“Don’t sell the steak sell the sizzle.”

Elmer Wheeler, “Greatest Salesman in the World,” circa 1937.

Is MLM prospecting selling a dream? Is there any substance to the activities of MLM?

In discussing MLM with a prospective new recruit, what matters? What should be clarified, if anything?

Multi-level marketing (MLM) from its start nearly 80 years ago was a marketing strategy steeped in products sales. Up to its time, members of sales forces were compensated only for sales they personally generated, unless they were also sales managers. MLM was a way to motivate more sales and sales force growth by adding compensation for the sales of new salespeople recruited by current salespeople.

MLM compensation rewards not only sales, but also prospecting to add new recruits to the sales force. The new recruits are looked after and cared for by the person who “sponsors” them into a “downline” sales position, because recruits earn commissions for their sponsors, who, in turn, teach them how to sell and recruit.

The Multilevel Attraction

The novelty that holds so much attraction for people interested in MLM is the payment of commission percentages down several levels of the newly formed sales force organization. For the companies employing a multilevel approach the trade-off is paying commissions for direct-selling, word-of-mouth marketing and sales, rather than spending big budgets on planned-for, but hit-or-miss advertising campaigns.

The strategy’s multiple levels of compensation make the system a means for residual income streams for each salesperson who participates and produces.

According to data about MLM, published on Wikipedia,

“… salespeople are expected to sell products directly to consumers by means of relationship referrals and word of mouth marketing.”

And it works! In fact, MLM has produced many millionaires, satisfied associates and pleased product consumers.

Possible Downside Activities

Companies that use MLM compensation plans, at times, have been painted in a negative light, but the strategy of MLM was always, and always will be, a strategic means of getting products sold. It is a way to reward significant producers of sales and sales force expansions.

Negatives within MLM come from individuals who exploit the system by loading up sales recruits under them in lieu of personal sales, or by selling their recruits too many products as a means to qualify for more commissions.

Still, one should not negate entirely the value of people who can inspire and motivate people to sell products. A lot of MLM products sell that way to the benefit of many. MLM has had its share of its inspirational people who have inspired and blown up MLM into the multi-billion-dollar sales business that it is today.

A Government Agency’s Take on MLM

Federal Trade Commission emblemA responsible discussion that a prospector could have with a potential recruit would include guidelines found online at the government agency with oversight powers over business. Here are a few of those guidelines that allow selling a dream, but based on facts, not pipe-dreams.

Multilevel marketing plans, products and opportunities vary. The Federal Trade Commission (FTC) recommends following the five following actions to ferret out the MLM details of companies being considered:

  1. Consider the Products
  2. Learn more about the Company
  3. Evaluate the Plan
  4. Ask Questions
  5. Consider the Products

In multilevel or network marketing, individuals sell products to the public — often by word of mouth and direct sales. Typically, distributors earn commissions, not only for their own sales, but also for sales made by the people they recruit, down four or five levels, albeit in smaller and smaller percentages.

When multilevel marketing plans are legitimate, money made based on your and your sales team’s sales to the public. If the money you make is based on the number of people you recruit and your sales to them, it is not legal. It is considered a pyramid scheme, which are illegal, and the vast majority of participants lose their money in those models.

Consider the Products

Many companies that market their products through distributors sell quality items at competitive prices. But some offer goods that are overpriced, have questionable merits, or are downright unsafe to use.

What will you be selling? Are there similar products on the market? Is the product priced competitively? Is it safe? Can your sponsor — the distributor who is recruiting you — support the claims about the product’s performance?

The freedom to buy into a MLM program and its products comes with a responsibility to ensure that marketing materials are truthful and that solid evidence exists to back up product claims. The standard set by the FTC is for new distributors to verify not only company claims, but also that competent and reliable research backs them up.

Learn More About the Company

An internet search and articles about the company’s track record in newspapers, magazines, or online may yield many data about a company, including how long the company has been in business; the condition of its reputation for customer service; what others on blogs and websites think about the company and its products; and data about lawsuits for deceptive business practices.

Evaluate the Plan

According to the FTC, taking time to think over a decision to invest hard-earned money at an opportunity meeting is smart. The agency recommends that you ask your sponsor for the terms and conditions of the compensation plan, including its structure, your potential expenses, and support for claims about how much money you can make.

Getting the name and contact information of someone at the company who can answer your questions is recommended, along with getting all of the data you asked for in writing.

New distributors are responsible for repeating unverified claims made by sponsors regarding incomes earned, so the agency cautions new distributors to be honest and realistic.

My own rule of thumb in this is: when in doubt, verify and get it in writing, including any company policies about money or product refunds. Ask for more information until it is absolutely clear to you. Your sponsor and other distributors should be willing to answer your questions.

In the end, keep your own counsel, because the freedom of opportunity comes with the responsibility to help keep it free for those who would follow you.

Ask Questions

Here are a few questions you might want to ask of your potential sponsor before deciding to participate or not:

“What are your annual sales of the product?
What were your expenses last year, including money spent on training and buying products?
How much money did you net last year, after expenses?
How much time did you spend last year on the business?
How long have you been in the business?
How many people have you recruited?” — Federal Trade Commission

People join and work within MLM plans for a variety of reasons; some work part-time, while others go “all-in,” as the saying goes. In the end, the MLM experience you have will be the result of what you and your team around you put into it. Given a solid, honest company and product line, your opportunity is as good as you can learn to make it. You will have a lot of help along the way. You will have the opportunity to help others.

You can begin by following the FTC guidelines which can help you “know before you go.” Once verified, the data about what has worked for the company you choose to represent will help you grow your downline and business.

Don’t Forget the FUN!

By the way, if by this point you feel a bit serious about MLM, let me remind you of another famous salesman’s words of wisdom:

People don’t buy for logical reasons. They buy for emotional reasons. — Zig Ziglar