Don't forget the commercial for a shampoo for women. It went something like, "If you tell two people, they'll tell two people, and so on..." The point it was trying to make was that soon everyone would be using the product if everyone who used it told two other people about it. MLM works like this.
Think back to the old commercial for a shampoo for women. It went something like, "If you tell two people, they'll tell two people, and so on, and so on..." The point it was trying to make was that soon everyone would be using the product if everyone who used it told two other people about it. That's exactly how MLM, which is also called "network marketing," works.
It is called "Multi-Level" because there are different levels in your business. In theory, there are more people at each lower level of your business. The structure, or matrix, of each MLM is different.
I'm using a 3x5 matrix for the example. In other words, you may only have 3 people on the first level of your business. And your business could have up to five levels. Think of it as "if you get three people, they get three people, and so on..." Only you are on your first level in this case.
Level 1: You are on this level.
Level 2: The first three people in your business make up this level.
Level 3: These are the first three people in level 2's business.
Level 4: These are the first three people in level 3's business.
Level 5: These are the first three people in level 4's business.
When level 2 is full, your matrix has 4 people in it. There are 4 of you.
When level 3 is full, your matrix has 13 people in it.
When level 4 is full, your matrix will have 40 people in it.
When level 5 is full, your matrix has 111 people in it.
If you bring on three new people, your second level is full. These 3 people can recruit 3 people each for their 2nd level. That's enough for your third level. This happens over and over again all the way down. If you bring in more than three people, they move down your matrix to fill the first open spot. We call this "spillover." So, you will partially fill the matrices of some of the people in your matrix. And the person who hired you might be a part of your matrix.
So, what does this mean, then?
When you join an MLM (multi-level marketing) or network marketing business, you will be selling or marketing a product or service. The company that owns the product or service will pay you a commission for your work. If you sell 10 products or services in a month, you get paid 10 commissions. If that item sells for $15 and you get a 20% commission, you make $30 for every 10 items you sell.
But with MLM, your work is done more than once. You will get paid commissions based on how hard everyone in your matrix works. Now, the commissions you get from them will usually be less than the commissions you get from your own work. And each MLM will have its own way to pay out commissions. On each level of your matrix, you might get a different commission on sales.
The key is in this duplication. If each of the 110 other people in this example matrix also makes 10 sales, then you would not just earn commission on the 10 sales you made. You would earn commissions on 1110 sales that month. In other words, if you earned 5 percent -10 percent on sales made by the people you recruit, and if they made 10 sales each, you could earn about $1300 for the month, even though you only sold $150 of products yourself. This is the power of copying.
Let me say something to warn you about this. Almost never does this matrix structure work the way it does in the examples. First of all, you probably won't ever get a complete matrix. Second, it's possible that most of the people in your matrix will never make many sales. You are the only one who can bring in sales. You might need to get the other people to buy.
There are three kinds of people in an MLM, or network marketing, setting. You, your upline, and your downline are all a part of it. You are all three, too.
The person who told you about the business is in your upline. This person may also be called your sponsor. The person who brought your sponsor into the business, and the person who brought them in, etc., are also part of the upline. Think of your upline as your business parents, grandparents, great-grandparents, etc. Most MLMs require your upline to provide some type of training to help you succeed in the business.
Most of the time, your upline will get a cut of the sales of the products you sell. So, in reality, the better training, and help they provide, the more commission they will make. Also, you will make more sales the better they train and help you. And, the more people you have in your matrix, the better you will be able to train them.
As soon as you bring in a new member, you join an upline.
Your downline consists of your matrix, which has already been explained. Your downline is everyone you bring into the business, as well as the people they bring in. From these people, you get a commission. Since your "upline" should have taught you, it's up to you to teach them. The more sales your "downline" can make, the better you train and help them. They are also better able to train their team, which includes some of your team members.
Is this really going to work?
It depends.
How's that for being evasive?
There are, in fact, a lot of bad MLMs. Most of these MLMs work only for a few people at the top of the original matrix for the company. Most of these rely mainly on recruiting new people, filling the matrix, and paying a "sponsoring bonus" for each person recruited. There isn't much focus on selling a product, if there even is one.
There are also some good MLMs, which is good news. The good ones have a lot of ways to learn. The products were also the most important thing to them. There are no leads, mailing lists, recipe swaps, or other things like that in the products. All of the products are real and can be used by anyone.
So, the short answer is that it can work if you are in a good MLM. In my article "My Dad Can Beat Up Your Dad: How To Choose Which Networking Business Is Right For You," I talk about how to find a good MLM business.
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This article was written and published in 2002. Dan Levy.
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