Multi-level marketing (MLM), (also called network marketing, direct selling, referral marketing, and pyramid selling) is a term that describes a marketing structure used by some companies as part of their overall marketing strategy. The structure is designed to create a marketing and sales force by compensating promoters of company products not only for sales they personally generate, but also for the sales of other promoters they introduce to the company, creating a down line of distributors and a hierarchy of multiple levels of compensation in the form of a pyramid.
The products and company are usually marketed directly to consumers and potential business partners by means of relationship referrals and word of mouth marketing.
if you like my post then pls click on advertisment and add as you in my follower list.
Its beneficial for you and me both.
MLM companies have been a frequent subject of controversy as well as the target of lawsuits. Criticisms have 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. Not all MLM companies operate the same way, and MLM groups have persistently denied that their techniques are anything but legitimate business practices.
Setup
Independent, unsalaried 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.
This arrangement of distributors earning a commission based on the sales of their independent efforts as well as the leveraged sales efforts of their downline is similar to franchise arrangements where royalties are paid from the sales of individual franchise operations to the franchiser as well as to an area or regional manager. Commissions are paid to multi-level marketing distributors according to the company’s compensation plan. There can be individuals at multiple levels of the structure receiving royalties from a single person's sales.
Legality and Legitimacy
MLM businesses operate in the United States in all 50 states and in more than 100 other countries, and new businesses may use terms like "affiliate marketing" or "home-based business franchising". However, many pyramid schemes try to present themselves as legitimate MLM businesses.
The FTC states "Steer clear of multilevel marketing plans that pay commissions for recruiting new distributors. They're actually illegal pyramid schemes.
Why is pyramid 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 empty-handed.
In a 2004 United States Federal Trade Commission (FTC) Staff Advisory letter to the Direct Selling Association 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 and gives eight steps to follow:
• 1) Find — and study — the company’s track record.
• 2) Learn about the product
• 3) Ask questions
• 4) Understand any restrictions
• 5) Talk to other distributors (beware shills)
• 6) Consider using a friend or adviser as a neutral sounding board or for a gut check.
• 7) Take your time.
• 8) Think about whether this plan suits your talents and goals
However there are people who hold that all MLMs are nothing more than pyramid schemes even if they are legal rendering the whole issue of a particular MLM being legal moot.
Compensation plans
Companies have devised a variety of MLM compensation plans over the decades.
1. Unilevel plans This type of plan is often considered the simplest of compensation plans. As the name suggests, the plan allows a person to sponsor one line of distributors, called a "frontline." Every distributor the person sponsors is considered to be on that sponsor's frontline and there are no width limitations, meaning there is no limit to the amount of people one can sponsor in the frontline. The common goal of this plan is to recruit a large number of frontline distributors and then encourage them to do the same. This is due to the fact that commissions are normally paid out on a limited depth, which typically means sponsor can earn commissions on sales between 5 and 7 levels deep.
2. Stairstep breakaway plans This type of plan is characterized as having representatives who are responsible for both personal and group sales volumes. Volume is created by recruiting and by retailing product. Various discounts or rebates may be paid to group leaders and a group leader can be any representative with one or more downline recruits. Once predefined personal and/or group volumes are achieved, a representative moves up a commission level. This continues until the representative's sales volume reaches the top commission level and "breaks away" from their upline. From that point on, the new group is no longer considered part of his upline's group and the multi-level compensation aspect ceases. The original upline usually continues to be compensated through override commissions and other incentives.
3. Matrix plans This type of plan is similar to a Uni-Level plan, except there is also a limited number of representatives who can be placed on the first level. Recruits beyond the maximum number of first level positions allowed are automatically placed in other downline (lower level) positions. Matrix plans often have a maximum width and depth. When all positions in a representative's downline matrix are filled (maximum width and depth is reached for all participants in a matrix), a new matrix may be started. Like Uni-Level plans, representatives in a matrix earn unlimited commissions on limited levels of volume with minimal sales quotas.
4. Binary plan A binary plan is a multilevel marketing compensation plan which allows distributors to have only two front-line distributors. If a distributor sponsors more than two distributors, the excess are placed at levels below the sponsoring distributor's front-line. This "spillover" is one of the most attractive features to new distributors since they need only sponsor two distributors to participate in the compensation plan. The primary limitation is that distributors must "balance" their two downline legs to receive commissions. Balancing legs typically requires that the number of sales from one downline leg constitute no more than a specified percentage of the distributor's total sales.
5. Hybrid plan are compensation plans that are constructed using elements of more than one type of compensation plan.
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 per cent 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)"
• USAToday: "While earning potential varies by company and sales ability, DSA says the median annual income for those in direct sales is $2,400.”
Criticism of MLM
The Federal Trade Commission (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 requiring "independent" distributors to sell at the low 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".[30] In April 2006, it proposed a Business Opportunity Rule intended to require all sellers of business opportunities—including MLMs—to 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),[32] 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).
Because of encouraging recruits to further recruit their competitors, some people have even gone so far as to say at best 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 "Multi-Level Marketing, a form of Pyramid Scheme, is not necessarily fraudulent."
List of multi-level marketing companies
• ACN Inc.
• Agel (MLM company)
• Alticor
• Amsoil
• Amway Global, also known as Quixtar
• Avon Products
• BioPerformance
• Cobra Group
• Deutsche Vermögensberatung
• Discovery Toys
• Dynamic Essentials (Company dissolved in 2003)
• Equinox International
• Excel Communications
• ENG
• Forever Living Products
• Freelife
• Fuel Freedom International
• Fund America, Inc.
• European Grouping of Marketing Professionals (GEPM) / CEDIPAC SA
• Herbalife
• Holiday Magic (Company dissolved in 1974)
• Juice Plus
• Kleeneze
• Melaleuca
• Mannatech
• Mary Kay
• Mini IQ
• MonaVie
• National Safety Associates
• Neways
• Nu Skin Enterprises
• Omegatrend
• Oriflame
• Pre-Paid Legal Services
• Primerica
• Quest International
• Sahara Care House
• Shaklee Corporation
• Stream Energy
• Success University
• Sunrider International
• Tahitian Noni International
• Telecom Plus
• The Pampered Chef
• The Southwestern Company
• United Sciences of America, Inc. (Company dissolved in 1987)
• USANA Health Sciences
• World Financial Group
• XanGo
• YourTravelBiz.com
Event marketing
"Whereas marketing outside the voluntary sector generally involves clarifying customer needs and then satisfying them with appropriate products or services, arts marketing more usually involves finding the right audience for the product and bringing audience and product together. It is a matching process rather than one in which the public is simply given what it wants." (Fishel, D. (1994), 7-8) From the author’s point of view, this statement contradicts in itself, but unfortunately it is advocated by some representatives of the arts industry. Of course, there are major differences between marketing physical products and arts experience, some of which are described further in this chapter. However, the marketing process should still involve segmentation of the markets and targeting the potential groups on the basis of comprehensive market research, which serves as a source for a clear definition of their needs and motivation. Many examples in the music industry have shown that certain music styles have been created or changed in order to please the changed social needs of the audience, i.e. the "sweetening" or "softening" (Truly, D. (Spring Sem. 1999) of music genres in order to appeal to a bigger audience.
Michael Hall defines event marketing as "the function of event management that can keep in touch the event’s participants and visitors, read their needs and motivations, develop products that meet these needs, and build a communication programme which expresses the event’s purpose and objectives." (Watt, D.C. (1998), 61) The event’s objectives and purpose must be integrated in the event marketing strategy, which serves as a basis for the design of an effective marketing mix. Generally speaking, marketing is seen nowadays more as a philosophy or a way of thinking and not just as a company’s function or strategy. Creating customer value and satisfaction are the heart of marketing in the service industry. (Cf. Kotler et al. (1998), 3) Therefore, they are stressed in a separate chapter.
A further aspect which event marketing should consider is the specifications of events: they are intangible (customers feel the benefit and the enjoyment, but cannot touch it), perishable (the event experience is short-lived), inseparable (one event is associated with the next and is identified with the organiser’s reputation; the production and consumption of the arts is at the same time), consistent (customers demand consistency of the quality of services and facilities offered at the event), and finally events are not owned by anyone but they are temporarily enjoyed by many. (Cf. Watt, D.C. (1998), 61)
When using the words "event" and "marketing" together one must differ between two concepts with regard to their purpose. One concept is using an event as a marketing tool incorporated in the marketing mix of a destination in order to attract certain types of tourists and increase the name of recognition as well as the positive image of the destination. The other concept involves the design of an event-marketing mix necessary to market a festival. The latter will be stressed in this chapter. Prof. Dr. Dreyer states that the marketing actions which need to be undertaken in both cases are very alike and should focus or at least integrate the destination where the event takes place in the event’s marketing process. (Cf. Dreyer, A. (1997)) C.H.Weber says that despite the perishability of special events, effective event marketing has a great impact on the local tourism industry, which is why more and more tourist destinations use events in order to attract additional visitors
The products and company are usually marketed directly to consumers and potential business partners by means of relationship referrals and word of mouth marketing.
if you like my post then pls click on advertisment and add as you in my follower list.
Its beneficial for you and me both.
MLM companies have been a frequent subject of controversy as well as the target of lawsuits. Criticisms have 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. Not all MLM companies operate the same way, and MLM groups have persistently denied that their techniques are anything but legitimate business practices.
Setup
Independent, unsalaried 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.
This arrangement of distributors earning a commission based on the sales of their independent efforts as well as the leveraged sales efforts of their downline is similar to franchise arrangements where royalties are paid from the sales of individual franchise operations to the franchiser as well as to an area or regional manager. Commissions are paid to multi-level marketing distributors according to the company’s compensation plan. There can be individuals at multiple levels of the structure receiving royalties from a single person's sales.
Legality and Legitimacy
MLM businesses operate in the United States in all 50 states and in more than 100 other countries, and new businesses may use terms like "affiliate marketing" or "home-based business franchising". However, many pyramid schemes try to present themselves as legitimate MLM businesses.
The FTC states "Steer clear of multilevel marketing plans that pay commissions for recruiting new distributors. They're actually illegal pyramid schemes.
Why is pyramid 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 empty-handed.
In a 2004 United States Federal Trade Commission (FTC) Staff Advisory letter to the Direct Selling Association 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 and gives eight steps to follow:
• 1) Find — and study — the company’s track record.
• 2) Learn about the product
• 3) Ask questions
• 4) Understand any restrictions
• 5) Talk to other distributors (beware shills)
• 6) Consider using a friend or adviser as a neutral sounding board or for a gut check.
• 7) Take your time.
• 8) Think about whether this plan suits your talents and goals
However there are people who hold that all MLMs are nothing more than pyramid schemes even if they are legal rendering the whole issue of a particular MLM being legal moot.
Compensation plans
Companies have devised a variety of MLM compensation plans over the decades.
1. Unilevel plans This type of plan is often considered the simplest of compensation plans. As the name suggests, the plan allows a person to sponsor one line of distributors, called a "frontline." Every distributor the person sponsors is considered to be on that sponsor's frontline and there are no width limitations, meaning there is no limit to the amount of people one can sponsor in the frontline. The common goal of this plan is to recruit a large number of frontline distributors and then encourage them to do the same. This is due to the fact that commissions are normally paid out on a limited depth, which typically means sponsor can earn commissions on sales between 5 and 7 levels deep.
2. Stairstep breakaway plans This type of plan is characterized as having representatives who are responsible for both personal and group sales volumes. Volume is created by recruiting and by retailing product. Various discounts or rebates may be paid to group leaders and a group leader can be any representative with one or more downline recruits. Once predefined personal and/or group volumes are achieved, a representative moves up a commission level. This continues until the representative's sales volume reaches the top commission level and "breaks away" from their upline. From that point on, the new group is no longer considered part of his upline's group and the multi-level compensation aspect ceases. The original upline usually continues to be compensated through override commissions and other incentives.
3. Matrix plans This type of plan is similar to a Uni-Level plan, except there is also a limited number of representatives who can be placed on the first level. Recruits beyond the maximum number of first level positions allowed are automatically placed in other downline (lower level) positions. Matrix plans often have a maximum width and depth. When all positions in a representative's downline matrix are filled (maximum width and depth is reached for all participants in a matrix), a new matrix may be started. Like Uni-Level plans, representatives in a matrix earn unlimited commissions on limited levels of volume with minimal sales quotas.
4. Binary plan A binary plan is a multilevel marketing compensation plan which allows distributors to have only two front-line distributors. If a distributor sponsors more than two distributors, the excess are placed at levels below the sponsoring distributor's front-line. This "spillover" is one of the most attractive features to new distributors since they need only sponsor two distributors to participate in the compensation plan. The primary limitation is that distributors must "balance" their two downline legs to receive commissions. Balancing legs typically requires that the number of sales from one downline leg constitute no more than a specified percentage of the distributor's total sales.
5. Hybrid plan are compensation plans that are constructed using elements of more than one type of compensation plan.
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 per cent 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)"
• USAToday: "While earning potential varies by company and sales ability, DSA says the median annual income for those in direct sales is $2,400.”
Criticism of MLM
The Federal Trade Commission (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 requiring "independent" distributors to sell at the low 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".[30] In April 2006, it proposed a Business Opportunity Rule intended to require all sellers of business opportunities—including MLMs—to 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),[32] 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).
Because of encouraging recruits to further recruit their competitors, some people have even gone so far as to say at best 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 "Multi-Level Marketing, a form of Pyramid Scheme, is not necessarily fraudulent."
List of multi-level marketing companies
• ACN Inc.
• Agel (MLM company)
• Alticor
• Amsoil
• Amway Global, also known as Quixtar
• Avon Products
• BioPerformance
• Cobra Group
• Deutsche Vermögensberatung
• Discovery Toys
• Dynamic Essentials (Company dissolved in 2003)
• Equinox International
• Excel Communications
• ENG
• Forever Living Products
• Freelife
• Fuel Freedom International
• Fund America, Inc.
• European Grouping of Marketing Professionals (GEPM) / CEDIPAC SA
• Herbalife
• Holiday Magic (Company dissolved in 1974)
• Juice Plus
• Kleeneze
• Melaleuca
• Mannatech
• Mary Kay
• Mini IQ
• MonaVie
• National Safety Associates
• Neways
• Nu Skin Enterprises
• Omegatrend
• Oriflame
• Pre-Paid Legal Services
• Primerica
• Quest International
• Sahara Care House
• Shaklee Corporation
• Stream Energy
• Success University
• Sunrider International
• Tahitian Noni International
• Telecom Plus
• The Pampered Chef
• The Southwestern Company
• United Sciences of America, Inc. (Company dissolved in 1987)
• USANA Health Sciences
• World Financial Group
• XanGo
• YourTravelBiz.com
Event marketing
"Whereas marketing outside the voluntary sector generally involves clarifying customer needs and then satisfying them with appropriate products or services, arts marketing more usually involves finding the right audience for the product and bringing audience and product together. It is a matching process rather than one in which the public is simply given what it wants." (Fishel, D. (1994), 7-8) From the author’s point of view, this statement contradicts in itself, but unfortunately it is advocated by some representatives of the arts industry. Of course, there are major differences between marketing physical products and arts experience, some of which are described further in this chapter. However, the marketing process should still involve segmentation of the markets and targeting the potential groups on the basis of comprehensive market research, which serves as a source for a clear definition of their needs and motivation. Many examples in the music industry have shown that certain music styles have been created or changed in order to please the changed social needs of the audience, i.e. the "sweetening" or "softening" (Truly, D. (Spring Sem. 1999) of music genres in order to appeal to a bigger audience.
Michael Hall defines event marketing as "the function of event management that can keep in touch the event’s participants and visitors, read their needs and motivations, develop products that meet these needs, and build a communication programme which expresses the event’s purpose and objectives." (Watt, D.C. (1998), 61) The event’s objectives and purpose must be integrated in the event marketing strategy, which serves as a basis for the design of an effective marketing mix. Generally speaking, marketing is seen nowadays more as a philosophy or a way of thinking and not just as a company’s function or strategy. Creating customer value and satisfaction are the heart of marketing in the service industry. (Cf. Kotler et al. (1998), 3) Therefore, they are stressed in a separate chapter.
A further aspect which event marketing should consider is the specifications of events: they are intangible (customers feel the benefit and the enjoyment, but cannot touch it), perishable (the event experience is short-lived), inseparable (one event is associated with the next and is identified with the organiser’s reputation; the production and consumption of the arts is at the same time), consistent (customers demand consistency of the quality of services and facilities offered at the event), and finally events are not owned by anyone but they are temporarily enjoyed by many. (Cf. Watt, D.C. (1998), 61)
When using the words "event" and "marketing" together one must differ between two concepts with regard to their purpose. One concept is using an event as a marketing tool incorporated in the marketing mix of a destination in order to attract certain types of tourists and increase the name of recognition as well as the positive image of the destination. The other concept involves the design of an event-marketing mix necessary to market a festival. The latter will be stressed in this chapter. Prof. Dr. Dreyer states that the marketing actions which need to be undertaken in both cases are very alike and should focus or at least integrate the destination where the event takes place in the event’s marketing process. (Cf. Dreyer, A. (1997)) C.H.Weber says that despite the perishability of special events, effective event marketing has a great impact on the local tourism industry, which is why more and more tourist destinations use events in order to attract additional visitors
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