LITERATURE REVIEW:Multi-level marketing (MLM) is a marketing strategy in which the sales force is compensated not only for sales

they personally generate, but also for the sales of others they recruit, creating a downline of distributors and a hierarchy of multiple levels of compensation. Other terms for MLM include pyramid selling, network marketing, and referral marketing. Most commonly, the salespeople are expected to sell products directly to consumers by means of relationship referrals and word of mouth marketing Some people use "direct selling" as a name for MLM, although MLM is only one type of direct selling, which started centuries ago with peddling. MLM companies have been a frequent subject of criticism as well as the target of lawsuits. Criticism has focused on their similarity to illegal pyramid schemes, price-fixing of products, high initial start-up costs, emphasis on recruitment of lower-tiered salespeople over actual sales, encouraging if not requiring salespeople to purchase and use the company's products, potential exploitation of personal relationships which are used as new sales and recruiting targets, complex and sometimes exaggerated compensation schemes, and cult-like techniques which some groups use to enhance their members' enthusiasm and devotion. In contrast to MLM is single-level marketing, where the salesperson is rewarded for selling the product directly to the consumer.

Direct selling, network marketing, and multi-level marketing

"Network Marketing" and "Multi-level Marketing" have been described by author Dominique Xardel as being synonymous, and as methods of direct selling According to Xardel, "direct selling" and "network marketing" refer to the distribution system, while the term "multi-level marketing" describes the compensation plan Other terms that are sometimes used to describe multi-level marketing include "word-of-mouth marketing", "interactive distribution", and "relationship marketing". Critics have argued that the use of different terms and "buzzwords" is an effort to distinguish multi-level marketing from illegal Ponzi schemes, chain letters, and consumer fraud scams. Some sources classify multi-level marketing as a form of direct selling rather than being direct selling The Direct Selling Association, an American industry body, reported that in 1990 twenty-five percent of members used MLM, growing to 77.3 percent in 1999 Companies such as Avon, Electrolux, Tupperware, and Kirby all originally used single level marketing to sell their goods and later introduced multi-level compensation plans. By 2009, 94.2% of members were using MLM, accounting for 99.6% of sellers, and 97.1% of sales. The DSA has approximately 200

members while it is estimated there are over 1000 firms using multi-level marketing in the US alone.

History
It is generally accepted that the first multi-level marketing plan was introduced in 1945 by the California Vitamin Company (shortly afterwards to become Nutrilite The plan allowed Nutrilite distributors with at least 25 regular customers to recruit new distributors and draw a 3 percent commission from their sales. Unlike traditional direct selling, this was an ongoing payment whenever the customer re-ordered, allowing direct sellers to build a sales organization that could generate a residual-like income

Setup
Independent, non-salaried salespeople of multi-level marketing, referred to as distributors (or associates, independent business owners, dealers, franchise owners, sales consultants, consultants, independent agents, etc.), represent the company that produces the products or provides the services they sell. They are awarded a commission based upon the volume of product sold through their own sales efforts as well as that of their downline organization. Independent distributors develop their organizations by either building an active customer base, who buy direct from the company, or by recruiting a downline of independent distributors who also build a customer base, thereby expanding the overall organization. Additionally, distributors can also earn a profit by retailing products they purchased from the company at wholesale price.

Income levels
Several sources have commented on the income level of specific MLMs or MLMs in general:

The Times: "The Government investigation claims to have revealed that just 10% of Amway's agents in Britain make any profit, with less than one in ten selling a single item of the group's products." Scheibeler, a high level "Emerald" Amway member: "UK Justice Norris found in 2008 that out of an IBO [Independent Business Owners] population of 33,000, 'only about 90 made sufficient incomes to cover the costs of actively building their business.' That's a 99.7 percent loss rate for investors." Newsweek: based on Mona Vie's own 2007 income disclosure statement "fewer than 1 percent qualified for commissions and of those, only 10 percent made more than $100 a week." Business Students Focus on Ethics: "In the USA, the average annual income from MLM for 90% MLM members is no more than US $5,000, which is far from being a sufficient means of making a living (San Lian Life Weekly 1998)" USA Today has had several articles:

"While earning potential varies by company and sales ability, DSA says the median annual income for those in direct sales is $2,400." In an October 15, 2010 article, it was stated that documents of a MLM called Fortune reveal that 30 percent of its representatives make no money and that 54 percent of the remaining 70 percent only make $93 a month. The article also states Fortune is under investigation by the Attorneys General of Texas, Kentucky, North Dakota, and North Carolina with Missouri, South Carolina, Illinois, and Florida following up complaints against the company. A February 10, 2011 article stated "It can be very difficult, if not impossible, for most individuals to make a lot of money through the direct sale of products to consumers. And big money is what recruiters often allude to in their pitches." "Roland Whitsell, a former business professor who spent 40 years researching and teaching the pitfalls of multilevel marketing": "You'd be hard-pressed to find anyone making over $1.50 an hour, (t)he primary product is opportunity. The strongest, most powerful motivational force today is false hope."

Legality and legitimacy

USA
MLM businesses operate in all 50 states.New businesses may use terms such as "affiliate marketing" or "home-based business franchising". Many pyramid schemes try to present themselves as legitimate MLM businesses However, there are people who hold that all MLMs are essentially pyramid schemes even if legal. The United States Federal Trade Commission states "Steer clear of multilevel marketing plans that pay commissions for recruiting new distributors. They're actually illegal pyramid schemes. Why is pyramiding dangerous? Because plans that pay commissions for recruiting new distributors inevitably collapse when no new distributors can be recruited. And when a plan collapses, most people - except perhaps those at the very top of the pyramid - end up emptyhanded." In a 2004 Staff Advisory letter to the Direct Selling Association, the FTC states: Much has been made of the personal, or internal, consumption issue in recent years. In fact, the amount of internal consumption in any multi-level compensation business does not determine whether or not the FTC will consider the plan a pyramid scheme. The critical question for the FTC is whether the revenues that primarily support the commissions paid to all participants are generated from purchases of goods and services that are not simply incidental to the purchase of the right to participate in a money-making venture. The FTC warns "Not all multilevel marketing plans are legitimate. Some are pyramid schemes. It's best not to get involved in plans where the money you make is based primarily on the number of distributors you recruit and your sales to them, rather than on your sales to people outside the plan who intend to use the products." and states that research is your best tool, giving eight steps to follow

1. 2. 3. 4. 5. 6. 7. 8.

Find and study the companys track record Learn about the product Ask questions Understand any restrictions Talk to other distributors (beware of shills) Consider using a friend or adviser as a neutral sounding board or for a gut check Take your time Think about whether this plan suits your talents and goals

Criticism
The FTC issued a decision, In re Amway Corp., in 1979 in which it indicated that multi-level marketing was not illegal per se in the United States. However, Amway was found guilty of price fixing (by effectively requiring "independent" distributors to sell at the same fixed price) and making exaggerated income claims The FTC advises that multi-level marketing organizations with greater incentives for recruitment than product sales are to be viewed skeptically. The FTC also warns that the practice of getting commissions from recruiting new members is outlawed in most states as "pyramiding". In April 2006, it proposed a Business Opportunity Rule intended to require all sellers of business opportunitiesincluding MLMsto provide enough information to enable prospective buyers to make an informed decision about their probability of earning money. In March 2008, the FTC removed Network Marketing (MLM) companies from the proposed Business Opportunity Rule: The revised proposal, however, would not reach multi-level marketing companies or certain companies that may have been swept inadvertently into scope of the April 2006 proposal Walter J. Carl stated in a 2004 Western Journal of Communication article that "MLM organizations have been described by some as cults (Butterfield, 1985), pyramid schemes (Fitzpatrick & Reynolds, 1997), or organizations rife with misleading, deceptive, and unethical behavior (Carter, 1999), such as the questionable use of evangelical discourse to promote the business (Hopfl & Maddrell, 1996), and the exploitation of personal relationships for financial gain (Fitzpatrick & Reynolds, 1997)" In China, volunteers working to rescue people from the schemes have been physically attacked. MLM's are also criticized for being unable to fulfill their promises for the majority of participants due to basic conflicts with Western cultural norms. There are even claims that the success rate for breaking even or even making money are far worse than other types of businesses: "The vast majority of MLMs are recruiting MLMs, in which participants must recruit aggressively to profit. Based on available data from the companies themselves, the loss rate for recruiting MLMs is approximately 99.9%; i.e., 99.9% of participants lose money after subtracting all expenses, including purchases from the company." In part, this is because encouraging recruits to further "recruit people to compete with [them]" leads to "market saturation."

Another criticism is that MLM has effectively outlived its usefulness as a legitimate business practice. The argument is that, in the time when America was a series of relatively small, isolated towns and rural areas not easily accessible to small companies, MLM was a useful way to let people know of and buy products or services. But the advent of internet commerce, with its ability to advertise and sell directly to consumers, has rendered that model obsolete. Thus, today, nearly all modern MLMs ostensibly sell vastly overpriced goods and services (if there even is a real product or service involved at all) as a thin cloak of legitimacy, while their members are driven to recruit even more people into the MLM, effectively turning these programs into pyramid schemes. It is because of this encouraging recruits to further recruit their competitors, some people have even gone so far as to say at best modern MLMs are nothing more than legalized pyramid schemes with one stating "Multi-level marketing companies have become an accepted and legally sanctioned form of pyramid scheme in the United States" while another states "MultiLevel Marketing, a form of Pyramid Scheme, is not necessarily fraudulent." In October 2010 it was reported that multilevel marketing companies were being investigated by a number of state attorneys general amid allegations that salespeople were primarily paid for recruiting and that more recent recruits cannot earn anything near what early entrants do.

Market research is often overlooked when it comes to building your network marketing business. The majority of MLM companies will of course devote a lot of time and resources into ensuring they have the right product for the marketplace and the right method of delivery before making their move and staking a claim to be the next big thing to hit the long and winding network marketing road. But the same cannot be said of the average networker, who lets face it, wouldnt know where to start if you handed him your latest market research plan to review. But market research is a critical component in any marketing plan. Building an online network marketing empire is far easier than it first appears if you know where to start and which direction to travel in when setting out on the road to financial freedom and thats where market research methodology kicks in.

There are five steps you need to take to create and maintain your own online business and build a substantial income within your chosen niche and network marketing is no different. The following series of articles will walk you through those steps and outline what actions you need to take in order to establish the right foundations for your future network marketing empire. Those five steps are: 1. 2. 3. 4. 5. Find Your Niche Connect With Your Audience Build A Relationship With That Audience Sell Yours or Other Peoples Products To That Audience Rinse and Repeat

In order to do this successfully you will need to be both creator and manager, entrepreneur and work horse, innovator and harvester. Put simply, building your online network marketing business is fun and hard work. You need to wear both hats and be ready to experience the challenges and demands of both if you want to succeed. But with the right approach an online network marketing business can bring you financial freedom so lets see if we can put you ahead of the pack by helping you to master market research and build your own network marketing empire. Network Marketing Training:

Whether you and new or old to network marketing the first thing to get clear in your mind when building your business either online or off line is where you stand in terms of product positioning. This is what is known as defining your market niche. For you, its the first step on the road to prosperity

Step 1: Find Your Market Niche In MLM A niche is just a smart way to say a group of people interested in one particular topic. Its an online or offline marketplace that has its own interests and its own customers like weight loss, telecommunications or green living. For a sustainable and highly profitable network marketing business that niche needs to be;

Passionate about the topic Spending money in the niche With established products and services already in place (Yes! You want competition!) Full of online content already, that gets read or watched by an audience of attentive people

For YOU to make money in that niche you have to connect with and become a part of that audience! Lets begin Finding Your Passion:

What do you search for online, and how frequently? What are your interests? How often do you use Google to search for information on a certain topic? What products or services have you bought online or off in the niche?

Heres a quick exercise for you; Write down the topics in a list similar to the one I have below. Next, write down alongside the topic how often you search for information related to it. Finally, add a figure to any where youve spent money on products or services (these can be real world or information products) related to the topic.

Okay, so now we have an idea what niche youre interested in and where you might start to build your network marketing empire, lets move on to see what other people are thinking about. Forget what you think you know about niche marketing! This is NOT about longtail keywords and minimal competition. This is about one thing;

FINDING A BIG COMPETITIVE MARKET ! Lets Look At Two Areas:

Is the niche COMPETITIVE? Are people making SALES in the niche?

There are three places online where we can go to answer these two questions and Ill show you exactly where they are in the next article

Multi Level / Network Marketing

The Latest Reviews on Multi Level and Network Marketing Programs... The internet is full of Multi Level Marketing business opportunities that have made some people
money and nearly bankrupted others. What most people want to know is, are these Multi level Marketing ventures scams or the real deal? It's hard to get a clear answer from either side since each has an agenda, whether it is to get you to join their Multi level Marketing network or not to. Trust me its not hard to come across Blogs or WebPages for either side of the argument. The typical set up for a Multi level Marketing operation is a combination of direct marketing and franchising. This is setup in a top down fashion in which the parent company spawns independent contractors. They are in turn paid in accordance with the amount of sales their cell produces. Thus a commission in a Multi level Marketing network will be earned upon the sale of service or products. In some cases this will be to another independent product distributor. There are also a variety of compensation plans set up by different Multi level Marketing networks, each being slightly different but maintaining the same goals of increased sales. There are in fact many legitimate Multi level Marketing operations in existence that offer a decent profit potential for their members. However the entire industry has been tarnished with a bad reputation due to the many scams associated with Multi level Marketing. The reasons that Multi level Marketing networks are stereotyped as scams is because too many have burned their members. An example of a fraudulent Multi level Marketing network is one that encourages it members to aggressively purchase products from their catalog knowing that

the products are not selling well. Subsequently, the company collapses due to a poor marketing or business infrastructure leaving its members with an overstock of poor selling products. The majority of criticisms and scam affiliations originate from the belief that the Multi level Marketing networks make their money from member fees rather than product sales. For instance I went to an MLM meeting where they were selling instructional tapes to go along with the products for $100. This type of activity is what gives MLM a bad name. These days the Multi level Marketing industry is still booming due to some innovations in the business model. Proprietors of these networks will avoid calling them MLM opportunities due to the negative connotations. They will call it network marketing or something similar to draw in people that have learned to avoid MLM. In the end my advice is to very cautiously proceed with Multi level Marketing. If you feel that you would be spending more on instructional material or undesirable products then stay away.

How to Choose a Network Marketing Company

By an eHow Contributor

Network marketing, or multi-level marketing, is a field for people who no longer want to work in the corporate world or who want to earn extra income. Working with a reputable networking marketing company provides you with the opportunity to be your own boss, set your own hours and work at your own pace. Successful network marketers research the possibilities when they start their businesses and they choose a company carefully.
Related Searches:

Business Research Business Ideas

Difficulty: Moderate

Instructions
Things You'll Need

Internet and books for research Contacts in the network marketing field

Research Network Marketing companies on the Internet. The Direct Selling Association (see Resources) has a large list of valid companies. The DSA's Direct Selling 411 website (see Resources) is designed to help you evaluate a company and learn more about the industry.

Look for the following qualities: at least five years in operation; a forthcoming website with average distributor compensation information, training support for distributors (on both products and how to run a business), positive team leader support and high-quality products. Find people who are building a network marketing business. Most people know at least one person involved in an MLM company. Even if the person you talk with is not part of a company you are interested in, they can give you an idea of what the business is like for them. If you do not know someone, the company you are researching will likely be able to find someone with whom you can meet. Attend information sessions. Many network marketing companies have informational meetings that welcome guests. This is the best way to meet a local group who will become a support network for you as you begin a business. Look for information sessions near you on a company's website. Find a product you truly love and will use in your own home. When you believe in the product, you will be able to sell it. Check for interest in the product with people you know. Network marketers sell to two markets: the "warm market" and the "cold market." The "warm market" is made up of people you know whom you think will be interested in the products and possibly the business. Not every network marketer sells to her warm market. You may also choose to sell to cold market prospects through "open house" sales, advertising and other sales strategies. Sign up to be a distributor either through the company's website or through a local distributor (who will become your "sponsor" and a great source of support). There will be a small start-up fee. Begin marketing your new network marketing business. You should expect training help from your sponsor and "upline," but you should also begin learning sales strategies on your own.

Tips & Warnings

There are several books that are helpful for a first-time Network Marketer. "Network Marketing for Dummies," by Zig Ziglar and John P. Hayes, and "Your First Year in Network Marketing: Overcome Your Fears, Experience Success, and Achieve Your Dreams!" by Mark and Rene Reid Yarnell are both good books with which to begin. Be wary of companies that offer "Get Rich Quick" schemes or have high start-up costs. A truly reputable network marketing company sells a valid product, has a low start-up cost and offers distributor compensation information upfront. Know the difference between a network marketing/MLM and a "pyramid scheme." A valid network marketing company is honest about how much work running a business will be and offers a legitimate product.

Because of the confusion some people have between "Network Marketing" and "pyramid schemes," you may meet with resistance when you first begin a network marketing business.