UNIT – II Entrepreneurial Opportunities In Contemporary Business Environment
MULTI LEVEL MARKETING
MLM / Network Marketing / Referral Marketing / Direct Marketing - Multiple levels of people are marketing a product to consumers
A Distributor, member, affiliate, partner or associate - gets customers and recruits and trains another sales rep to get customers.
The products and company are usually marketed directly to consumers and potential business partners by means of relationship referrals and word of mouth marketing.
Sales rep gets customers and trains another sales rep to get customers. “Refer a friend and you’ll receive a discount on your next purchase,” this is multi-level marketing.
The Traditional Company
In a non-MLM company, a sales manager and sales reps are hired by the company.
Once a sales manager is overwhelmed, the company can hire another manager or convert a sales rep into a manager.
Traditional companies (non-MLM) use “Multi-Width” Marketing.
The Multi Level Company
An MLM company “starts” by recruiting one person who gets customers and recruits sales reps with the option to become a manager.
The MLM company only pays commissions, not salaries.
This is beneficial to the company because of rapid expansion by the number of trained sales reps.
This is also beneficial to the sales reps because their income isn’t limited to only what they can sell - they can also earn commissions for having trained other sales reps.
MLM is Organic Organically, the MLM industry is a fantastic model. Here’s why:
In its organic state one person shares a valuable product or service with another
A person shares a business idea with another
The person who shares the business with another ONLY profits IF the person they shared the business with succeeds.
These three steps are the organic concepts of MLM and are absolutely brilliant.
Criticism Of MLM
AMWAY was found guilty of price fixing and making exaggerated income claims.
MLM's are also criticized for being unable to fulfill their promises for the majority of participants
The exploitation of personal relationships for financial gain
Prices are kept exorbitantly kept high
Continuous Expanision of network to increase sales turnover
Low overhead Costs – No marketing infrastructure cost
Entry into new markets easily and quickly
Can introduce and demonstrate innovative products
Marketer can maintain high margin
Disadvantages Risk of Over and Under stocking Distributors may take over the control Company has no control over Sales Team Close relationships with customer is difficult No advertising, brand building difficult