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Multi Level Marketing (MLM): Purpose, Traits and Examples [Complete!]

Admin BFI
26 July 2023
53336
Multi Level Marketing (MLM): Purpose, Traits and Examples [Complete!]

The MLM business is one of the businesses that is considered controversial in Indonesia. MLM or Multi Level Marketing is a marketing strategy with a pyramid scheme consisting of upline and downline members.

Even though this business is often considered bad and should be avoided, in fact, this one business strategy is not always bad. What is MLM business and how does it work? Let's look at the following reviews.

 

1. What is Multi-Level Marketing (MLM)

Multi-level marketing or better known as MLM is a tiered or chain marketing strategy. This business is in great demand by young people or anyone who wants to have additional income.

Moreover, the method is quite easy, flexible, and there is no time constraint. Making it easy for many people to be attracted to this type of business.

Reporting from Investopedia, the MLM business is a strategy used by certain companies to sell products directly while simultaneously recruiting new members to join their business activities.

These new members will of course be trained to become part of a distributor who is able to sell products and get additional commissions if they are able to get new members. Or in other words, customers or buyers can simultaneously become sellers at the same time.

In addition, for existing income, it is usually based on an agreement from the percentage that has been informed at the outset.

In short, the MLM business is a marketing strategy focused on selling products on a large scale, involving broad, tiered relationships.

2. Terms in MLM Business

Multi-level marketing (MLM) has several terms that you need to know, including the following.

  • Downline

New members are obtained by recruit and can also be interpreted as new members brought in by other downlines. Because there are no limitations for new members to recruit other new members.

  • Upline

The term is used to refer to old or long-time members with higher positions.

  • The Plan

Comprehensive business plan, including promotions and commissions.

  • Sponsorship

Namely, certain parties are invited to join this business to serve as sponsors or owners of capital.

  • Recruit

Members of new members recruited by sponsors or capital owners.

  • Compensation Plan

Can be interpreted as a compensation plan, but the meaning is more to the distribution of commissions that will be obtained from sales.

The terms above are the terms most commonly encountered in the MLM business world.

3. Multi-Level Marketing Goals

Multi-level marketing aims to make as much profit as possible from product sales. This is because the existing income or profit depends on the number of successful sales made.

Implementing this strategy can cut costs for promotion or advertising. Because the form of promotion that sells is mostly carried out by members who are members.

This is quite reasonable considering the members will try to sell their best to get big commissions. The most prominent way of promotion in this MLM business is word of mouth or word of mouth.

4. Advantages and Disadvantages of MLM Business

multi level marketing (MLM)

Image Source: Freepik

Every business strategy basically has advantages and disadvantages. The following are the advantages and disadvantages of a multi-level marketing business, as we have summarized from the Lead MLM Software site.

4.1 Advantages of Multi-Level Marketing

1. Offering Opportunities for Entrepreneurs

Multi-level marketing is a business strategy that does not require a lot of capital to run. You can make your own products and sell them through the MLM business or become a distributor and get profits from every product sold or by inviting other people to join this business.

2. Cost-Effective Strategy

Through MLM you can reach more customers without spending a lot of money. This can happen because the way MLM works is divided into several layers and the distributors work independently.

3. Flexible Schedule

Every member who is part of multi-level marketing can work at any time. This can adjust to your own convenience or adjust to the target consumer. Work anywhere and anytime.

4. Helps Develop Communication Skills

MLM is a sales and marketing strategy that requires members to meet directly with potential customers. This certainly can help members to develop their communication skills. Good communication skills will be very useful to reach more customers.

5. Guidance

Multi level marketing as the name implies consists of various layers of members. The existence of this layer allows members to obtain guidance or mentorship from various people who are more experienced and bring many benefits.

4.2 Disadvantages of Multi-Level Marketing

1. Threats of Fraud

The MLM business is very widespread everywhere and there are not a few naughty actors who deliberately deceive people, making many people afraid and wary of joining it. This certainly can threaten the sustainability of existing businesses.

2. Low MLM Income

The income earned from MLM is relatively low. High competition between MLM companies makes it difficult for members to get profits. Especially if the members who are members of it are quite a few.

3. Slow Growth Rate

It takes a long time for MLM companies to make a profit and become successful. The reason is, it takes a long time to get people to join this business. Not to mention having to face other MLM businesses that have appeared first.

4. Rejection from the Community

Most people already have a negative view of the MLM business, so it takes a long time and great sacrifice to build trust from the community.

5. Lack of Training and Support

In multi-level marketing, members are not required to be professionals, it all depends on their will and motivation. Despite receiving mentorship from superiors, newly joined members are left to find their own way if they want to level up or gain a lot of benefits.

5. Characteristics of a Good MLM Business

After you know the meaning of an MLM or Multi-Level Marketing business, here are the characteristics to make it easier for you to distinguish it from other types of business:

1. The product or service offered is clear

A good and legal MLM business has a clear product. This is because this product is the main source of profit for a business entity or company. So, before you join this business, be sure to find out in detail what goods or services are offered.

2. Legally Registered Business Entity

Every company must have a clear business entity, regardless of the sales strategy carried out in the form of MLM or others.

A legal MLM business has been registered with the Indonesian Direct Sellers Association (APLI) and is usually incorporated as a Company (PT) or CV. The company address and other information are also clearly stated.

3. Reasonable Product Prices

Companies that implement MLM business strategies will not set prices that are too expensive or cheap. The price listed is in accordance with the quality offered, if there is a reseller who sells it at a different price, the price is not necessarily incongruous or very different from the distributor.

4. The Commission Promised Is In Accordance

A good MLM business is a business that provides a commission amount according to the initial agreement. Commissions earned are in the form of money and are paid out consistently.

If a company provides products instead of money as a commission, you should be suspicious of this.

5. Members Guide Each Other

In the MLM business, there are Uplines and Downlines, Uplines as seniors or members with high positions will not hesitate to guide their subordinates or newly joined members.

As with downlines, new members can guide fellow members. The guidance that exists in business activities can be very varied. For example, holding training or training, marketing tips and tricks, and so on which will be very useful for getting high sales.

6. Examples of MLM Business in Indonesia

The following are some examples of businesses implementing a legal multi-level marketing strategy that are quite well-known in the community.

1. Tupperware

2. Herbalife Nutrition

3. Oriflame

4. Young Living

BFI friends, that's the information about Multi Level Marketing (MLM): Purpose, Characteristics, and Examples [Complete!]. Hopefully, this information can be useful for all of us, especially in distinguishing between legal and fake MLM.

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