When thinking about starting a home-based business, many typically consider MLM-oriented companies as a possibllity.
MLM has a interesting history and when a particular MLM Opportunity is product-oriented, MLM is a perfectly legal and legitmate vehicle to earn extra income. However, it is important, as with any business, to look at the big picture before joining an MLM Company and plan for success based on realistic expectations.
Most people who become involved with an MLM did not start out looking for an MLM opportunity but rather a turn-key home business. Often people are introduced to MLM at the invitation of a friend or associate while others learn about MLM Opportunities after requesting information either online or in connection with other types of advertising. When introduced by a friend, it's natural to rely on the "referral" or friend's judgement when deciding about whether to become involved. However, throwing caution to the wind may not be the best course of action. Whether you are contemplating starting an MLM-oriented home-based business, or are already involved in multi-level marketing, there's no time like to present to learn more about MLM in general and learn more about how you can perhaps become one of the few who are successful in your own MLM Business.
What is MLM ?
There are several definitions of MLM or Multi-level Marketing. The first definition is from Wikipedia's Online Dictionary and the second is from the FTC.gov website. Notice the warning in the FTC definition regarding commisssions not being product-based. This simply means that plans that are not product-based where commissions are based solely upon recruiting or unreasonably priced products, may in fact be considered as Pyramid Schemes. This is the most important point to consider when researching an MLM Company.
MLM (Multi-level Marketing) also called Network Marketing, "is a business model which utilizes a combination of direct marketing and franchising. Typically, individuals become associated with a parent company in an independent contractor relationship. Sellers are compensated based on their sales of a product or service, as well as the sales of those they bring into the business."
Multilevel marketing plans, also known as "network" or "matrix" marketing, are a way of selling goods or services through distributors. These plans typically promise that if you sign up as a distributor, you will receive commissions -- for both your sales of the plan's goods or services and those of other people you recruit to join the distributors. Multilevel marketing plans usually promise to pay commissions through two or more levels of recruits, known as the distributor's "downline."
If a plan offers to pay commissions for recruiting new distributors, watch out! Most states outlaw this practice, which is known as "pyramiding." State laws against pyramiding say that a multilevel marketing plan should only pay commissions for retail sales of goods or services, not for recruiting new distributors.
The legitimacy of MLM Business Model, when the company is product-based, is one that is not subject to debate along legal lines but rather there is a practical question as to how many distributors are really successful. Skeptic Sites suggest than less than 1% of MLM Distributors are actually successful and turn a profit. However, most experienced-based knowledge suggests that the skeptic sites are a bit extreme in their evaluation of the MLM business model in general. The reality is that people can and do make money with MLM. There is the likelihood that marketers can be successful if they base their expectations on a realistic view and understand the cost of doing business in particular.
Multi-level companies often are often described and categorized in different ways. Companies characterized as Network Marketing and Direct Sales Companies may also be considered to be MLM-type companies if they use multiple levels of compensation to pay commissions to their distributors. The term MLM and Network Marketing are often used interchangeably to refer to companies that meet the definitions cited thus far.
The working definitions presented are fine so far as they go and are less of a consideration than is the practical question of how one can prepare to succeed in your own home-based business when the MLM business model has been chosen.
The MLM Model - Pros and Cons
If you are new to the world of MLM, it might be helpful to become familiar with both the pros and cons of MLM in general .
Most prominent MLM-oriented web sites offer a mostly pro-MLM point of view and of course there are skeptic web sites which are critical of MLM in particular (some are critical of most everything in general). Nevertheless, skeptic sites and sites that monitor compliance with legal issues can be helpful in researching specific MLM Companies. It is relatively easy to learn more about MLM in general and MLM Companies in particular using the Internet as a research tool. What can be challenging is finding an information source that is fair and balanced.
MLM Companies
As a business model, MLM is here to stay so it is important to emphasize there are legitimate MLM Companies who are product-oriented and sell legitimate goods and services. There are also so-called Multi-level companies which do not offer a legitimate product or service and they should be avoided.
Therefore, if you are new to MLM, it is important to have enough information to be able to select only legitimate MLM Companies. Again, from Wikipedia's Dictionary, "In a legitimate MLM company, commissions are only earned on the sale of products or services to the end consumer who, in many cases, is also a distributor. No money may be earned on a "sign up fee" or for recruiting alone...Analysis of the compensation plan is often required to determine whether participants are paid based on actual sales of products to customers versus new recruit bonuses and sales of business support materials." This definition seems to shadow the definition offered by the FTC and is suitable for purposes of illustrating the primary concern about a company needing to be product-based.
Finding customers
Most new MLM'ers inherit certain attitudes regarding their company and products and the industry and essentially adopt attitudes that reflect commonly held beliefs about how they can succeed. Some MLM Companies suggest that since the opportunity is so good and since the products are excellent, all that is required for success is to be able to locate a source of quality prospects (also known as leads).
Perhaps the most significant and overlooked expense associated with any business is the cost of acquiring new customers. Many experts suggest that customer acquisition is the most significant expense that companies will have to absorb.
The same consideration holds true for MLM-oriented businesses. How will you go about find new customers and recruiting new downline members? This is not a trivial question but one that is pivotal to your future success. A second question also emerges which is once you find a good source of prospects, how will you personally market to them?
Old school marketing vs Internet-based Automation
Many different and complimentary marketing methods are available today and offer varying degrees of effectiveness.
Before looking at particular marketing methods, first let's examine the framework that shapes the opinions and expectations of MLM Marketers today. Today, many MLM Companies emphasize automating customer acquisition and suggest that it's possible to put everything on auto-pilot so to speak. That sounds attractive because everyone wants to accomplish as much as they can and make as much money as possible with the least amount of time and effort. In fact that is often one of the main appeals that are used to recruit people into an MLM Company is it not?
In contrast to this "automated" approach, there is the "old-school" approach of sales and recruiting which emphasizes person-to-person networking, joining groups so you can network with members, working your warm market which is composed of your your family, friends, and associates, etc., and using what seem to be more time intensive manual methods to sell and recruit. Marketers who are not comfortable selling face-face, prefer to use automated sales methods that are made possible by the Internet.
Aside from how you acquire prospects, the effectiveness of your sales or marketing campaign is based on several variables. Unfortunately, often-times, company "types" and high-level distributors/recruiters often over-simplify what is required to attain success in recruiting and in product sales.
All too often marketers are told that if they only find the right leads source, they will succeed in the business because everything else is already there. This advice misses the point and in some cases avoids dealing with the reality of the cost of customer acquisition.
Of course every distributor or business person must have people to present an offer to. That's fundamental for any business. However, what should be equally emphasized are core requirements and skills such as training, especially sales training, how to elicit referrals, and how to close the sale in particular. If you don't have any contact with prospects, you may find that your are missing a lot of sales. So, as a substitute for the personal touch, and often times a lack of time, many marketers are turning to automated marketing solutions.
Opt-in email - an automated sales solution that may not meet expectations
Automating your marketing sounds appealing and it can really work. Initially, when marketers try automated solutions, one of the first things that is tried is opt-in email.
So, if you automate everything, it typically means that you will be buying opt-in email, sending out a few hundred thousand or so and will try to get people to click on the links in your email ads. That may or may not work for you because you will competing with everyone else who is doing the same thing not to mention the spammers. Now this type of marketing strategy has its place and does work to one degree or another for many marketers but often times, the reality - the results you are likely to experience, will not match up with expectations.
Let's consider click throughs and conversions
Real-world data suggests that email marketers will experience click throughs of less than one percent. On the surface, even that low a percentage sounds appealing when you do the math. However, the appeal of numbers is based on the assumption that all of your email will get through to it's intended destination and if you are contracting with a email broadcasting service, it also assumes that you understand what is meant by a "response."
Companies who send email for you typically define a response as a click-through. In other words, if you send 100,000 email ads using an opt-in list and 1% of those who receive your email click on the advertising link in your email, that is considered to be a 1% response - from their point of view. Stop for a moment to consider what is being said here. A blaster service often claims a certain response rate but that is only the amount of people who click on the link in your email ad. This is not the number of people who request information or join your program!
So, when you think about it there is another conversion factor to take into account. What becomes important is the conversion ratio of your web site. Good web sites have a conversion ratio of around 10% which is somewhat realistic if you are only getting visitors to request information.
If you are ask for information which may considered more personal in nature, or look at enrollment, the conversion factor may be as less than one percent and range upward to around five percent. This response rate is highly dependent on several factors in addition to the quality of the leads you are advertising to.
So, now you know that in our conservatively biased typical scenario, out of one thousand people who clicked on your email ad, and visited, you now have about 100 people who most likely requested information. Out of those 100 people, you will find about a third have entered information with typos or provided bogus information. So typically, from that number you might actually have around 50 responses which need to be worked.
Now you can contact every respondent - NOT!
You may find that not all respondents can be reached, some were unqualified (teenagers and kids), some were just curious and the list goes on. So out of that list of 50 respondents, how many people do you expect to recruit? Most people will be glad to provide a temporary hotmail or yahoo email account so you can send them an email follow-up. Few will provide a real phone number and fewer still real physical address. So, if you follow-up with an email, how many people will resond?
OK, the point is that you might wind up with a mere handful of people if you are lucky that are really interested and with whom you can contact assuming that your email got through as intended. The biggest problem now is deliverability is down because of email filters and this has made sending opt-in email even less attractive.
Because of the desire to curb spam or unsolicited email, most and internet service providers who offer email, and that includes hotmail and yahoo type accounts, have installed email filters that attempt to block spam. The result according to one estimate, is that up to 68% of email is often not delivered. This happens even when companies are sending email to their own opt-in in-house and private customer lists!
Many people think that because opt-in email leads include a phone and a mailing address that they are quality leads. Nothing could be further from the truth when it comes to phone numbers or mailing addresses being useful because most of the time the information is bogus. If you require proof, go ahead and buy opt-in email leads and try calling the phone numbers. You'll see what I mean.
There are other alternatives which emphasize a quality approach as opposed to sending out bulk email. And generally speaking the more quality oriented approaches are more effective. The main point is that your costs to acquire customers will usually be more than what you might have expected if your expectations are based on what most people say. For the typical opt-in email blast, your upfront costs will include around $150 per one hundred thousand email and about $350 for the blast if you have a service do his for you. That adds up to around $500 for the cost of the blast and the email. Now if you divide the cost by the number of leads that responded, that is the cost of developing your real leads list. You can easily see that when you divide the cost by the number of people who actually signed up, the cost of acquiring new customers using this method will often be much more than anticipated.
If things don't go as planned
Again the key to marketing your opportunity is keeping your costs low so you can try different marketing methods so you can see what might work for your opportunity and have enough ADVERTISING funds to give each method a fair test. If you are convinced that your opportunity is great and the product is sensational, and it's the lead source that is the problem (IT'S EASY TO BLAME THE LEADS - RIGHT?), then try again using the same marketing method that you have been told will work, but use several different lead sources. If the results are the same, perhaps you have proved to yourself, the hard way, that something else may be the problem.
Many marketers are conditioned to blame the lead source first when their marketing campaign falls flat. The truth is more elemental than that. All the elements required for success must be present if your campaign is going to succeed. It gets back to fundamentals and includes some of the issues first mentioned. Your company has to be reputable and the products must be in demand and reasonably priced and there needs to be something unique that makes getting the product or service from you desirable or necessary. In addition, the opportunity must be presented in a compelling way to a sufficient number of interested prospects in order to be able to find enough customers to make it all work.
Your lead source and the quality of leads is only one factor and some would say not the most important factor in being successful. If you don't believe it, consider how many people in direct sales, who only used the phone book or a Criss-Cross Directory, managed to build their businesses from scratch before the advent of no-call lists and you'll appreciate the role of the factors that are under-emphasized by most marketers and especially recruiters.
The reality is that you can short-cut finding good leads, but real success will come to those who are effective in presenting a good opportunity and who understand the nature of the game.
Quality Leads - Surveyed Leads and the Telephone
More and more experienced and new marketers alike are turning to surveyed leads as their preferred method of marketing. Unfortunately, many people turn to surveyed leads only after spending money on email blasting or opt-in email campaigns. Having wasted money on various failed attempts to recruit customers, most MLM'ers turn to surveyed leads as a last resort and that is unfortunate.
Rather than turning to surveyed leads as a last resort when a marekter's available advertising funds have been diminished, perhaps a better plan of action would be to utilize surveyed leads from the start. The benefits of this approach are two-fold. When you present your opportunity live to someone on the phone, you'll quickly find out if you can sell and if there is any interest for your product or service.
Surveyed leads, especially real-time surveyed leads can take a lot of the guess work out of the equation. When you work with Surveyed Leads, you are working with a lead that was generated online when a prospect took time to complete a survey form. The fact that a person took the time to complete a form, answer personal questions, and provide contact information suggests that this type of lead is a better quality lead than those that are generated from co-registration and incentivized opt-in email sources. You can click here to view a typical online survey form.
If marketers enjoy more success with surveyed leads, as opposed to opt-in email, it may be because marketers who use surveyed leads tend to use the telephone and call respondents. Surveyed leads are attractive when you plan to work by phone because a good lead source will guarantee phone numbers and have a replacement policy which means you aren't on your own with quality surveyed leads unlike opt-in email. Again although surveyed leads cost more than opt-in email or autoresponder leads, you should have a better chance of success using surveyed leads given that the other requirements for success are there.
Follow in the footsteps of success
So the real question is how does one acquire the necessary skills and the right mind set? There is no better way of insuring success than by patterning after successful people and if you are serious about growing a downline, there is no substitute for being good on the phone. The good news is that you can learn to be effective on the phone as you don't have to be a rocket scientist to sell. To quote the old adage, "you can learn by trial and error" or you can pattern after success.
If your upline is interested in training you and is willing to help you learn how to present your company and it's products and services, how to present the opportunity, and help you close a few sales, you might be in the right place at the right time, and in the right sales organization within your company. There is no faster way to succeed than learning from a mentor who can show you the ropes step-by-step.
The next best thing is to consider professional sales training. MLM Coaches are available who can teach you the ropes - how to sell and sell and recruit in the MLM world. If you don't have access to someone who can train you in your organization and don't want to invest time and money with an MLM Coach you can always do it yourself by investing in a good sales how-to book or course.
Again, the same considerations apply when you consider investing in an Online "Marketing" Course. I have purchased most courses and have found that they really are sales brochures that are designed to ultimately sell automated sales solutions. These courses seem to overlook the reality that real conversions result from contacting real people and sales effectiveness is something that is not advocated or taught.
Find the right leads source for MLM Leads
Once you have your ducks in a row - that is to say, you've found the right company and someone who will work with you so you can learn how to present the opportunity, it's then a matter of finding the right type of mlm leads - leads that will work with your style based on how you prefer to contact your prospects.
Finding a good leads source is somewhat like finding a good company as many of the same core criteria apply. But ultimately, it's just a matter of being willing to test a few lists or leads from the provider you wish to work worth. See if you can arrange for a free sample. If a free sample is not available that doesn't necessarily mean you shouldn't try their leads. Some very high quality brand-name lead providers just don't offer free leads and there is a good reason for that. The best way to evaluate leads is to test real production leads anyway and you should be able to purchase a smaller quantity of leads in order to keep your costs as low as possible. That's the simple and easy way to see if the leads will work for you.
Things to consider:
The following checklist should prove to be helpful to those who are considering MLM as a home based business and to those who are looking for ways to make money who are already involved in MLM.
1- Is the company reputable? You can check government sites such as the FTC (offers a more balanced view) to learn more about MLM and some MLM Companies in particular. Also if you wish to counter balance MLM Company advertsing and claims with a skeptics view, consider a visit to MLMWatch.org and other similar "Skeptic" sites to see if a prospective company is above board. It might be helpful to determine how many years the company has been in business. Has the company complied with relevant industry and advertising regulations in the past and are there any current or pending actions rulings or investigations on record against the company?
2- Is the company publicly traded or privately held? Companies that are public ally traded have to conform to certain minimum standards.
3- Does the company have a good reputation in their industry and are company distributors happy with their compensation plan? When is the last time the compensation plan was changed and are pending changes under consideration?
4- Is the company product-oriented and are the products needed or in demand?
5- Are the companies products or services unique, or of good quality, and reasonably priced? In other words, will your products be competitively priced and equally desirable in terms of quality and their appeal?
6- Do you completely understand the compensation plan?
7- Are production requirements reasonable and reachable? What are the penalties of production goals are not met?
8- Will you be able to find new customers affordably? How will you acquire new customers?
9- Would you personally be interested in buying the products or services offered by your company if they were available elsewhere. Have you purchased similar products or services in the past or do you think you or your associates would be likely to use the products and services in the future?
10- What will you cost of doing business be? Do you know what your expenses are likely to be on a weekly or monthly basis?
11- Will your company or upline train you?
What's next?
Given that you do your homework, it is certainly possible to succeed in your own business. Many people are making money using traditional marketing methods and many are making money online using more modernized tools. While you are considering how to make money, it may be helpful to consider investing in a quality Marketing course and investing in yourself by learning more about how to write good ad copy if you prefer automated marketing or how to sell in person if you like to work with people moreso than with computers.
If you consider this as a begining in your journey and are willing to learn and investigate the many options that are available you, you will be able to make an informed decision and find ways to set up your home business by either developing the knowledge and skills you need or perhaps colloborate with others who can add complimentary skills that are needed to make your venture successful.
If you considering the MLM Business Model , you can click here to view a list of companies that adhere to ethical guidelines of the Direct Selling Association.