01 March 2007

MLM =.= Again....

How well do you know about this? I am 99% sure you freaking had no idea of it, you know it as a direct selling, this is only a part of it for those of you who thinks you know....

Extracted from "Wikipedia"

Multi-level marketing (MLM) (also called network marketing or NM) is a business model that combines direct marketing with franchising. In a typical multi-level marketing or network marketing arrangement, individuals associate with a parent company as an independent contractor or franchisee and are compensated based on their sales of products or service, as well as the sales achieved by those they bring into the business. This is like many franchise companies where royalties are paid from the sales of individual franchise operations to the franchisor as well as to an area or region manager.

In a legitimate MLM company, commissions are earned only on sales of the company's products or services. No money may be earned from recruiting alone ("sign-up fees"). One must analyze the compensation plan to determine whether participants are paid from actual sales to customers and not from money received from new recruits. If participants are paid primarily from money received from new recruits, then the company is an illegal pyramid or Ponzi scheme.

Now the above statement is only generally about the MLM. Now let me extract the important point of the MLM compensation plan from the Wikipedia :
Compensation plans

Companies have devised various MLM compensation plans over the decades.

* Unilevel or Stairstep Breakaway plans are the oldest and most popular. They feature two types of distributors -- managers and non-managers -- and three types of pay:
  • o Baseshop overrides are overrides of managers from their subordinate non-managers, collectively called a baseshop. This is the same as any other sales organisation.
  • o Generational overrides are overrides of managers from the baseshop of managers who were previously their subordinate. Most plans compensate at least three generations of such managers.
  • o Executive bonuses are commissions for managers who exceed a sales quota. For example, 2% of the total company sales revenue may go to a bonus pool that is shared monthly pro rata to managers who exceed $10,000 in that month.
* Matrix Plans limit the width of each level in a distributor's group, forcing strong distributors to pile ("spillover") their recruits over people who did not sponsor them.
* Binary plans limit the width of each level to two legs. Commissions are based on "cycles," where a distributor is paid a fixed amount whenever both legs achieve a certain number of sales units each. Commissions are paid incrementally when the sales volume in each leg matches.
* Elevator or Matrix schemes feature a game board or a list on which each distributor pays in one or more product units to participate. When a certain number of units have been paid in, the structure splits and the earlier participant receives consideration. The Matrix scheme article discusses the legality of this plan. You must do your own research as with any other investment.

So I wanted to stress that MLM is legit because everything uses this even the large organisation uses it to expand their business.

For example Coca-Cola company selling the franchise license to you and you will produce the product and sell to the retailers finally the products arrived to the consumers, and the Coca-Cola company will get some of the percentage(%) from the sales of the Cola drinks, am I right? Now is that a scam? Nope I would say it's how the business goes. If the product do not have anyone buy it then the business will went down or liquidation.

MLM is not a scam! But the person who uses it to lie others, now that is a scam! Get it right..... Thank you for reading it.

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