hi Laura,

    Read the comments you got and noticed that there was not one negative about MLM…. interesting …looks like you are talking to the converted.

    I love MLM … the idea that anyone can reach their potential…is so esciting.
    Often the sponsor is to blame for new members quitting…. in their excitment to have a new member on their team they do exaggerate and make it sound rosy … when it is a business and any business need lots of work to make it successful.

    Great post.

    Cheers
    Bryan

  16. Hi Laura,

    Great comparison between MLM and other marketing systems. You forgot the great reward trips MLM companies offer. 13 years in this industry I have 11 trips to exotic locations in the Americas and 10 trips within Australia all paid for!

    For those who haven’t made it in Network MArketing, they are missing out on lifestyle and time freedom BIG TIME!

  17. Great comparison of the 2 marketing systems. It’s great to see that the mlm system of moving products has become more and more universally excepted with the likes of Donald Trump and Bill Clinton’s endorsement of the industry.

  18. Laura,
    Interesting and clearly written. It leads the reader to question why anyone would use traditional sales over MLM. But MLM has its limitations.

    Most sales forces are not selling products, they are selling service and are connected to that service. These sales are generally complex and have long sales cycles. Not candidates for quick hit sales of most MLM.

    It seems to me that Most MLM is about selling information about MLM or selling a specific product where the barrier to enter the mainstream market is to high. And MLM has a perhaps undeserving but negative stigma to overcome which is significant. IMO of course.

    My point is that traditional marketing techniques are most of the time the only way to sell a majority of the overall sales that occur throughout the world and in comparison, MLM is a tiny part of the sales universe. Having said all of that, MLM is legit and the reputation is improving and it is a growing segment.

  19. You can’t deny the leverage that an MLM provides. The problem I have often found is the retention. How do you keep people motivated? It seems you can never stop recruiting but I guess if you can find a quick and easy way to recruit then it will work.

    1. @Nicole Rushin, Hi Nicole. I totally agree, that’s one of the biggest hurdles in the industry – attrition. This is why it’s so important to learn how to sort and not try to convince. Make sure it’s a good fit. Of course you just never know what someone else will do but it’s important to understand that maybe only 20% will actually do something and it’s usually 5% who generate the majority of your business. So, you just make sure you have the tools and resources available and those who are serious will show themselves.

  20. Very interesting comparison, and I think you’ve pretty much hit the nail on the head. Personally, I can’t think of any other major differences. Thank you for a well thought out article.

    Live with passion and purpose,
    Vanessa

  21. Hi Laura,
    What a great comparison here between traditional marketing and multi-level marketing. You sure found the key differences that make the MLM approach far more successful.

    I thought the key point was that in MLM you can have many many marketers who you can afford to keep on even if they don’t market a thing. You can keep these reps active by communicating with them and just wait for them to decide when they are ready to really market.

    Well-written post, Laura!

    Dawn and (Dave)

    1. @Dave and Dawn Cook, Hi Dawn and Dave! Excellent key point to bring out. Oftentimes individuals will be idle until something happens in their life that triggers them into action. All you can do is be there for them when they’re ready because THEY have to want it for themselves.

      Thanks!

  22. Hi there Laura
    I am completely sold on the benefits of MLM but why, oh why, do people treat it less seriously than they would if it was a traditional business?
    Whilst an MLM opportunity can cost as little as $10 a month, its potential is just as great as any traditional franchise…..if we take the business as seriously as if we had placed our life savings in it and remortgaged the house!

    I have lost count of how many members give it just a few months when they should really treat MLM as their long term pension plan!

    Thank you for a great post

    Peter

    1. @peter chapman, Oh gosh yes Peter. It’s very frustrating to watch so much potential not realized and very unfortunate. If individuals would even give it a year working as hard for themselves as they do for somebody else…. They would be amazed.

      Building a business is a process and not an event. It takes time to develop the skills and knowledge needed to be successful so you have to be willing to “pay your dues”.

  23. Hi, Laura,
    Thanks for clearly stating some of the primary differences between MLM and a traditional business. Both of them involve marketing, and that’s the aspect that many who are expecting to ‘get rich quick’ forget about when they decide to join an MLM.
    Take care, and have a great day.
    Angela

  24. Hi Laura,

    It’s really interesting to see the differences between MLM and Traditional marketing… it appears that MLM is a brilliant business model when a good company is found!

    Emma 🙂

  25. Pingback: Tweets that mention MLM versus Traditional Marketing | LauraMPaulson.com -- Topsy.com

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