how does MLM work?
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seriously...
when i asked this question, all i got was stony silence or hostile abuse..
since this forum is innudated with people very pro-MLM, please please please, explain!
not in terms people have no idea about, but in simple short sentences..
and please tell us how this can "make millionaires" out of everyone involved?
oh, people who have been burnt by MLMs, try not to flame?
and people, who can rebutt the pro-MLM people, try to do so without resorting to flaming? the same goes for the anti-MLM people who can take apart the pro-MLM people's stand..
now, go... convince people... -
oh.. here's what i think of MLM... as written by someone else...
he's got even more views than i have, but i've only scratched the surface of MLM and found it to be bad..
and people who want to get into MLM, please read this first! it may save you and your family lots of remorse, anger and misunderstanding....
What's Wrong With Multi-Level Marketing
within the essay, it says it all.. very well-researched and everything the pro-MLM people don't want you to know.. -
MLM is based on products. That's the difference between pryamid system.
Pryamid systems is based on heavy recruiting and they often have only 1 product to work on. Pryamid usually don't last longer than 2-3years. Besides that, they need a maintainence fee monthly. Pryamid system is a get-rich-fast program. But, it is the people at the top who really earns. The ppl at the bottom only earn a miserable thousand or hundred or even lesser. As from what I know, they offer an attractive offer of poolshare which is often 1%. Let's do the maths. If 1 person manage to get 1%, then 100 person would get 100%. Then what does the company earns? Nothing! Which means, these ppl are out of job again. Indeed, this 1% is attractive.
Then what's MLM then? MLMs are companies which does not focus heavily on recruiting. They are focus on the products.
Let's take a look at an article.
http://www.stopspam.org/faqs/mlm_vs_pyr.html
Find more articles about it on yahoo or google.com (google rec. =D)
MLM is a get-rich-forever program. You can earn residue income from it. If you are in a good MLM company, you will be able to meet lotsa millionares who made their income from MLM.
MLM is a great road for ppl in the employee quadrant to get to the business quadrant. The reason is you can do it anywhere, anytime. Besides that, it requires low capital. What most people nowdays does is, continue with their full-time job and do a part-time MLM business. When their MLM business income tally or more than their full-time job, they quit their job and do the business full-time. -
residual income?
pray tell.. how does one get residual income without leeching off the efforts of others?
(added)
because it sounds like a pyramid scam... you get a percentage of the people under you.. so the more people under you, the more you will get...
and on and on.. building up a pyramid...
so, the guy at the base of the pyramid is basically supporting about 9 to 10 levels??
and how does this reconcile with the stuff MLM people say about the product.. that it is cheaper for the customer?
profit margin is trimmed because it is "cheaper", yet that margin is supporting about 9 to 10 levels?
please explain how this happens? and don't give me the "cut out the middle-man" thing.. because i see 8 to 9 middle-men in a 10 level MLM... -
i'm not pro-MLM
Basically.
Profits = Money shared by individuals + money placed into pool + money used to function company.
Pool = Money shared by members who accumulate enough sales.
Direct selling = selling as a member.
Indirect selling = having a selective people working under you doing direct selling.
Indirect selling returns u a share of = your current position - the seller's position. blah blah. thus the higher you're the more you benefit from people selling below you.
i'm lazy to write about this now. I'll give a detail analysis of how it works. -
Okay, time to answer the question.
MLM = Multi-level marketing, a marketing strategy that is based on direct selling of products to consumers.
The seller gains a percentage of the profit made through selling the products.
The product, basically, regardless of the claim is not the key.
The key is the consumers. They direct their sales at friends, relatives and past associates.
Usually the %age of the profit earned by the seller is fixed by his position, the introducer (the person who introduce the seller) gains a %age of the profit equivalent his profits for his position minus the introducee's. And this list goes on until a certain level where a person who will gain the remaining profits for the base sales.
Thus, assuming A sells the product. A is supposed to gain 5% for the sales. This is direct profit for the seller.
B introduced A and B is supposed to get 15% for his sales, B will gain (15-5)% of the profit.
C introduced B but C is at the same position as B, so C gains zero profit, but still accumulates points (which will help upgrade the position)
D introduced C and D is at the highest position. D gains (35-15)% of the profit.
This is called indirect profit for D and B.
As D has achieved a certain position in the company, D will gain profit from the pool equivalent to his position say he gets 10pts.
The total pool pts is 251, D will get from the pool, 10/251% profit for the sales for the month.
That is pool profit.
The products, thus, may be sold at a price triple to four times its original manufacturing cost depending on how the company decides the pool, gain and sales.
The credible part of this system is that, it is indeed a fast scheme to wealth as long as you're the first few top seller.
Your network, of introducees, will actually, work to increase your sales volume.
The problem with this system, sellers may be overly concerned over sales and thus vent their frustration on family, friends who had taken up their so called precious time listening but refusing to purchase. -
ok, my parents are buying Nutrilite products, the MLM is Amway. Generally, dis is how it works, AS FAR AS I UNDERSTAND
you pay a sum of 60 odd bucks a year to be member. when u member, u buy things at a cheaper (Dealer) but fixed price. u may sell to others at a higher (Retail) but fixed price. like dat u earn. the more u order per month, the more bonus u have, when ur bonus reach a level, u get promoted and u can get slightly cheaper than Dealer price, hence ur profit goes up. u can also get people to sign membership, so u will get 3% of the bonus they receive FROM AMWAY, basically, look below for the 'network'
Me->You->your fren
I will get 3% of your bonus from amway and 3% of your fren's bonus from amway. on top of dat, amway also pay me bonus for wat i ordered in dat month. so if u and ur fren never buy anything for the mth, i don't get the extra bonus.
So no matter how low you are in the 'pyramid', those on top will not cut into your bonus or profit, they get the extra bonus from amway, not siphon it from u. -
something still doesn't seem kosher...
so, how come the end customer earns? the margin is pretty small in the first place...
then it has to support the huge pyramid...
is the end customer paying a lot? -
ill try to explain in layman terms of the "concept", not specifying to wad companies and wad flaws or benefits.Originally posted by the Bear:seriously...
when i asked this question, all i got was stony silence or hostile abuse..
since this forum is innudated with people very pro-MLM, please please please, explain!
not in terms people have no idea about, but in simple short sentences..
and please tell us how this can "make millionaires" out of everyone involved?
oh, people who have been burnt by MLMs, try not to flame?
and people, who can rebutt the pro-MLM people, try to do so without resorting to flaming? the same goes for the anti-MLM people who can take apart the pro-MLM people's stand..
now, go... convince people...
first i want to make clear between MLM and pyramid concepts. the main difference is the source of money earned. MLM is from products, pyramid is from recuitment of people, the law stated this very clearly... other than other conditions, but this point is very clear.
MLM is a type of direct sales whereby the people who made the products sell directly to their customers, that way more costs can be cut. MLM companies make used to independant distributors or agents to promote their products to the people around them, to cut costs, so if there are more people selling, of cuz more money will be earned. so MLM in order to get more people selling, they put a lil benefits to agents who recuit people to sell products, like intro fee like dat. but the agent will not have to pay money to join the company, however can buy starter kits which are the products themselves, either to sampler or understand them further.
this way, the main source of money is still from the sales of products and not recuitment of people. so if you sell products, you earn from those sales, such as 10%.
this is the original MLM concept, that is accepted by the government. -
the product itself is not dat expensive, people sign member mostly to be consumer of the nutrilite product line to get retailer priced products. the MLM is both a health product company plus MLM interweaved. the company earn profit by selling its products to the 'retailers'. it can keep on giving bonus is becos it has many retailers and the retailers goes on to promote the stuff.Originally posted by the Bear:something still doesn't seem kosher...
so, how come the end customer earns? the margin is pretty small in the first place...
then it has to support the huge pyramid...
is the end customer paying a lot?
From my point of view, as i have said in some other old threads, if you are not into the MLM, you can also sign membership for the products itself. You can always return the product for refund if u are unhappy, of cos there must still be over 50% left.
* You will NEVER see amway products on advertisements on TVs. On commercial planes yes. -
Hey I did, on SCV, but not on local channels.Originally posted by chunyong:the product itself is not dat expensive, people sign member mostly to be consumer of the nutrilite product line to get retailer priced products. the MLM is both a health product company plus MLM interweaved. the company earn profit by selling its products to the 'retailers'. it can keep on giving bonus is becos it has many retailers and the retailers goes on to promote the stuff.
From my point of view, as i have said in some other old threads, if you are not into the MLM, you can also sign membership for the products itself. You can always return the product for refund if u are unhappy, of cos there must still be over 50% left.
* You will NEVER see amway products on advertisements on TVs. On commercial planes yes. -
i know it's from the sales of the product...
but how much of the profit does those at the bottom get, considering the fact that a percentage of the margin is skimmed off to the higher ups...
can the company claim that the products are cheaper for the end customer?
if it is, how can the people earn a proper living with it without massive selling? -
sure anot...sure is amway boh....i got SCV also leh...Originally posted by laurence82:Hey I did, on SCV, but not on local channels. -
Yes, it was the nutrilite products, brought to us by Amway heheOriginally posted by chunyong:sure anot...sure is amway boh....i got SCV also leh...
Nah, just want to mention I saw it.
If you are on holidays like me, do nothing but sit in front of TV whole day, sure can catch on Discovery or CNN one.
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my father watch discovery all day leh, he never see. maybe now they finally decide to use TV, my parents into Amway since 199x, even b4 SG opened up the MLM thingy in 200x.Originally posted by laurence82:Yes, it was the nutrilite products, brought to us by Amway hehe
Nah, just want to mention I saw it.
If you are on holidays like me, do nothing but sit in front of TV whole day, sure can catch on Discovery or CNN one.
i now holidays, still got 6-7 weeks to opening school.... -
TV is evil, its all propaganda muahahahhahahaOriginally posted by chunyong:my father watch discovery all day leh, he never see. maybe now they finally decide to use TV, my parents into Amway since 199x, even b4 SG opened up the MLM thingy in 200x.
i now holidays, still got 6-7 weeks to opening school....
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well, choose wat u wanna listen and 'take in' loh....dats the way it is.Originally posted by laurence82:TV is evil, its all propaganda muahahahhahaha -
Originally posted by the Bear:i know it's from the sales of the product...
but how much of the profit does those at the bottom get, considering the fact that a percentage of the margin is skimmed off to the higher ups...
can the company claim that the products are cheaper for the end customer?
if it is, how can the people earn a proper living with it without massive selling?
They wait for 1000 under them to do the job.
or if they happened to belong to the overselling mlm, they just wait for 10 under them to do the job. -
Ok, so think of a franchise.
A corporation, let's say McDonalds sells a franchise or a store to someone
who wants to own his own business, let's name him AL.
Al pays McDonalds 2 million for the rights to own the franchise. And in turn
Mcdonalds tells him where Al's store will be and also gives Al a box of instruction of how to prepare food and the guidlines for marketing and advertising. In addition,
Al has to buy all of his supplies and food from corporate at wholesale.
Al's job is to get customers and make money. However, Al also has to turn around and give McDonalds Corporation a royalty, some corporations are up to 40%.
So, Al has to get enough customers to pay Mcdonalds first and then himself. It takes about 5 years.
McDonalds has thousands of franchises all over the world collecting royalties from all of them.
What if Al went to his friend and said "hey, I have this great business with great burgers you should do it too". His friend does the business too, and also pays McDonalds their royalties. Do you think Al gets a bonus for finding them a new business owner....NO!
Al and his friend get customers, pay their royalties and Mcdonalds is happy.
And then Mcdonalds comes along and says "hey Al, you have a lot of business on this corner. We are going to open another one across the street, do you want to buy it? Unfortunately, Al doesn't have enough to buy, so McDonalds turns around
and sells it to someone else, cutting Al's profits in half!!
In network marketing you are the corporation. You start your business just like Al did, however your cost is a fraction of a franchise, you find customers who may or may not be friends and family because that is who you know.
You also buy product at wholesale and when you buy a big amount of product
you get a bigger discount.
Some of your customers will like the products so much that
they will want start their own business. They pay their distributor fee
at the fraction of the cost of a franchise. And when they do, guess what, you get to earn royalties
from all of their sales just like McDonalds does, because you introduced them
to the product.
You do not have any territories or limits. Your income is dependent
upon how many customers you have and if you've help other people
start their business you get paid on that as well.
If you put those same products on a store shelf, you have
to consider all of the middle men involved. EVERYTHING
is sold at a higher than manufactured cost whether
it's on the store shelf, sold through franchise or network marketing.
It's just another business model.
Take a look at this video on the top middle of this web page:
It will give you an explanation of the MLM business model.
http://www.anmnow.com/streamofincome/index2.shtml
You will find out that MLM is the most ethical way to do business.
Enjoy!
Lisa -
MLM in fact is juz another methodolgy of sellin its product and services ....
let make a very simple example .... cigarette
do you think cigarette is so ex?
NO! it is cheap. but why it is priced at almost to SGD$10? while in malaysia you can get the same brand at RM$5?
from manfacturer to wholesaler to DISTRIBUTOR to Retailers to Consumer.
from such process there is so much increase in tax and good service charges.
MLM elimate the retailer and make you a distributor.
and using this idea to think through how you get the burger from mcdonalds or KFC.
Food court cha ka tiao and Hawker Centre Cha ka tiao