MLM Network Marketing – What You Need to Know Before You Get Involved

MLM Network Marketing, instantly the term seem to be familiar with but the intricacies might still not be that conspicuous and clear. Do we really understand the exact functionality offered through this structure? In actuality, the concept offer many significant benefits as compared to any other network or individual businesses.

You might have attended such seminars which explain you about the MLM Network Marketing or Marketing through MLM Network. For most of us, the reality is just the word of mouth and the exact strategies are less known.

This way of doing business is kind of the fastest growing business because it relies on a transfer methodology; that is transfer of the product or the services from Point A to Point B. This type of business has a few negative encounters in the past and had lasting impact on those who were into this but the concept has again grown and become the voice of new business arena.

Marketing MLM Network completely depends upon how you are making up your further customers rather what is exactly taught is how exactly we share our services and products with others. It is definitely different from the Pyramid schemes in which the person will remain on top and rest who joins the group later will remain at lower network. You market yourself, you get the returns.

It just follows a chain through you in which you market the product and take the product from Point A to Point B. Hence the product moves from one level to another level, that’s why it is also called Multi Level Marketing.

You purchase various products from the wholesaler offered at wholesale prices, you directly take that into market and sell it in retail and make money out of it. One misconception which should not be entertained is that every time you sell the product, you need not to sell it in retail; you need to share it with people and make them as your customers.

It is about building a huge downline and the sales are an outcome. And slowly you can actually expand in multiple directions rather than only in a single direction. You can simply talk to people and recruit them for your job, train them how to build the business further, you’re done. Gradually, your team expands as your immediate recruits start building the business.

There are lots of services that are being sold through MLM Network Marketing. For every successful movement of the product from one level to another or depending upon the financial strategies, you are compensated.

Is Multi Level Marketing (MLM) A Legitimate Business Opportunity Or Not?

I will preface the following by stating that I am not an MLM’er but many of my colleagues are, and in the current climate of financial uncertainty it is an option many are looking at.

I have tried to give a simple unbiased opinion of the pro’s and cons of the industry so that you can draw your own conclusions.

Is MLM legitimate?

The recent global recession has not coincidentally corresponded to resurgence in some previously uncool forms of marketing, such as Multi-Level Marketing, Party Plan and Home Based Internet Marketing. Companies such as Amway, Tupperware, Mary Kay Cosmetics and such like are having significant successes in their recent recruitment drives.

Multi-Level Marketing has a stigma attached to it for decades, with polarizing attitudes that have contributed to family tensions and damaged friendships. Some people would be more supportive if you announced that you had joined a new age cult. The legitimacy or otherwise of these direct selling organizations is an issue of both legal and moral standing.

What exactly is Multi-Level Marketing? (MLM)

It is a marketing strategy to sell goods or services through a network of independent distributors.
Income is derived from the sales derived from the network of personally recruited members, usually as a result of personal sales and over-rides on the teams’ volume.

Legal Legitimacy.

Countries have individual laws that define the legality of sales and marketing techniques. There is a Grey area that many companies need to navigate which is regarding the issue of definition.

The biggest compliance issue is that concerning pyramid selling, which is usually considered illegal. Most contemporary MLM companies are able to comply and adhere to local legislation, but often walk a fine line, as interpretations can vary.

Moral Legitimacy.

Prior to the Internet, recruitment was conducted with an almost evangelical zeal, with many organizations using huge motivational rallies and sales techniques that were frowned upon by many non-believers.

Some criticism and stigma has come from the perception that many of the bigger organizations inculcate members by indoctrination. Mass direct marketing to friends relatives and anyone with a pulse, many of whom have no interest in joining often alienates and causes relationship fractures and residual bitterness.

In recent years there has been a quite a shift in credibility and professionalism. Well-respected authors and entrepreneurs have started to endorse MLM. Robert Kiyosaki and Donald Trump are two that come to mind. Internet marketing allows members to strategically attract like-minded people into their network. Training is more streamlined and success is less dependent on the cult of charisma, and perhaps more equitable

Financial Legitimacy.

The compensation plans vary from company to company, and are a tool for soliciting new recruits. The power of compounding numbers can suggest that massive incomes can be earned simply from sponsoring a few people who do the same ad infinitum. Pick a number and double it ten times over and then imagine that number represented your network of distributors, who all sell and consume the companies’ lotions and potions. The lure of over-ride commissions for very little work can attract many naive members, who subsequently depart disillusioned, weeks, months or years later.
Conclusion.

As a vehicle to create passive income there are many benefits to investing the time, energy and money to create a solid passive income. Like most things in life however, there is rarely a free lunch, and those that succeed will be those that combine ambition with a verifiable action plan and under the umbrella of a stable and trustworthy organization.

Calculating the Marketing Allowable – Or How Much to Spend on Marketing

Before starting a direct marketing campaign, managers often wonder, “How much should I spend on the actual marketing costs?” There’s actually a way to calculate this figure. You don’t have to guess, leave it to chance, or the whims of the accounting department.

Called the marketing allowable, this figure is a form of sensitivity analysis that gives you a good guestimate of the amount left to spend on marketing after the major costs are accounted for.

In order to calculate the marketing allowable, you’ll need a few numbers handy:

  • Net sales. If you don’t have your net sales figure, take your gross sales and subtract out the returns. That’s your net sales.
  • Variable costs: To figure out your variable costs, add together the cost of good sold by percent of orders, the fulfilment cost as a percent, and the bad deby percent, then multiply it by sales. Did your eyes just glaze over? Take a deep breath. You should know your cost of goods sold. If you don’t know your fulfillment costs, use a placeholder. Twenty percent (.20) is not unrealistic.
  • Overhead costs
  • Premiums: If you give away little items with every sale, like a free exercise DVD with the purchase of a home gym system, the DVD is the premium. The cost to make each is the number you’re going to use to determine your marketing allowable.

Marketing Allowable: The Formula

The formula to calculate the marketing allowable looks like this:

Net Sales

- Variable Costs

- Overheard

- Premium

= MARKETING ALLOWABLE

What It Looks Like with Real Numbers

I’ll plug in some numbers now from a real client, who has graciously given permission for me to use their numbers as long as I don’t mention the name of the business. It’s a small, family owned e-commerce business selling gift items.

Net Sales: $48,000 (rounded out for our example)

- Variable Costs: $11,000

- Overhead: $28,000

- Premiums: $1,000

Marketing allowable: $8,000

So technically, this client is “allowed” or can spend about $8,000 on direct marketing to obtain $48,000 in net sales. Remember that I kept the numbers small and nice and round so they would be easy to follow. In truth, a company generating these revenues would need a much higher net sale figure to pay a salary – which I’d include in the overhead line as part of the operating expenses of the company.

When to Use Marketing Allowables

Calculating the marketing allowable isn’t just a subtraction and decimals example, even if you have to work some decimal magic on the variable costs line. It’s actually a useful tool for budgeting. if your company does zero-based budgeting, the kind where you have to justify your spend from the bottom up for each fiscal year, you’ll want to know your marketing allowable for the product or product category. You can easily run some figures and adjust amounts in the spreadsheet for the premiums, for example, or the overhead costs, and see how it impacts the marketing allowable.

Remember that marketing numbers are rarely fixed in stone. One of the benefits of placing these numbers into a spreadsheet and playing around with them is watching how changing one line in the formula impacts others. For example, if you can keep your overhead nice and low, look at how much is left to funnel into marketing. And if you could funnel more money into marketing, how many more potential customers can you reach? Conversely, if you up the premium amount and offer a spiffy DVD player with that DVD, you may have less for marketing, but if you test that concept and it pulls in more sales, it can be a winning combination.

Direct marketing is all about measurement. Math is the language of reality, and direct marketing, so heavily based in math, takes nebulous marketing concepts that scare CEO’s and makes them real by adding dollars, cents, and sales to the conversation.

So calculate your marketing allowable today, and play the numbers out. Maybe there’s more in your marketing budget than you thought!