Beware, network marketing! What are MLM business projects and how to distinguish them from a financial pyramid

Network marketing or MLM business has existed for a long time, but nothing is taught about it in schools and universities, so this topic is still covered in a veil of myths and stereotypes. I wrote this article for those who have encountered network marketing themselves and are considering it as an option to make money, become an entrepreneur and earn passive income. I will try to reveal the truth so that you are not hostage to myths and stereotypes and will share my vision of how to earn the maximum in this business. If you think that I am wrong about something, write about it in the comments.

MLM business what is it decoding

For those who are not in the know: MLM stands for MultiLevel Marketing, which translates as multi-level marketing. This is a scheme for distributing goods and services in which a company attracts distributors who have the right to attract new distributors for a fee.

1. Scam for suckers, financial pyramid

Network marketing or MLM business - what is it really?

4.1 (82.31%) 26 votes

The majority of the population of the post-Soviet space will not have to remember for a long time what network marketing is, which cannot be said about young people. “Do not offer network marketing,” this phrase has topped resumes and job advertisements for 20 years. By the third decade of the 21st century, it seems that the public has “let go”: this phrase no longer evokes negativity, and young people even look with interest at booklets about personal business from scratch and beauty consultants. It's time to look back and calmly figure out what MLM is. The result should be an answer to the question: are there personal prospects in these malicious networks and is it realistic to build a career as a successful entrepreneur in the MLM business.

What is MLM: the whole history of MLM business to this day

Some sources call David McConnell, the first head of the California Perfume Company, the founder of network marketing and the direct sales method, while others call the farmer and vitamin supplement manufacturer Carl Rehnborg.

If we evaluate the importance of one and the other person in the “invention,” the merits will turn out to be approximately equal. Moreover, upon closer examination, it turns out that two people running their own business, who had hardly heard of each other, came to the same conclusions:

clients are more likely to trust the recommendation of a friend, be it a friend or a neighbor, than the most expensive advertising;
the direct sales method significantly reduces the costs of logistics and warehousing of products, practically eliminating the concept of “inventory balances”;
The “6 handshakes” principle makes the geography of business almost limitless without significant costs.

Karl Rehnborg discovered another principle that is still actively used not only in network marketing, but also in business in general. But it will be discussed in detail later: in other respects, the models are really similar. These two businessmen actually discovered the advantages of network marketing independently and quite accurately (although the term itself was found much later). As for the dates: Karl Rehnborg achieved maximum prosperity back in the 40s, and McConnell published his postulates in the mid-80s. But it was the first who created the company that still exists today and remains true to the principles of the described type of marketing. In Russia this project is known as Avon.

As for the originality of the invention, both respectable gentlemen can hardly take credit for the discovery. American preachers began selling, even if not goods in the literal sense of the word: hardly anyone will argue that the system “Would you like to talk about God” and “Do you want, let’s look at this catalog with new products and super-gifts for registration together" has a lot in common. It is the home bible salesmen who have been knocking on the doors of godly Americans for over 100 years who really know how to attract people to network marketing. And even if they are not focused on material income, they fully implement the MLM principle.

Is Network Marketing Business the American Dream?

Skipping several decades of formation and testing, you can immediately stop at the 80s. This is the heyday of the American history of marketing, which has already received exactly this name: multi-level marketing or multi-line (eng. multilevel marketing, MLM). In Russia it is called network.

To understand the essence of linearity and network, we can imagine the Internet - the global web:

the author created an original meme with his girlfriend;
a neighbor posted it on his personal page;
classmates who knew the character responded;
hundreds of readers reposted and commented;
a funny photo appeared on the walls of residents of other cities and countries;
A few days later, the girl from the outback woke up famous.

If you imagine that the same heroine would try to “break through” through a modeling agency or acting bureau, the difference in the dissemination of information will immediately become obvious. Advertising “from word of mouth”, or in the case of a network “from account to account”, in most cases turns out to be more “volatile”. And if you imagine that the example does not include a photo, but a supplement or tights that tighten the tummy, and each reposter will receive a few cents for advertising - you get typical network marketing on the Internet, that is, modern.

The history of MLM business is more modest in scope. The first experience of using multi-line sales technology was food additives and dishwashing detergents, for which manufacturers offered commissions for advertising. For the small entrepreneur, the system turned out to be beneficial: he simply invited those who use his products to “recommend” them to their neighbors. The potential customer base also liked this idea: they could get characteristics and feedback on taste or effectiveness from someone they knew, and if they were lucky, they could try the product before purchasing.

American housewives saw another advantage in this scheme, not always clear to Russians: to show off a new meat grinder or wonderful vitamins, they gathered “neighbourly”, drank tea and discussed the weather. For a mentality in which simple visits and feasts are not accepted, this is an excellent form of leisure and the only acceptable reason from the point of view of etiquette to visit unfamiliar people. And even if the organizer of the “tasting” or home presentation did not make any sales, no one was upset. Before the multi-level marketing system moved across the ocean, to Russia and Europe, no one perceived it as a serious business. Miss Donson presents trays on Wednesdays, and Mrs. Jackson presents cookie kits and cookies on Mondays, this is American network marketing in classic look. And if visiting Mexican and Latin women began to sell key chains or nail polishes more intrusively, they are rather an exception from the typical series.

Russian grin of multi-level marketing

Understanding how network marketing works and its advantages in the American outback, many readers are wondering: why is there such a negative attitude towards this innocent entertainment in the Russian Federation and neighboring countries. To understand why the mlm business deserves such an attitude, we will again have to talk about the mentality and economic situation. Russia in the 90s - the time when network marketing arrived in the post-Soviet space:

lack of money and confusion, sometimes turning into hunger and depression;
complete chaos in legislative framework and lack of understanding of how the country will develop further;
the emergence of the first merchants and the abandonment of socialist ideals;
rampant crime and the emergence of scammers of all stripes.

The idea of a business that did not require significant capital and investments, in an atmosphere where the very words “businessman” and “entrepreneur” sounded promising and fascinating, could not help but hypnotize. And if you consider that for a considerable number of people during the period of unemployment and non-payment, this was simply the only opportunity to hold money in their hands, the attention to the topic of business in network marketing becomes understandable.

Networkers suggested:

Business from scratch, without investment or with minimal investment.
Earn money in your free time and without a schedule.
Real money and not according to the salary schedule.
A career and prospects are what Russians, exhausted by political and economic collapse, so lacked.

The grain that fell into suitable soil gave rise to such powerful sprouts. The first and truly American MLM companies Avon and Herbalife had thousands of followers with the same techniques. Russian network marketing acquired its own features, much more aggressive:

Unlike American women, who rejoiced even at the idea of just “hanging out,” Russian entrepreneurs were told fairy tales about a comfortable life for everyone and personal planes purchased with earnings from the MLM business;
the “leaders” of the branches pressed on the most painful points, advising them to borrow and sell something in order to enter the “team”;
The very mentality of the Russian people played a cruel joke - the desire to get everything at once drove hundreds of poorly informed people into debt for the sake of buying a contract.

The company that suffered the most from such aggressive marketing was Herbalife, which is remembered for its “If you want to lose weight, ask me how” badges. The stepped marketing plan implied an increase in the discount for the volume of repurchase. Sold apartments and boxes of supplements under beds are not isolated cases in the history of this company. To sell the inventory, the consultants, driven into a trap, shamelessly lied, embellishing the product and attributing to it miraculous properties. These disadvantages of network marketing, which are not guilty of anything in their essence, created the reputation of the industry for many years.

Modern network marketing - old tricks in a new way?

Once again, abstracting from the historical background, one can be convinced that modern network marketing is not far from its prototype. Perhaps he had just begun to return to the present course:

the most popular products sold online are women's accessories, cosmetics and supplements, just like in the 80s in the US;
MLM again began to be perceived as additional income, and not as a main activity;
A more stable economic situation has removed from the market consultants who are intrusive and disingenuous when talking about the benefits of the product.

But the rest of the operating principles have changed little: also, any network company offers to use, save and earn money. Contracts are also concluded and seminars are periodically held for the team; consultants also use catalogs and the main weapon of an mlm company - sincere advertising and direct sales. And because network marketing is now being built on the Internet, rewards are awarded to electronic wallets, and consultants sometimes do not see each other, little essentially changes.

MLM economic model: who turns the wheels

When wondering how to make money in network marketing, you need to decide on the role of a specific network participant. It’s not for nothing that this scheme is called a pyramid. And although representatives of MLM companies are categorically against such comparisons, they are the most accurate.

The pyramid has several levels:

The stage is the foundation on which the entire system is built - users, buyers and consumers. It often happens that MLM enterprises, in order to prevent distortions, oblige their consultants to buy a certain amount of the product for personal use. Sales generate turnover, from which the rest of the network feeds, right up to the very top.
Consultants, partners, and ordinary network participants can be consumers, or they can focus specifically on team building. The task of the former is to buy on their own and earn a discount or a small reward depending on the volume, while the latter is to find new partners for the sake of a percentage of their turnover.
Leaders of branches or structures are those who already have with good reason can call themselves entrepreneurs. They rent offices and hold motivational events, their photos with the comments “you can do it too” are posted on websites, they receive remuneration from the structure and are an example to others. Focusing on their story is one of the pillars of MLM.
The owners of the company are often anonymous, never seen. Especially when we are talking about dubious enterprises that sell supplements under the guise of medicines and miraculous devices that turn out to be Chinese devices. However, there are exceptions: the Buryak couple, who ran the Vision company, did not hide either during the heyday of the company or now. The high-profile divorce involving the division of the mansion was broadcast on all television channels.

The level of income depends on the level at which a particular person rises. Therefore, it is impossible to determine exactly how and how much you can earn in network marketing; the answer should be based on the intrigue of how to take a high place in the hierarchy, on which the income you receive directly depends.

A visual comparison table between MLM and a financial pyramid:

	Financial Pyramide
There are real products to promote.	Lack of product, presence of a plausible legend.
Free entry into the business (or a minimum fee, for example, for registering on a closed portal).	Paid entry, the contribution amount varies from $10 to infinity.
Income from selling products or creating trade turnover.	Income from entry fees of new attracted participants.
A training system is available, personal growth is possible.	There is no training for participants (only possible for leaders of network structures).
Official registration of participants as representatives of the company.	There is no official registration of absolutely all participants.

Types of Business Plans in Network Marketing

The Russian version of the model of cooperation with MLM companies is presented as a serious business. Such a presentation, as the experience of organizing hundreds of projects shows, hides the disadvantages of network marketing in the eyes of a potential recruit:

the need to constantly buy something is called investment;
the obligation to attend motivating classes - corporate ethics;
time spent - working day and flexible schedule;
a markup system for the buyer - incentives for the consultant and a check.

Another concept that runs like a red thread through all project presentations is the marketing plan. Its type determines both the responsibilities of network participants and the thresholds for possible earnings, which qualitatively describes how network marketing works.

Stepped

The simplest type of marketing plan, not much different from simple trading. With a one-level scheme, there are no such differences at all: one level (managers) recruits and trains consultants. The second (the same consultants) - they sell the product. From trade turnover. which the group organized depends on the manager’s remuneration, less often - the percentage of the implementer’s income. An additional incentive can be bonuses for the group: gifts, discounts, joint recreation, as another opportunity for group cohesion. The young men knocking on apartments with handbags with the image of a rhinoceros and the inscriptions “OS MAX”, selling flashlights and knives for meat grinders, are representatives of the 2nd link of this marketing plan.

In a multi-stage system of this type of marketing plan, each specific seller has the opportunity to increase his percentage: it is also tied to sales volume. The greater the turnover, the greater the volume discount offered to the consultant. The famous Herbalife works exactly according to this scheme.

Matrix and its variants

The matrix system is advertised as an almost passive income in network marketing. The first thing the manager will tell you at the meeting is that he himself will “sign” for the newcomer. Indeed, the “matrix” allows such options. This reward scheme is most reminiscent of the game of Tetris: to receive a reward, you need to fill in the line below you:

in a binary scheme these are 2 branches, in a trial – three and so on;
one account - standard turnover value (for example, 1000 rubles)
each level has its own percentage of remuneration, those invited personally - the first level;
if each of two people signed up for a specific consultant buys 1000 rubles, he will receive a bonus;
in order to receive a reward from the second depth, all 2*2=4 accounts must “pay”;
an incomplete line does not bring rewards.

The manager can indeed arrange the “chips” according to a convenient and most profitable scheme, but it is unlikely that he can take advantage of the accounts of other interested parties. From the next accounting period, the placement of chips begins anew. Without new sales, there will be no “passive” income.

Classic MLM

This scheme differs from the matrix only in the absence of restrictions on the growth of the network “in width”. Ivon, Oriflame, Faberlic, Mary Kay, Dovgan Service work according to the classical scheme: the list of MLM companies of this type can be continued for a long time. The first lines bring the maximum income, with “depth” the percentage decreases. Loyal projects do not limit the volume of their own redemption, although a minimum level for receiving a reward is usually set. This allows the network to maintain a certain stability, generate turnover, and gives newcomers an additional incentive to attract people to network marketing in order to increase income.

The working methods for each type of marketing plan differ little: only some focus on sales and product advantages, others openly declare that they are selling business, chance and nothing more.

How realistic is it to make money in network marketing?

The ironic tone of this material should not be misleading: it is possible to make money in this system, and the fact that it is possible to find the optimal structure and direction of activity also remains a fact. But to say that MLM is easy is disingenuous:

the seller, in order to receive his percentage, must sell, recommend, show catalogs and carefully put in place competitors, of which there are many;
the manager working with the structure must look for new signatories, train and set an example of optimism;
senior managers are involved in organizing events, supplies and legal support; they handle accounting;
the heads of structures, under the guise of mega-successful people, hide their fatigue from constant travel, meetings with regional leaders, they also resolve issues of supplies and logistics.

Modern realities have somewhat simplified the work of some links: orders are placed via the network, the catalog can be shown with a link to the site, and subscribers can be found in other regions. But this does not change the main essence. Network marketing is an active business and constant movement. In addition, stores have also switched to the Internet, minimizing the advantage of online retailers. You can make money online under the following conditions:

sociability and the ability to constantly contact people in person or via the Internet;
having some free time and the desire to spend it purposefully;
compliance with the company’s theme (a seller of bio-additives should radiate health, and a seller of weight loss products should be slim);
optimism, the ability to persuade and lead, the talent to energize or become an example to follow.

Having discovered all the qualities in yourself, you can safely consider the offers “I’m looking for an assistant with no experience to an entrepreneur” or “a business from scratch on a part-time basis.” These traditional turnovers are a sure sign of recruitment to an MLM company.

Video interview with billionaire Richard Branson about MLM:

- History of MLM business development
- The essence and essence of MLM business
2. Conclusion

Only infants have not heard this sensational and somewhat scandalous abbreviation. Some believe that this is yet another scheme to deceive gullible consumers, others believe that there are many possibilities. Let’s try to figure out what MLM really is in this article.

1. What is MLM business or network marketing

MLM (MLM in Russian version) is an abbreviation for English multilevel marketing, MLM– multi-level marketing. Or as it is also called – network marketing.

The basis of this method is not direct sales through classic retail stores, but sales through a network of sales agents (partners, consultants, dealers).

MLM business structure

History of MLM business development

The history of network marketing begins in 1927 when the creator food additives K. Rehnborg began distributing his own vitamin supplement and achieved very good results. When the demand for his supplements exceeded his capabilities, he came up with the idea of inviting friends and acquaintances to distribute his products for an appropriate fee. Later people from his company "Nutrilite Products" Lee S. Mitenger And William S. Casselberry developed the basic principles of MLM, which soon became popular throughout the world. And at the end of the 50s, employees of the same "Nutrilite Products" founded a well-known trading Amway network .

MLM business and MLM companies gained the greatest popularity in 1980 -e – 90 -s years.

These days, online companies offer a very extensive list of products: from vitamin supplements and cosmetics to dishes and household appliances. Multi-level marketing is the basis of companies such as "Avon", "Oriflame", "Faberlic", Zepter International. According to some estimates, the annual turnover of network companies is about $200 billion.

The essence and essence of MLM business

The core of the business is made up of distributors.

Distributor is a sales agent whose activities can be divided into three components:

Product promotion.
Attracting new distributors and creating your own subnetwork.
Conducting training events (trainings, seminars) aimed at achieving the goals of the first two points.

The distributor's remuneration consists of payment for personal selling and for goods sold by its subnetwork.

The larger the personal network, the more bonuses the agent who developed it receives.

One more distinctive feature of such networks is out-of-store sales. Sales are carried out, as a rule, on the territory of the potential buyer (home, office) or on neutral territory ( shopping centers, cafe, etc.).

Success in Network Marketing

Legality of online mlm business

Disputes over the legality of MLM companies are still ongoing. This is due to the fact that dubious structures are disguised as multi-marketing networks, the purpose of which is to build financial pyramids.

Many of these companies generate income by forcing future agents to pay for numerous stages of “preparation” - making a down payment, purchasing a minimum batch of “products,” and obligatory payment for expensive trainings.

As a result, only the organizers of such pyramids benefit financially, and all participants at the pyramid level are left with nothing, because as such, promotion of the product, as well as the product itself, does not exist.

For training purposes, impressive conference rooms are rented, and dummies are invited who supposedly achieved colossal success.

Business trainings in MLM companies

In order not to fall into the network of these scammers, you should not trust organizations whose work requires significant financial investments. The dubious quality of the product or its complete absence should also alert you.

The goal of a serious network structure of an mlm business is to promote goods (usually of fairly high quality) and develop distributors in particular and the network in general.

In some countries (Korea, China, USA), the activities of MLM companies are seriously limited at the legislative level.

2. Advantages of MLM business and its advantages

What is attractive about working in this business?

Underemployment. According to statistics, most sales agents are busy from 1.5 to 5 hours a day. This allows you to work on a flexible schedule, which is important for students, retirees, etc.
Partnerships that allow the employee to choose the pace of work, content and companions. There is no negative “superior-subordinate” effect.
The ability to create your own business with minimal investment, using a ready-made scheme and receiving comprehensive support, which reduces the risk of failure to a minimum.
Gradual transition to this species business, without the need to dramatically change the scope of activity.

The companies themselves also have significant advantages when choosing the MLM format:

Low advertising costs.
No expenses for maintaining offices and stores.
Selling exclusively your own goods, which eliminates the risk of “getting lost” on the general shelf.
High customer loyalty.
Additional income from paid training events.
The distributor replaces an entire staff of employees: advertising specialists, customer service, and recruiting managers.
In times of crisis, when classic linear trading companies are suffering losses, there is an increase in sales agents in the MLM business. The specialists remaining as a result of layoffs go to these structures in search of alternative income.

Active "anti-network" The policy will be carried out as long as the multi-level marketing format itself exists. Some see this as an intensified competition for the consumer of large retail chains, while others rightly blame the creators of illegal pyramids. But one way or another, there are more than enough examples of successful network companies. It is important to make the right choice.

Watch the video: MLM business, what is it - its trends and prospects

2. Conclusion

Owning complete information You can make an informed decision about what an MLM business is - use it to access certain products that are not available in regular stores, receive additional income, or develop your own trading structure with a solid income.

Glad to welcome the audience! I think it's time to discuss network marketing, because I often get asked if I have tried to work in this field. I actually received more than one offer, so I figured out the intricacies. Thanks to this, I will tell you in detail about MLM: what it is, what principles underlie it, and most importantly, how gullible clients and employees are deceived.

What is MLM: definition, abbreviation decoding

MLM companies operate on the principle of network marketing, when products are sold not through stores, but through distributors. Distributors in this scheme not only sell goods: attracting new people becomes an important part.

The product is sold at the company's office, at the client's home or at work. After making a purchase, the person is asked to sign a contract and “open his own business.” In practice, this means selling products and attracting other distributors. Remuneration is calculated depending on the level in the system, the amount of sales and the number of referred distributors.

Why was the scheme called MLM? The abbreviation comes from the English multilevel marketing (MLM). Well-known companies resort to a similar principle: Avon, Oriflame, NL International.

The history of the development of MLM business and its legality

There is debate about the origin of network projects. It is known that schemes with elements of such marketing existed in the 1920s, and their homeland was the United States. The activity gained momentum until the law intervened. Currently, restrictions have been introduced in 6 states:

Distributors have the right to sever relations with the company. If they want to return the product, the company is obliged to buy it back at a price that is at least 90% of the original price.
When attracting new members, you cannot promise a certain level of income.
The ban also included a condition obliging the distributor to purchase goods for a specified amount on a monthly basis.
The law does not allow schemes where the distributor makes money solely by attracting new participants.

In the Russian Federation and the countries of the former CIS, the activities of network companies In a similar way not regulated. As a result, distributors find themselves without money and with huge stocks of goods on hand. To compensate for losses, they are forced to lure acquaintances, relatives, colleagues and simply subscribers into in social networks.

MLM companies in Russia can be represented by foreign or domestic brands, but none of them have produced a truly successful businessman - except for the founder!

How MLM works: principles and essence

Marketing Principles MLMs are attracted by their apparent simplicity. The company produces goods at its own factories, then develops a business plan: it includes the required level of sales and a system for encouraging distributors. According to the companies, after concluding a contract, you can simply receive points for purchased products or engage in distribution among friends. Let's figure out together what is really being offered to you.

MLM from the company side: words and reality

Although you have learned the definition of the term, you are more interested in the practical implementation of the principles. What do they look like in reality?

Network companies declare that they set the following goals:

Product price reduction. According to statements, savings are achieved through hand-to-hand sales. Without the costs of advertising and renting premises, it would not be difficult to cope with the task, but in fact the goods are sold at several times inflated prices (the emphasis is on “eliteness”).
Providing quality products. When selling through stores, there is a risk of counterfeits, which is excluded in online business. But the quality in fact raises complaints: just study the reviews of the “Flying Swallow” or food products from NL International. Some products still earned praise from consumers, for example, lines from Amway. But the stories of distributors who give presentations should be taken critically.
Improving the product delivery system. According to the companies, control over logistics and storage conditions relieves the buyer of inconvenience. In fact, the principle is violated. After all, distributors know: the client cannot be given time to think about the purchase. Otherwise, he will look for reviews, find cheaper options, and simply realize that a biological supplement or miracle cream is not needed. For this reason, the distributor keeps a stock of the product on hand; if necessary, he can borrow it from his colleagues. As a result, storage and transportation conditions are far from ideal.
Improving the distribution of financial flows. Due to the lack of advertising costs, funds are spent on business development and encouraging distributors. But when you get acquainted with the working conditions, you will understand that such options bring more losses than profits. After all, managers, in order to gain the necessary points from sales, purchase products themselves. You will be convinced of this by watching a video where a network marketing representative admits: he pours in his own money, and then forces his relatives to make acquisitions.

Buying products distributed over the Internet should be approached critically. Some companies offer worthwhile products: according to reviews, cosmetics from Avon or Oriflame have long remained a budget but acceptable option. Zepter produces good products, although the price-quality ratio remains questionable. But most MLM companies sell a dubious product at an inflated cost, and selling it is problematic.

MLM from the consumer side

On the consumer side, a product distributed through networks can be a convenient option. Just scroll through the catalog, place an order, and the products will be with you in a few days! But there are some disadvantages, which include:

overpriced;
obsessiveness of distributors (the meeting with the manager will not be forgotten soon!);
ineffectiveness and even harm of products, especially in the field of sports nutrition.

The convenience of shopping should be assessed in each case: the identity of the distributor, the cost of the product, and the availability of shares play a role.

Network marketing from the distributor side

According to assurances, multi-level marketing is a chance to open a business when there is no start-up capital. The word “business” is generally repeated like a mantra, along with “partnership” and “the company is giving away a free Mercedes” (I’ll talk about that later). What do they forget to mention when trying to persuade you to sign a contract?

Work in MLM without infusion own funds impossible at the initial stage! Several years ago, the amount of mandatory monthly purchases from NL International was 9 thousand rubles. Coercion was justified as follows: “How to distribute without trying the product?” But sellers in a bookstore are not required to read every brochure, and in a bakery they are not required to try all the contents of the store! Apparently, the networkers decided not to adopt their experience.

You will have to hold constant meetings, pushing people to buy. Sales go well if you work as a trainer and recommend sports nutrition. Women in the beauty industry can also sell cosmetical tools. I will not say that a good instructor makes money from personal training and will not risk his reputation by recommending harmful powders. Let's focus on the question of where you will distribute the products.

I’ll tell you a secret: during the trainings you will be taught how to call relatives and friends. According to assurances, you need to contact everyone you have seen at least once and spam everywhere. Perhaps during your training you will be convinced that selling useless weight loss foods or fructose marmalade is a chance for a better life, and everyone deserves a chance. But the real point is to get your friends and family hooked on dubious products. Do you want that?

Basic principles of relations between the company and distributors

The relationship between the manufacturer and distributors is determined by state legislation. They are based on a contract, which is not a form of employment. Consequently, no salary is paid, and you will not be provided with a minimum level of income. But after the stories of top managers, it’s simply inconvenient to ask such questions: you are promised a free car as a bonus, and you ask about some little things that interest those who work “for their uncle”! As a result, you can forget about social guarantees.

Requirements for distributors

Requirements for distributors vary depending on the company, but generally stipulate the need to purchase a certain amount of goods and make sales above the agreed amount. Often, mandatory attendance at trainings is added, where you will be taught the principles of work.

Advantages and disadvantages of MLM and working in network companies

I learned about the pros and cons of the option from my own experience, since I recently got caught in the NL International network. I’ll say right away what I noted:

The advantages include product design. The owners of the company spared no expense in developing the site, which makes an impression upon first meeting.
The disadvantages include the need for purchases in the amount of 8,000 rubles. monthly. But the main disadvantage will be the inflated price of a product that does not please with its properties: I agree to buy quality, but the products are simply not worth the money. I was also surprised by the so-called “free schedule”, in which there are no days off. And the peak was the promise of that same auto bonus! Interested in this attraction of unprecedented generosity, I decided to find out. And I found out that managers with high performance across the entire team actually get a Mercedes. But not as a gift, as they assure you, but as a lease. This means that the car is rented, and after the agreed payment period becomes the property. The problem is that you will have to perform very high rate sales, otherwise the fees will fall on you. If you don't make a plan within a few months, the Mercedes is taken away. That is, they impose a loan on you for an expensive item, depriving you of the opportunity to choose an option that suits your pocket.

Having shared the main impressions, I proceed to a detailed story.

How I got caught in the net

One day, while exploring Instagram, I found a page successful person, With interesting photos and exciting stories. At the end there was often the phrase: “If you want to get on the team, write to Telegram.” I don’t miss the opportunity to expand my horizons, so I contacted the person and set up a meeting, which was postponed due to his business trip. Finally, I arrived at the address and ended up in an office located on the 3rd floor of the shopping center.

At this stage, it became clear that I was faced with a network business. I listened to stories about how you can make money without going to the store for groceries, but by shopping in NL. In general, purchase goods worth 8,000 rubles every month. and get back 980 rubles, which you can spend only on their products. Then they told me that this is not a network business, a completely different level and earnings, they promised a Mercedes... everything is standard.

I left, but they didn’t leave me alone. A month later, when I forgot about this story, a new subscriber appeared. He had a topic that was interesting to me, training on street horizontal bars. We started talking about sports, and eventually met in real life. Then he persuaded me to sign a contract and switch to NL products - sports nutrition.

It was necessary to master the introductory and training blocks of information, and then pass the exam. When I did it, I was added to the newbie chat. Here I learned the news that to activate the contract you need to buy products for 4,000 rubles, and then another for the same amount. The money scam had already begun, but I decided to try nutrition: get in shape and see what I could sell people.

I took a complex for losing weight in 25 days, which is offered to clients with “excess fat.” Distributors say that the price is 3,700 rubles, but then it turns out that for the effect you will need an additional course costing 4,000 rubles. They hide from the buyer that the full set will cost 7,700 rubles. But that’s not the point! And the fact is that after 15 days of use, I realized: and 100 rubles. – high price for such a product.

How I parted ways with NL International

When I stopped making purchases and attracting clients, my mentor became nervous. The chat was filled with recommendations from top managers sharing their experiences (on deceiving customers). But I didn’t place a new order and simply left the chat. The result? Cell phone calls from a mentor. I calmly outlined the situation, and in response I heard: “You were brainwashed, you yourself could not leave the business.” As a result, assurances poured in that I would regret it when I saw that I had refused the free car. The last phrase was: “If you mess up your brain, you’ll call yourself.”

My conclusions? With long-term cooperation, you risk losing money, friends and health, since the products are dubious. Later I looked at other brands, but my opinion only became stronger.

You understand what an MLM business is, but you are wondering why not recommend a miracle product to your friends. In some chains you will indeed find good products, but brands do not position their products as unique. Avon or Mary Kay present affordable lines, but you can forget about making full money with these companies. Their distributors receive, at best, an increase in their basic income.

But there are also MLM programs focused on aggressive promotion of goods. During training, they force the idea of the uniqueness of the offers: “We have unique dietary supplements, other brands offer nonsense,” “Only our cleaning products are effective and environmentally friendly, unlike store-bought chemicals.” The product is introduced into a number of products with a set of miraculous properties. At the same time, they are in no hurry to announce the price, because it is unreasonably inflated.

An example of active campaigning from MLM

Representatives of the MLM business assure that in the store you overpay 50-100% of the price (the numbers are taken arbitrarily). But no one admits that the premiums for products distributed through the network are even higher: the manufacturer is not going to pay bonuses out of his own pocket. The recommendations you receive are driven by a desire not to help, but to sell.

Types of MLM: what schemes work according to

MLM companies can be divided by the type of bonuses they offer:

The multi-stage branching model implies that the distributor reaches different stages in the development of the network. With each active distributor attracted, both the percentage received and the discount on the product increase. Then the distributor forms his own subnetwork and receives a bonus from its turnover.
The single-level model is similar to the previous one, but it does not provide for the separation of subnets.
When working according to a matrix scheme, remuneration is accrued from limited quantity attracted people. For example, with a 3x7 model, profit comes only from an option “width” of 3 distributors and “depth” of 7 levels. The option is most often associated with fraud, when the registration of newcomers “on the first line” is limited, and they are transferred to a person from a lower level.

It is believed that the marketing plans of these companies are aimed at stimulating activity and learning from experienced traders. Judge for yourself how true this is.

Business plans for MLM companies: what they represent and how not to get hooked

You will most likely hear about a business plan in the MLM field from one of your acquaintances who is actively inviting you to a meeting. If you come, the standard set of arguments will be waiting for you:

“2-3 hours a day, just use it and tell your friends”;
“car from the company”;
“income of 100,000 rubles. given that minimum investment at the start";
“Hurry up to start while the company is taking its first steps in Russian market»;
“It’s better than regular work and accessible to everyone.”

Those who agree to try themselves in network marketing are invited to a seminar where they are given details. Programs may vary in detail, but the pattern remains the same: you must earn a certain number of points. Since a beginner cannot cope with the task alone, he has to attract similar sellers. From their implementation you get “group turnover”, so you urgently need to invite “energetic and active partners” to your team, luring them into “business” by hook or by crook.

The scope of MLM is growing every day, the number of such companies is multiplying almost geometrically. It seems that everywhere people are just waiting for the opportunity to join such a company. Accordingly, the impression is growing that MLM is nothing more than the “wave of the future” - that is, a form of business that is growing in its development and dynamics. They even say that MLM will replace all other forms of distribution. They also assure that every person can achieve success if they persistently and constantly follow the company's methods and that, in the end, we will ALL trade and buy only in the MLM system.

Analyzes and studies show, however, that the basic business idea, which is what structured firms use, is nothing more than a trading trick. MLM companies are aimed at constantly recruiting new traders; only a small share of the products reaches the end consumer, who is not a member of this structural organization.

In general, all the promises and conversations of the MLM industry, all their visions of the leading role of this form of trading in the future, contain as much economic truth as reports of a UFO landing. In a financial sense, the chance of making money on MLM is approximately equal to the chance of becoming rich when playing roulette.

The money side of MLM is richly marked by gigantic losses for millions of consumers. The system itself, which implies limitless growth in the number of employees in any economic space, is already condemned from birth to instability.

The main area of activity of multi-level marketing - “personal retail trade” is the opposite of the direction of all effective economic models, the development of new technologies (the Internet has not yet been canceled!) and basic consumer habits. Such “retail” activities serve as a cover for the main activity - attracting new investors to the pyramid.

As in all pyramid organizations, the income of traders and managers at the tip of this pyramid directly depends on the continuous influx of “fresh” investors at the base of the pyramid. The structure works until it collapses itself or is stopped by the state (or even legal) apparatus.

The growth of multi-level marketing can be explained by a cunning play on cultural traditions, social and personal needs, as well as some economic vices in a particular country, but not by the ability to provide any customer need. MLM marketing plans are “grown” without any professional evaluation from any reputable organization or independent expert. The popular deception is that MLM is a future-oriented investment model or a way to build a career, and that the risk of such an enterprise is lower than an ordinary job or other business.

***

The true circle of people who are interested in another MLM company is not the consumer or society, but new and hopeful investors. The marketing pressure of such firms is less aimed at introducing the product or the end consumer, but is more focused on future merchants. The true product is not the pills or lotions, but the investment of resources (money and time) into the trading community.

Deceptions small and large permeate the world of network marketing.

First lie: MLM is a business that offers the best opportunity to make big money.

Is it true: Almost everyone who joins an MLM structure loses money. And this is not an assumption, but a historical truth.

At Amway, the largest company, only 0.5 to 1% of all salespeople make it to the next high level sales of a "direct" merchant, the average income of all Amway representatives is about $40 per month. And this is without taking into account expenses and before paying taxes! The marketing system of companies based on the MLM system itself can produce only a small group of financial winners. If one manager needs a structure of several thousand representatives just to receive at least some significant income, then these representatives themselves already need a subordinate group of a million people! And this is just to at least copy the success of their leader. How many people can you really recruit? What is declared as “company growth” is nothing more than cutting money from new and new members of the structure.

MLM: How beautifully they describe your “rapid career”!

Most of Those who lose their money and time drop out of MLM within the first year of activity. Official statistics says that approximately 60-70% of all consultants (as they like to call themselves) leave the firm in the first year. These data are based on a report by the American Securities and Exchange Commission (SEC). It also reports that about 2/3 of the amount of all paid premiums from NuSkin were received by 200 participants of the pyramid at its top, with 63 thousand (wow!) “active” distributors!

Second lie: Network marketing is the most popular and effective way present goods on the market. The consumer loves to buy from an MLM company.

Is it true: If you check the ins and outs of network marketing, you will find an unproductive and ineffective distribution system on which the entire structure of many of these firms is based. The personal retailer is a model of the distant past rather than the future. Selling directly to friends and acquaintances means forcing them to change their shopping habits, limiting their product choices, forcing them to pay more and getting involved in stupid business models. All the inconvenience of such network marketing leads to the fact that it is not so much the product that is sold, but the opportunity to hire other traders.

Lie three: In the end, all goods or services will be sold through MLM. All trade will soon be on MLM tracks.

Is it true: It's not that new. MLM firms, in their current form, emerged in the late 1960s. And even in the homeland of MLM - the USA, all these companies in total have not reached even one percent of retail turnover!

Lie four: MLM is a new style of living that contains joy and happiness. This is the way to achieve everything in life!

Is it true: Motivational MLM slogans promise wealth and life in complete luxury. At the same time, most people are in search of meaningful activities in which they can demonstrate their abilities and personal talents. Not everyone and not everywhere is eager to sell some worthless or dubious product to their relatives.

Fifth lie: MLM is the best thing there is to maintain peace of mind.

Is it true: The use of spiritual concepts and the interpretation that when working in the MLM system you get satisfaction from helping your loved ones is already from the realm of the Christian religion. The presence of supposed “moral support” from the structured firm is based only on its income from new members of the pyramid. And support will end as quickly as new customers stop coming. Many MLM companies directly talk about their Christian benefactors, but this can also be explained by the fact that a large number of chain firms originated from Utah in the USA. And it is difficult to surpass this state in terms of piety. That's why they are Mormons :-).

Lie six: Achieving success in MLM is easy! Your friends and family are your natural clientele. Those you love will be your customers for life!

Is it true: Turning friends or family into a tool for personal commerce destroys relationships with others. Marketing pressure can lead to a basic loss of loyalty on the part of friends. There is a chance to simply “get” everyone with your products. Is the thirst for profit worth it? And there are few people who will buy your product from you.

The seventh lie: You can sell in your free time. Working for an MLM company provides the greatest flexibility and personal freedom regarding the time invested. In just a few hours a week, it is possible to create significant additional income and develop personal income to such a size that other work becomes redundant.

Is it true: Decades personal experience Millions of people have already proven that making money in MLM requires an unusually high investment of time, personal active participation, patience and the ability to fool others. In addition to the necessary hard work and special personal qualities, the model of such marketing occupies numerous aspects personal life at different times. For MLM, any person is a potential buyer interested in the product. Every moment in life is an opportunity for a sales pitch or presentation. There are no forbidden places, people or times to sell. Consequently, there is no free space or free time left as soon as a person enters such a structural organization.

By virtue of the fact that employees allegedly create their own income, the MLM system achieves control or even dominance over a person’s entire life and requires that person to comply with the system. Many people are so drawn into this system that they become socially dependent and cannot maintain the same contacts with their environment.

Eighth lie: MLM is a positive, new business that supports its employees. MLM strengthens the spirit and personal freedom of a person.

Is it true: Multi-level marketing spreads messages of fear, deceives potential employees with promises of high earnings, but adds to this predictions of the collapse of existing forms of sales of goods or services, scares with the prospects of unemployment and even the collapse of entire states. Professions or forms of labor familiar to everyone are put on display for amusement, because this is nothing more than “slavery” without the chance of unlimited earnings. Phrases like: “only losers work for their uncle” are very common in the speeches of trainers at MLM seminars. The multi-level marketing system itself is elevated to the rank of the last hope of all humanity. A solid business model is never based on negative forecasts and intimidation of naive people.

Ninth lie: MLM is the most The best way develop your business and become independent.

Is it true: MLM does not give you independence. It is a complete illusion to be a member of an MLM as a “free” trader. Many MLM firms directly prohibit their salespeople from collaborating with other firms. Most employee agreements provide for simple immediate termination, and many sponsors can easily be stripped of their own structure for various reasons. Salespeople ("consultants" as they call themselves) are just part of a complex system of hierarchies over which they have absolutely no control.

Lie tenth: Network marketing is not a pyramid scheme because it sells a product.

Is it true: Selling a certain product does not at all protect the company from the application of “anti-pyramid” laws to it, which exist in many countries of the world. In the United States, federal authorities have successfully closed down some firms that sold much-needed goods. The liquidation of the firms was caused by violations of legislation regarding financial pyramids. Many MLM companies constantly violate current legislation, but are not prosecuted by the authorities, since they operate in the semi-legal sector.

Personal conclusions

Most MLM firms are not worth the attention of potential employees. The very system of pressure on traders leads to the fact that people are forced to sell their clients either absolutely worthless or overly expensive goods. IN Lately, many MLM firms have massively “moved” to the Internet. But even there they remain nothing more than a system of pumping money out of their fellow citizens.

I hope that somewhere there is a fair and honest structural company, but I haven’t seen it myself yet... And those organizations that caught my eye were engaged in simple deception. I would be glad to know about an honest company.