Introduction
As Nigerians have come to realize that there are no
jobs readily available to them, young and old graduate and illiterate, they have
gradually accepted the option provided them by the increasing number of
multi-level marketing businesses springing up here and there.
While a few of these businesses deliver on their
promises with much difficulties, most of them out-rightly scam their members
robbing them of both their hard earned cash and the trust of family and friends
to whom they introduced the idea.
Like I noted earlier, there are some who deliver on
their promises with much difficulties. These difficulties may be in getting
their down-lines (other people who joined through them) to commit their own
funds or sell some hard to market business product. The few genuine MLM
businesses are not only hard to find but also have easy to market products
line.
On this post, we share some pointers to note in
determining if the MLM business you have stumbled across is a poor idea of a
scheme, an outright scam or a genuine pot of gold. Let's see the concept behind
the MLM business.
As Nigerians have come to realize that there are no
jobs readily available to them, young and old graduate and illiterate, they have
gradually accepted the option provided them by the increasing number of
multi-level marketing businesses springing up here and there.
While a few of these businesses deliver on their
promises with much difficulties, most of them out-rightly scam their members
robbing them of both their hard earned cash and the trust of family and friends
to whom they introduced the idea.
Like I noted earlier, there are some who deliver on
their promises with much difficulties. These difficulties may be in getting
their down-lines (other people who joined through them) to commit their own
funds or sell some hard to market business product. The few genuine MLM
businesses are not only hard to find but also have easy to market products
line.
On this post, we share some pointers to note in
determining if the MLM business you have stumbled across is a poor idea of a
scheme, an outright scam or a genuine pot of gold. Let's see the concept behind
the MLM business.
The Business Concept
Multi-level marketing (MLM) is a strategy that some direct sales companies use to encourage their existing distributors to recruit new distributors by paying the existing distributors a percentage of their recruits' sales; these recruits are known as a distributor's "down-line." The existing distributors also make money through direct sales of products to customers.
In this strategy, the sales force is compensated not only for sales they personally generate, but also for the sales of others they recruit, creating this down-line of distributors and a hierarchy of multiple levels of compensation. So revenue comes in passively and actively. Actively when a distributor directly makes sales and passively when one or more of his recruits makes a sale.
Though widely controversial, Multi-Level Marketing is a legitimate business strategy. The problem is with pyramid schemes, which use money from new recruits to pay the existing network members at the top. We discuss Ponzi and Pyramid schemes in subsequent posts, lets see tips that separate real MLM business from other schemes.
The Business Definition
The Business Definition
A good MLM business that is worth investing your time, money and the trust of your network is supposed to align with the true definition of this peculiar business model. This definition means three things.
- A Logical Business Entity: A good MLM business entity is one that has a proven logic for conducting the flow of value within its network. This flow of value is the exchange of goods and or services accountable for the cash changing hands . Without this foundation of value, it is just a matter of time before the weight of the expectant initial members collapses the system. This is the collapse often witnessed in pyramid schemes like MMM.
- A Marketing Entity: The valid MLM business entity is designed around distributing a product. This is the core operation of marketing as found in the name of the business. The MLM business that does not clearly emphasize the sales of a tangible product, either in goods or services, should be quickly discarded as a scam or averted as future crisis.
- A Multi-Leveled Entity: The multi-level component of this business system is required to provide a crowd of marketer participants that generate more revenue in sales, which is usually more than the regular marketing structure, this is the crowd sourced factor. Then there is the delegated leadership responsibility framework that makes this type of business very easy to run. Here, the managers are responsible in directing only their down-lines instead of leaving it to a central management system.
The multi-level component of the business system is required to provide a crowd of marketer participants that generate more revenue in sales, which is usually more than the regular marketing structure. Then there is delegated leadership responsibilities. It is a lot easier to run an MLM business where managers direct their down-lines instead of leaving it to a central management system.
The Business Model
Businesses are categorized according to their models. It is the business model that determines what are the moving parts of the system, its activities and the value it traps. In asking about the business model of an entity, it is important that the business can reply to these three sets of 9 questions comfortably.
- What does the business do? : The value proposition is by all means the first thing to consider in assessing a business model. What have the founders set out to produce as value, which is to be exchanged for money being distributed. In joining this network this is what you are going to be marketing, so it is important to note its importance and demand within your network.
- How does it do it? : The key activities, in running the business, is next in line of things to consider. Sometimes what makes the remarkable difference between businesses might just be the things it does differently from the others. If the network is a service based one, how can you connect with its culture, how much do you accept its business operations and ideology.
- What do I need in doing it? : Some MLM systems have goods they sell to their recruits, who go ahead to find others to sell it to. This might be commodities easy to exchange for money or goods nobody wants. It is important to confirm with the recruiting personnel before joining and parting with your money.
- Who will help me in succeeding? : Your key partners, affiliates, down-lines. Who are they and how do you plug into the already conceived network of marketers. They must be people with some enthusiasm, knowledge of the product and zeal to win; else you might not make it beyond the dream of being rich.
- What will it cost before I start earning? : Most MLM businesses are just another disguised Ponzi scheme, they convince you about the benefits of the program long enough to blur the fine print, which comes back to bite you in the caboose. It is important to weight the cost of setting up with and proceeds estimated long before parting with your first dime.
- Who are my customers? : Is the business targeting you as the end-user, or is
it encouraging you to talk to people you do not know? The demography of your customers, their availability and preferences are all factors in the equation of your financial ambition. It is important that equation balances in your favor.
- How do I interact with them? : What are company policies that make interacting with the end-consumer easy as eating cake? The interaction that generates sales is important because the team you build up in expecting to make money would all be gone during the days of making those cold calls.
- How do I reach these customers? : There are wonderful MLM businesses, which have gone as far as developing the right channels in distributing their products in order to maximize profits. They are worth joining since all you need is to apply your network to the product assuming it is of value to them.
- How much are my expecting to make? : The oldest reason for going into business must be justified before one may claim being on the safe side of investment. The desire to make increase must be satisfied with clear prospects of revenue streams from the efforts made, else it is recommended to hold your peace.
There you have it, kindly leave your thoughts and opinions in the comment box below or include any points you think I left out.
