Multi level marketing is: understanding, type, excellence and shortcomings
MLM or Multi Level Marketing is one form of marketing or marketing which is currently a lot of people. In the country, companies that apply this MLM business are a lot, starting from nutrients to cosmetics. Other terms often used for MLM business are marketing pyramids or network marketing.
What is Multi Level Marketing?
MLM or Muliti Level Marketing is one of the marketing systems that utilize customers as a distribution network.
If taken from the origin of the origin, Multi has many meanings, the level of having the meaning of levels, and marketing is marketing, so that multi-level marketing is a tiered marketing system and many. MLM is a marketing system used by giving bonuses to consumers or customers to be able to be directly involved as a seller and can benefit from the partnership line.
Members who are members of MLM will be referred to as commercial partners, distributors or members. Furthermore, the commercial partner will invite other parties to become a member, so that the customer or market network can be wider and more large.
The success of commercial partners in inviting and adding members will be able to increase corporate turnover, so that it will provide maximum profits. Therefore, the company will provide benefits to its authorized partners in the form of incentives in the form of a bonus.
The following are some Definition of MLM based on experts:
1. Muslich (2015) argues that MLM is a modern marketing system by utilizing a distribution network that has been built more permanently and will provide the position of the company’s customers as marketing personnel.
That is, MLM is a tiered system of thought through distribution networks that are formed promising to customers as well as marketers.
2. According to Harefa (2000), MLM is a direct sales or marketing system for a product, both in the form of goods or services on consumers, so that the distribution costs released from the goods sold or marketed will be very minimal, even to zero.
That is, this MLM business does not require any distribution costs. In addition, MLM also does not require promotional costs because this promotion and distribution costs have been handled directly by its merchant partners with tiered systems.
What is the difference between multi level marketing with ordinary business?
Clothier (1994), explained that there are several things that distinguish MLM businesses with conventional businesses, namely:
- Sales fleet. In the MLM system, marketers are their own distributors, so the distributors will become bosses and hire themselves. Whereas for conventional businesses, goods must pass through retail-and consumer traders.
- Profit sharing. In the MLM system, the distributor will get a compensation from a direct comparison of the efforts they do. Whereas in conventional business, those who benefit are owners, directors and distributors. The retailers will benefit, but with a small margin.
- Selling products. All MLM sales will be carried out directly. Whereas in conventional business, new consumers will get the product they want by shopping in certain stores.
Types of Multi Level Marketing
Setiawan (2017) explained that there are several types of MLM systems, here are these types of MLM:
- Binary plan system
The Binary Plan system is a MLM system that prioritizes its network development in the two legs. The bonus that will be obtained will be greater if the network can be increasingly balanced. Conversely, if there is no balance, the bonuses will actually flow profusely to the company.
MLM with this binary plan system is usually applied by various companies in Indonesia. Those who apply this MLM system is relatively faster to develop, and its partners will also get a bigger bonus.
To make it easier to get these bonuses, usually partners from companies that implement this MLM system will apply the rules in it will give money as a bonus result of the recruitment of the partners they have invited. Systems like this look like trading people subtly.
In general, this type only provides a large bonus at the beginning of the career stage only as a form of a place and proof that running this Binary type MLM business is very easy. But in fact, this system even more profitable those who have joined in the early stages.
- Matrix system
This MLM Matrix system will develop its network by using the concept of three frontline, as well as down. This type of MLM arises to anticipate the MLM Binary system which is more regarded as a Money Game.
- Break Away System
This Break Away type MLM system will develop its network by prioritizing wipers. The bonus received by partners will be greater if the frontline is getting more and more. However, the weakness of this system is that or agents must arrange everything alone.
In addition, this system also allows downlines to exceed its upline. At first, the bonus that would be obtained by partners would be small, but this bonus will continue to increase if it is in the top rank. Usually, companies that apply this MLM system will do the lure of recruitment bonuses because the initial bonus of his career early.
Multi Level Marketing System
The following is the MLM work system based on Setiawan’s opinion (2017):
1. At first, you will be sponsored by a member or distributor of the MLM company. Your sponsor is a distributor that has already joined the MLM company. Your job is to only sell the product of the MLM company and start looking for new business partners as much as possible to join as a member, until later it can form a broad network.
Pay for grades / registration. Everyone who wants to join must pay a certain amount of money has been determined by the company. This registration money will be submitted to the nearest Stockiest party while providing a form that has been registered and filled by the prospective member. After pouring out some money, the distributor or member will get various facilities to help the sales and recruitment of other members.
2. Sign an agreement or contract. A member who has paid the base money is required to sign a contract that is binding the company and members. A member must comply with various regulations that have previously been established, while the company must provide products, provide commissions, services and guidelines so that their members are able to run their business smoothly. Each member has the right to obtain various company products at wholesale prices or distributor prices.
3. Carry out product sales activities. Furthermore, the members must carry out the company’s product sales activities on other prospective customers. Most of the sales will be carried out directly or face to face, starting a special recommendation or a direct approach. Usually, every member will provide an explanation of various company products and convince consumers will benefit, excellence or quality so that prospective consumers willing to buy the product.
4. Develop a network. In addition to the duty in selling the company’s products directly to prospective consumers, the members must also develop their sales network as wide as possible. In order to increase the network, the member must be diligent in seeking prospects.
Some strategies that can be used to build prospects are by developing the widest network, exploring the entire market, meeting many people, and appearing as an agent.
If the member successfully developed its network, the company will provide incentives in the form of bonuses, such as discounts, and various other incentives. This MLM strategy is very dependent on the development of its network, the more members join, the greater the bonus will be obtained.
Advantages and Weaknesses Multi Level Marketing
Yusuf (2000) explores that there are some MLM advantages and weaknesses, here are the explanation.
1. Multi-level marketing advantage
- MLM can bring passive income which turns out to be promising as an additional fixed salary every month.
- MLM trains each member to hone communication skills with his downline, so that it will form a very strong personal selling spirit.
- Expand business relations.
2. Multi-level marketing weakness
- Every MLM member is not a businessman, but only a follower in a complicated hierarchy system, where they only have control that tends to be a little. So, they will be controlled by a system that is in effect at that time, and cannot be free.
- MLM will have a negative effect on the real sector. If there are already many people who are tempted by MLM, all activities in the real sector will be disrupted, because the circulation of money in MLM is only in the scope of the company alone and will definitely reduce the productivity of the community to work hard.
- MLM will make many people not want to try to play capital in business activities in the real sector. Even though the capital needed in the real sector is quite large.
- The pre-member money that rotates on the MLM business will not be guaranteed by the government in its security. So that the money owned by a member is likely to be returned.
If taken from the origin of the origin, Multi has many meanings, the level of having the meaning of levels, and marketing is marketing, so that multi-level marketing is a tiered marketing system and many.
To make it easier to get these bonuses, usually partners from companies that implement this MLM system will apply the rules in it will give money as a bonus result of the recruitment of the partners they have invited.
Your job is to only sell the product of the MLM company and start looking for new business partners as much as possible to join as a member, until later it can form a broad network.
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