Multi-Level Marketing (MLM) or Network Marketing (NM)
How are Multi-Level Marketing and Network Marketing defined?
Multi-Level Marketing (MLM), also called Network Marketing (NM), in a general sense, is a business model which utilizes a combination of direct marketing and franchising. Typically, individuals become associated with a parent company in an independent contractor relationship. Sellers are compensated based on their sales of a product or service, as well as the sales of those they bring into the business.
Multi-level marketing has a recognized image problem because of difficulties in making a clear distinction between legitimate network marketing and illegal "pyramid schemes" or Ponzi Schemes. Nonetheless, many NM/MLM businesses operate legitimately in all fifty US states. Because of this image problem many new NM/MLM business do not use the words "multi-level marketing" or "network marketing" and instesd use terms like "affiliate marketing" or "home-based business franchising," etc.
In a legitimate MLM company, commissions are only earned on the sale of products or services to the end consumer who, in many cases, is also a distributor. No money may be earned on a "sign up fee" or for recruiting alone. Critics contend that some companies produce revenue primarily by attracting new participants, as opposed to selling products. Analysis of the compensatin plan is often required to determine whether participants are paid based on actual sales of products to customers versus new recruit bonuses and sales of business support materials.
A major shift in MLM occurred during the 1980s when companies began allowing their members to focus solely on marketing rather than handling the tasks of stocking/distrbuting products as well as taking care of comission payments to their sales organizations. Today, most MLM companies act as fulfillment comanies by taking orders, shipping products, calculating and paying commissions, etc.
Often, victims of fraudulent or illegal MLM schemes are required to purchase expensive inventories of products. These schemes are often quick to collapse when the merchandise cannot be resold, leaving all but those at the top of the pyramid with sometiimes staggering financial losses.
Isn't MLM against the law?
No...MLM is NOT against the law if it is a legitimate business entity. In fact, MLM is a viable multi-billion dollar business distribution and compensation strategy and is recognized as such by the U.S. government. The Federal Trade Commission (FTC) also recognizes MLM and offers information and tips on how to know if the company you are investigating is legitimate or not. What is specifically against the law is pyramiding or pyramid schemes. The paragraphs below are from the FTC website:
"If a plan offers to pay commissions for recruiting new distributors, watch out! Most states outlaw this practice, which is known as "pyramiding." State laws against pyramiding say that a Multi-level marketing plan should only pay commissions for retail sales of goods or services, not for recruiting new distributors.
Why is pyramiding prohibited? 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 top of the pyramid -- lose their money."
The FTC says to consider the following tips if you are considering an affiliation with a MLM plan:
• Avoid any plan that includes commissions for recruiting distributors.
• Beware of plans that ask new distributers to buy expensive inventory or establish a minimum monthly sales quota.
• Avoid plans that claim to sell "miracle" products or promise enormous earnings. Ask the promoter to substantiate all claims.
• Evaluate the product or service to determine if there's a market for it, and if it's competitively priced.
• Beware of testimonials from people who claim to have earned large sums through the program. They may be "shills" paid by the program's promoters.
• Resist pressure to buy in. Take your time to think over your decision and your investment. Discuss it with a friend, accountant or lawyer.
Before signing up for any program, the FTC recommends calling the Better Business Bureau and state Attorney General where you live and where the company is based to see if there's a history of complaints against the organization. While a complaint record may indicate questionable business practices, a consumer is remided that a lack of complaints doesn't necessarily mean that the program is legitimate.
The best way to operate when evaluating a multi-level marketing program is to be leary of any plan that makes claims that seem too good to be true.
The bottom line is that there is no golden egg. If you are considering joining AMSOIL, a solid MLM program offering a legitimate product at a competitive price, you need to know that you will still need to invest some sweat equity, as well as dollars, for your business venture to pay off.
The Legitimate AMSOIL MLM Program
The AMSOIL Program is a time-proven and legitimate MLM program. It works successfully because AMSOIL operates by selling products through independent distributors (Dealers), and providing a Marketing Plan that affords these individuals the opportunity to build and manage their own sales force by selling and supplying products, as well as recruiting, motivating, and training others to sell AMSOIL products. The distributors' compensation includes their own sales and a percentage of the sales of their Personal Group.
In short, AMSOIL is a NM organization, which uses a MLM infrastructure, to afford its independent distributors an opportunity to build their own business. AMSOIL pays you on your product sales and the product sales of those you sponsor. You can earn a Qualification Bonus, Retention Bonus, and Duplication Bonus - as well as commissions - but in order to receive these bonuses and commissions, AMSOIL Dealers must sell product.
Do I have to contact all my family and friends to register them as AMSOIL Dealers?
Absolutely not! In fact, you have complete control over whom you decide to contact about AMSOIL. You may or may not want to contact your famiy or friends; it's completely up to you. The beauty of an AMSOIL Dealership is that you are your own boss. You get to decide who you want to talk to about your business and who you don't. You decide what type of customers to approach and what your approach will be.
You have five established channels to market for the AMSOIL products mechanisms:
Personal Retail Sales
Catalog Customer Sales
Retail Account Sales
Commercial Account Sales
Internet Sales
You have three primary business building methods:
Registering other AMSOIL Dealers
Registering Preferred Customers
Registering Commercial and Retail Accounts
You have multiple and proven successful AMSOIL Business Models to pattern your personal business after, if you choose:
Internet Business Model
Trade Show Business Model
Retail / Full Service Business Model
Home Warehouse / MLM Business Model
Commercial Account / Professional Rep Business Model
Preferred Customer Development Business Model
While AMSOIL is there to help guide you throughout your AMSOIL business carreer, an AMSOIL Dealership is not for everyone. AMSOIL recognizes this and has several different programs designed to closely match the relationship that each individual or company wants to have with you and with AMSOIL.
A perfect example of this is AMSOIL's Preferred Customer program. For a small fee, individuals can gain access to AMSOIL's entire product line and be able to pruchase the products at wholesale price. This program, coupled with the availability of products through the AMSOIL product catalog makes AMSOIL's products available to anyone and everyone regardless of their feelings towards being a Dealer or their economic position. Most AMSOIL Dealers also sell AMSOIL products through established Retail Stores (according to the terms and conditions of the marketing plan). Even so, there will be those who are simply not interested, and that's OK. You are never expected to push AMSOIL products or the AMSOIL business opportunity on anyone.
