MULTI LEVEL MARKETING

CHAPTER 1
INTRODUCTION

Multi-level marketing (MLM) is a marketing strategy in which the sales force is compensated not only
for sales which are personally generated, but also for the sales of others who are recruited, creating a
down line of distributors and a hierarchy of multiple levels of compensation. It is a kind of network or
referral marketing. A company can be termed MLM when the products or services are distributed by
independent distributors. Their compensation depends on their own sales as well as the sales of other
distributors they have included in the company. The term multilevel comes from the concept of
recruiting and training distributors as a part of the sales team within the company.

Multi-level marketing is a legitimate business strategy, though it is controversial. One problem is that
pyramid schemes, which use money from new recruits to pay the people at the top, often take advantage
of people by pretending to be engaged in legitimate multi-level marketing. Pyramid schemes can
sometimes be spotted by their greater focus on recruitment than on product sales.

Around the world, direct selling is a growing channel of retail distribution for 'low ticket' consumer
goods; particularly personal products, cosmetics, nutritional supplements and household goods for
which there is a strong repeat market. Traditionally, direct selling companies offered self-employed
direct sellers a flexible part time earnings opportunity. The direct sellers were usually managed by
employed sales managers.

Multi-level marketing (MLM) is a marketing strategy in which the sales force iscompensated not only
for sales they personally generate, but also for the sales of the other salespeople that they recruit. This
recruited sales force is referred to as the participant's "down line", and can provide multiple levels of
compensation. Other terms for MLM include pyramid selling, network marketing and referral marketing

A strategy that some direct sales companies use to encourage their existing distributors to recruits new
distributors by paying the existing distributors a percentage of their recruits' sales. The recruits are
known as a distributor's "down line." All distributors also make money through direct sales of products
to customers. Amway is an example of a well-known direct-sales company that uses multi-level
marketing.
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Multi-level marketing businesses function by recruiting salespeople (also called Distributors,

Independent Business Owners, IBOs, Franchise Owners, Sales Consultants, Beauty
Consultants, Consultants, etc.) to sell a product and offer additional sales commissions based on the
sales of people recruited into their downline, an organization of people that includes direct recruits,
recruits' recruits, etc. This arrangement is similar to franchise arrangements where royalties are paid
from the sales of individual franchise operations to the franchisor as well as to an area or region
manager, but in some MLM programs, there can be seven or more levels of people receiving royalties
from one person's sales.

MLM is a sales system under which the salesperson receives a commission on his or her own sales and a
smaller commission on the sales from each person he or she convinces to become a sales person

1.1 HISTORY OF NETWORK MARKETING

Dr. Carl Rehnborg was working in China and began to observe that urban Chinese citizen showed sign
of malnutrition, but not he poor citizen living in rural areas. His studies revealed that this was because
the riches urban folks were eating polished rice, void in any nutrients critical to human diet. After many
years of research and study in this field, in 1939 Dr. Carl Rehnborg setup a company called Nutrilite, to
manufacture food supplements containing different vitamins and minerals vital for human body. The
major problem he faced was in the marketing and the customer education relating to this product or
range, since most of the people at that time had not heard about vitamins and minerals. To solve this
problem he came up with another new idea in1945, whereby he used his zealous customers as a sales
force, working a system which we today know as multilevel marketing.

It is generally accepted that the first multi-level marketing plan was introduced in 1945 by the California
Vitamin Company (shortly afterwards to become Neutralize). The plan allowed Neutralize 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.

The 1980s saw a major shift as companies began managing the stocking and distribution of products
as well as commission payments to their members. This allowed members to focus on selling. Today,
most MLM companies act as logistics companies that take orders, ship products and calculate and pay

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commissions. With the arrival of the Internet, MLM companies have started to go online. Many
established MLM companies began to use the Internet to promote their products. At the same time,
many other new MLM companies started their businesses using the Internet, a model generally called
online MLM.

1.2 EXAMPLES OF MLM

1. Amway is the best example of MLM, but there are many others. Cutco Knives are marketed through
Vector Marketing, both Vector and Cutco are owned by the same parent company.
2. Aflac (borderline case, like Farmers Insurance): Aflac sells supplemental health care insurance,
including in Japan which has a vestigial and increasingly inadequate national health care plan. It is
not a full-blown MLM, but has many attributes of one.
3. Alticor parent company of Access Business Group and Quixtar and Amway. Originally, Alticor was
Amway, but changed its name and incorporated Amway outside the USA as a wholly-owned
subsidiary.
4. Farmers Insurance mostly sold through inexperienced agents recruited by district managers. While
most insurance is sold through third party firms, Farmers has a peculiarly MLM-style of recruiting
agents who have no experience whatever with insurance.
5. Mary Kay Cosmetics (extremely well-known; recruits are supposes to show customer show to use the
products). Uses a scheme of leasing cars to sales people who make monthly targets.
6. Nikken(Japan-based health care products, dominated by magnets)
7. Nu Skin(Japan-based health care products) product was Interior Design Nutritionals(IDN), since
renamed Pharmanex also markets.
8. Arbonne which is international company offering skincare product. The product developed in
Switzerland and based on botanical principle.

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CHAPTER 2
PROCESS OF MULTI LEVEL MARKETING
Professional network marketers all have a system for bringing new distributors onto their team. The
details of the implementation are widely varied, but the basic structure is common across all systems
that I have studied, and the true professionals know where they are in the process with each prospect.

Five steps process

1. A sales representative (a distributor) first becomes effective at selling a product or services to a

consumer.

2. Recruit one person and train them how to get customer. This person would be called your down line.

3. Once your sales rep can get customer at will, and then train them how to recruit another person.

4. Ensure that your sales rep can train his new sales rep how to get customers.

5. Then, you recruit one other person and repeat steps two through four. Keep doing this until you have
reached the income you desire.

Fig 2.1: Process of MLM

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CHAPTER 3
NETWORK MARKETING AS BUSINESS

Network Marketing has advantages and disadvantages, just like every other kind of business model, Network
marketing is also known as referral marketing, cooperative marketing, MLM or multi-level marketing. At its root
Network Marketing business requires that you build a distribution network, Network Marketing is not for
everyone. In reality, only a small percentage of those who pursue the industry succeed in it. The reasons are
complex, and there are no easy answers because human relationships are unique and cannot be categorized into a
set of rules and tasks to be followed. Most successful Network Marketers are positive, extroverted people who
have a large circle of influence. In other words, they are credible and respected, and have a large number
of people who know them, like them and trust them. Successful Networkers have been successful in other areas of
life, and can translate that success into the Network Marketing arena. Network marketing at its root will always
require good, old fashioned conversation whether it is in person, via telephone, e-mail or instant messenger.

3.1 DIFFERENCE BETWEEN NETWORK MARKETING BUSINESS

AND TRADITIONAL BUSINESS

Traditional businesses are based on a few business owners selling their products to many customers. The
Network Marketing business model is based upon many business owners each selling products to a few. The
traditional business strives to be unique, whereas the Network Marketing business strives to be duplicable. The
traditional business sells products. The Network Marketing business sells products and offers a business
opportunity. Network marketing business success requires that you sell products, and that you develop a team of
business partners who also sell products. To develop a solid, six figure incomes in Network Marketing business,
an individual really need to have a strong sense of self direction, an unflagging optimism, and the enthusiasm and
passion to promote your product and business daily to the people around you. Network Marketing leaders make a
point to speak to five to ten NEW prospects daily to keep a regular flow of new people into the business and also
need to grow personally as well as professionally, to confront own inner fears and limitation and to take the time
to learn the skills need to succeed in the business.

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CHAPTER 4
MLM LEAD GENERATION

MLM lead generation is critical when it comes to finding success in Network Marketing. Justas any
business thrives or fails based on their flow of leads, an MLM business is no exception. Leads may seem
more important when you just get started in a Network Marketing program, but lead generation will
remain a constant concern throughout your career in the industry.

4.1 SEVEN STRATEGIES

There are a number of different strategies that can be used for lead generation, but the best results are
achieved by using a combination approach with multiple strategies. Here are seven categories of MLM
lead generation approaches.

1. Warm market
Warm market is where most people start their MLM marketing. Warm market means all of your
friends, family, and coworkers- people you already know, or have known. It is the simplest and
fastest way to succeed with your MLM lead generation strategies.
Warm market is used in both the sales and direct marketing industries. In direct marketing it is
similar to using the phrase "permission marketing". In sales and direct marketing your warm market
is said to be people you know, which could be friends, relatives and existing customers, even
referrals are said to be warm. “Cold market" refers to a sales person's future or prospective
customers
2. Local prospecting
Local prospecting for MLM lead generation is called cold market prospecting. Because of the huge
amount of rejection- the cold shoulder you can expect.
3. Traditional Advertising
Traditional advertising avenues like radio, TV, print, direct mail, and outside advertising like
billboards and ad space on buses or cabs is not very effective for MLM lead generation
4. Buying Leads

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Buying leads is dangerous unless you have no concerns about money, because you may find yourself
wasting a bunch of it.
5. Search Engine Marketing
Create a well-designed lead funnel that starts with your advertising on one of the search engines sites
and directs people to a capture site with a compelling offer that gives you a high conversion rate and
registration rate from your visitors.6. Social Networking Social Networking is a huge topic too. It’s
all about relationships and offering solutions to those you meet.
6. Attraction Marketing
Attraction marketing is the most appealing method of online MLM lead generation. That’s when
you become such an authority figure that people seek you out rather than the other way around.

4.2 SIX WAYS TO GENERATE THE BEST MLM LEADS

Generating the best MLM leads is both a skill and an art that can be learned. One of the important
factors to remember is that you are talking to real people. It’s not about you. It’s about them. Find out
their feelings, their goals and wants. Then provide a solution. Build a relationship and then a
partnership. The fact is most people don’t care about your company, pay plan, etc. They care about
finding a solution to their problem.

1. Generate MLM leads with a personal website. Learn to sell yourself. Why should someone join you?
What makes you unique? And what value and expertise do you bring to the partnership? Answer these
questions on your Website. Sell “you.”

2. Use an auto responder to acknowledge your MLM leads. As leads visit your website, offer a “free
report or newsletter.” This will build your subscriber list and allow you to communicate with your
prospects. Use it to provide valuable information. Timing is everything. If the timing isn’t right today, it
may be next year. Be that person who has stayed in touch.

3. Have an MLM leads generation plan and goals. Will need to set goals and stick to them. Be consistent
and stay focused.

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4. Write articles to generate MLM leads. Article writing is a great avenue for building a presence online.
Submit these articles toe-zines and newsletters. Articles are powerful because you can present yourself
as an expert in your industry.

5. Create a blog for MLM leads. Blogging is fun and it allows you to write freely to your niche. Blog
posts can be various lengths. Blog regularly and watch your traffic grow.

6. Learn to Squidoo for MLM leads. Anyone can do it. It’s simple, fun and it allows you to monetize
your marketing. I’ve created some of my best MLM leads through Squidoo. Conclusion: Generating
Multi-Level Marketing Leads Generating the best MLM leads is a process that won’t happen overnight.
But it will happen. Pick one or two lead generating avenues and master those. Then, when you are ready
add one more and repeat.

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CHAPTER 5
GOVERNMENT REGULATION ON MLM

Government is aware of a number of multi-level marketing companies operating in the country are
disguised as those selling products but they are inherently operating money circulation scheme. Some
complaints have been received, in the light of which, the Government, in Department of Financial
Services, has constituted an Inter- Ministerial Group consisting of representatives from Department of
Financial Services, Ministry of Corporate Affairs, Reserve Bank of India, Securities Exchange Board of
India, Department of Consumers Affairs, CIEB (Department of Revenue) and SFIO to –

 Draft Model Rules on the Multi-Level Marketing Companies and on the prohibited scheme
under the prize Chits and Money Circulation Schemes (Banning) Act, 1978.
 Frame clarificatory guidelines on how to distinguish between genuine direct sales from disguised
money circulation scheme.

To regulate the sale of goods and services outside of retail establishments otherwise known as "Direct
Selling (Multi-Level Marketing)" and to provide for protection of consumers who purchase goods and
services from direct sellers, following guidelines are issued with the approval of the Competent
Authority.

5.1 CONDITIONS FOR PERMISSIBLE DIRECT SELLING

 Should be a Direct Selling Entity, having sales tax/Vat, Income Tax, TDS and other license as may
be required as per the law/regulations of its principle place of business.
Should have bank account with at least one nationalized bank.
 Partnership Deed or Memorandum of Association should clearly state their nature of business.
(Those who do not have such specific clauses should get their memorandum of Association or
Partnership Deed, as the case may be, amended within 2 months from the date of publication of
these Guidelines).
 Pay sales incentive at the agreed rate within the agreed period.

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 Shall display names and Identification numbers of their authorized Direct Sellers in the official
websites.
 Should have a consumer grievance cell that should ensure addressable of consumer grievances
within 7 days from the date of making such complaints.
 Website should provide space for registering consumer complaints hassle free.

5.2 PROHIBITION
 Payment of incentive by whatever names it is called unrelated to their respective sales volume.
 Supply/Distribution of goods with the knowledge that such goods/products are inferior or exceeded its
validity period as per the manufacturer.
 Direct Selling Entity/Direct Seller will not indulge in money circulation scheme or any act barred by the Prize
Chits and Money Circulation Scheme (Banning) Act, I978.

5.3 GENERAL CONDITIONS

 MRP of the goods should be visibly displayed on the package.
 Accounts of individual Direct Sellers shall be maintained properly and should be made available through
World Wide Web.
 Sales incentive should be distributed to the respective Seller on or before the agreed due dates.
 Goods sold by the Direct Selling entity should carry guarantee/warranty of the manufacturer. However
consumer should be given opportunity to exchange/return the goods if he finds any manufacturing defect or
the product purchased is not useful for the purpose it was meant, within 30 days from the date of purchase,
provided any seal/protection on the product is kept unbroken

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CHAPTER 6
NETWORK MARKETING IN CONTROVERSIES

This kind of business always comes in controversies and always un news because of some reasons they are as
follows

 Market Saturation
Some people believe that the Network Marketing model itself is flawed because an unlimited number of
distributors selling products create market saturation. A good research project would be to compare the
relative income levels of distributors coming into a company that is mature and has more distributors, with
those of distributors entering a young company without a lot of distributors.

 Unscrupulous distributors
Unfortunately Network Marketing can attract lazy people who think they will make money off of the work of
their down line without selling products themselves. Important in Network Marketing to focus on working
hard. There are also some Network Marketers who do not think about targeted advertising, and instead try to
sell their products or their business opportunity to anyone who breathes, regardless of whether they want to
hear about it. This approach can alienate friends and makes a terrible impression, thereby contributing to the
'sleazy' image of Network Marketing. Even worse, some companies use this as the model of how to start your
business. There are Network Marketing distributors who clog up the internet with zillions of business
opportunity unsolicited e-mails, newsgroup posts and other unscrupulous advertising.

 Scams
Some scam artists use Network Marketing to distribute their products quickly and then take the money and
run, giving the entire industry a bad name, and due to this many people lost their money. Some of the
companies who involves in this kind of scams are speak Asia, Tulip, RCM, Swarn Laxmi Yojna.

6.1 DRAWBACKS OF NETWORK MARKETING BUSINESS

Probably the biggest disadvantage to network marketing is that it can be difficult to embark in your own business.
Network marketing unfortunately has a kind of negative stigma to it and most people are suspicious of network
marketing thinking that it is a pyramid scheme, if an one is not in this kind of business it’s hard to adjust and have
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to be a self-starter but there wards can be just as great. To avoid these disadvantages, work with people who know
what they are doing and can teach, support, and help. The worst experience in network marketing comes when
someone join a company, and fail every time.

6.2 CHARACTERISTICS OF TOP NETWORK MARKETING

BUSINESS

 Integrity and honesty

 Full disclosure about the company’s ownership, financial strength, product development, and distributor
relationships
 A mission statement along with ethics standards and values
 A simple, duplicable marketing system that people from all orientations can follow with a reasonable
expectation of success
 Products that have been tested for reliability and marketability
 A fair compensation plan that’s easy to understand and rewards both full-time and part-time distributors
 Support for the associates in the form of outstanding marketing materials, conference calls, and national
meetings
 An experienced management team
 Training that teaches people what to do and how to do it so that they can become successful within a
reasonable period of time
 Technology that makes it easy for distributors to recruit, train, sell products, and manage their organizations,
and for retail customers to buy products.

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CHAPTER 7
ADVANTAGES AND DISADVANTAGES OF MLM

7.1 ADVANTAGES OF MLM

1. MLM marketing holds many advantages, mostly for the business. A business that use MLM marketing as
a means to market as a product or service gains the advantage of not having to hire full time salespeople.
2. Marketing is done thought a multi-tiered system of independent representatives, each in business for him
or herself.
3. These are the people responsible for selling the product or service offered by the company and for
recruiting new independent salespeople into the business.
4. One distinct advantage for the independent representative is low overhead.
5. The affiliate does not have to keep inventory on hand.
6. Most orders are taken either online or through a campaign of catalog distribution.
7. With multi-level marketing opportunities you can say goodbye to the daily grind and never ending
dissatisfaction of life.
8. Once you have built your multi-level marketing business opportunity to a certain level, it will not take a
full work schedule to keep it going smoothly.
9. Having successful multi-level marketing businesses can give you the money you have always dreamed of.

7.2 DISADVANTAGES OF MLM:

1. MLM is often a very attractive business model to these looking to supplement their current income. The
major draw is the idea of getting paid someone else’s work
2. You must make sure you are joining the best, do your research.
3. With a online marketing business opportunity you usually need a huge down line to make good money.
4. With a failure rate so high, getting them involved may burn some bridges later if it doesn’t work out.
5. One major disadvantage of MLM/affiliate programs is also its biggest draw for new people, the down
line.

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CHAPTER 8
REASONS FOR FAILURE IN MLM

1. the most important reason of a failure on our opinion is a lack of desire

2. The second reason we would like to mention is a lack of action

3. The third reason for people to fail in network marketing industry is a lack of focus

4. The distributor not talking to people.

5. The distributor not talking to enough people

6. The distributor not talking to the right people

7. Distributor not talking right to people.

8. Lack of Training/No Self Growth

9. No Goals Set

10. Fear.

11. Lack of Leadership

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CHAPTER 8
CONCLUSION

If you look around, you’ll see many businesses having a great fall or loss, many job opportunities being
stolen, salaries being cut etc. Due to this unfortunate scenario, people are struggling and suffering a lot
to find a stable job or to get settled in a business to earn well for a living. So, to solve all the issues,
home-based business opportunities have started knocking the doors.

MLM is a business which runs through network marketing, referral marketing, and direct selling. It is
totally a non-conventional and non-traditional business which always has a room for more people. This
kind of business is all about expanding your networks and will only get stronger when more and more
people will join.

It is based on “Word of Mouth” marketing, i.e., every time when you refer or share about this business
with anyone, you convincing power and the words you speak should attract the listener’s faith in you, so
that he thinks about joining this business. The sales promoters are required to create a down line which
looks like a pyramid. So, every time when anyone joins the business, they are added to the down line
and the levels above become more profitable, hence, producing more profit. In this, the sales promoters
are not just rewarded for the sales generated by them but also for the sales generated by the promoters in
their down line, in the hierarchy.

The best part about this business is that it keeps growing and there is no chance of falling. Every
member earns a particular amount depending upon their sales and people in their down line. MLM
benefits each employee in appropriate proportions in the pyramid and the ones, who are on the top of the
down line, definitely get intense earning opportunities. This business also allows you to earn unlimited
income and it all depends on how wisely you invest your time, money and labor into it.

When you work in an MLM business, you automatically become an independent business person, a self-
made man, and you unknowingly work a lot on shaping your personality. Your personality develops
automatically when you communicate with people, speak in meetings, manage your down line, maintain

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decorum, generate leads, handle emails and website which improves your communicating skills,
management skills, disciplines, consistency, focus, confidence etc.

You are your own boss and can decide when and where to work from. It is, again, a flexible business.
The results and your income depend solely on how productively you devote your time into this business
and set your targets. MLM has this great advantage of earning residual income continuously in future,
even if you aren’t that active. You do not require any qualification or any work experience to work in
MLMs. It is open to all and any individual and be at the highest position if works well.

There are just a few things that you need to know before you begin working with MLMs. You should
have an idea of the products and services offered by them, their costs, their marketing plan and it would
be beneficial if you take some reviews from the people who are already working there and who actually
use their products. It is a system of work ready, which means, the promoters can begin it any time after
forming an action plan with their sponsor.

In the current scenario, MLM is quite popular for generating a lot of money with flexible working.
There is a great buzz about it in the market. Again, this business requires low startup cost, free training
by the company, grasping advertising benefits etc. One can earn a lot by encouraging people to join and
convincing them to buy a product. Currently, it is one of the fastest growing businesses among
passionate, hardworking and dedicated people.

Something which needs to be taken care of while starting with this is to make sure that they are real, not
any scam. There are MLMs which are profit making while others tend to be real scams. To beware of
them, you need to do some serious research. You need to take reviews from people, consider their
reliability and steadiness, products and services, staff assistance, market plan etc.

Over a period, the business of MLMs have been evolving and rising at a fast pace with the number of
companies, their number of sales and sales promoters, wide range of products and services, execution
plan, great earning opportunity etc. Therefore, the concept of MLMs is gradually becoming very
powerful and popular, attracting more and more people into it. The future of MLM will definitely have a
lot to offer with much greater opportunities and scope.

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