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MLM has been adapted to technology-based products and services with amazing success
What is MLM?

Multilevel Marketing began more than 60 years ago as part of the direct selling industry and has served a significant role in the introduction of many new consumer products and services to the marketplace. MLM, also known as network marketing, has had particular success as a vehicle to introduce many of the “new to the world” concepts in natural health products, weight loss and skin care products that we now consider commonplace in our everyday life. In recent years, MLM has been adapted to technology-based products and services with amazing success. Dozens of companies have emerged to market telecommunications including long distance, local phone service, and even cell phones while others now encompass e-commerce and other web-based products. From life and health insurance to dental and legal services, every imaginable consumer product or service need is now fair game for this channel of distribution. As a result of this evolving marketplace, federal, state and local governmental agencies have recognized MLM as a legitimate channel of distribution, even as they have actively responded to the need for rational regulation within the industry.

The MLM industry currently consists of well over 2,000 companies in the United States, with sales of more than $28 billion annually. According to the Direct Selling Association (DSA), approximately 13 million Americans participate in this industry as independent sales people, and the number is growing every day as more and more individuals take part in the entrepreneurial explosion that is reshaping every sector of the economy

Why Companies Choose MLM ?
The decision of how to bring a product to market is more complex today than the past. Years ago, if you had developed a new consumer product you wanted to sell, all you had to do was buy advertising on any or all of the three television networks to be assured that the vast majority of people would see your advertisements. Although expensive, building brand name was simpler.

But today, there are hundreds of viewing choices, thousands of magazines and millions of web sites. Competition has heated up. While 25 years ago each category of product may have offered three or four primary brands, there are now dozens. As the cost of securing a sustainable share of the market has skyrocketed many companies are actively looking for lower cost alternatives to launching their products and services.

MLM offers many advantages in this situation. MLM is still essentially a person-to-person system of marketing. The truth is: people like to buy on the basis of a friend, relative or a coworker’s referral. Word of mouth is still the most potent sales motivator. MML consulting experience suggests that, as a result, the cost of bringing a product to market through MLM is usually a small fraction of that of conventional marketing and distribution.

In addition, because MLM is based on the principle of multiplication where one person “tells and sells a few,” who each “tells and sells a few more,” who each continue the process, exponential growth shortcuts the traditional time and costs to build a product brand. Once critical mass is achieved, the growth can continue with little or no additional investment.

Another factor, contributes to this phenomenon: Typically in MLM, a high percentage of distributors are also regular customers. These people have bonded to the brand more completely than normal retail customers would, because their income stream from their business depends on loyalty to the brand. In most MLM companies, the purchases for personal use by distributors represent 50% or more of the total sales. And most of the other customers have some form of personal relationship with their distributor, so that their loyalty to that friend or family member extends somewhat to the commitment of buying the products.

Of course, there is always attrition, as there would be with any product subject to personal consumption. But a properly managed MLM company that has reached maturity can expect to overcome attrition through natural growth while experiencing some consistent level of increased geometric growth resulting from the MLM system itself. And when that company introduces new products, they will have an automatic customer base in its growing number of distributors and loyal customers.
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