Distribution Models Applying to MLM Businesses

The topic of business models is an area of research that has had the spotlight shone on it again and again. As business culture evolves worldwide, corporate leaders continue to impose their new and changing ideas on the ways in which products should be taken to market and ultimately sold.

Contrary to this however, the agreement on a sole distribution model for the MLM industry in particular was reached a long time ago. The very idea that drives MLM businesses is, in effect, the actual distribution model itself. What am I talking about? Well, let me explain everything in a bit more detail.

The concept here is simple. MLM businesses employ "representatives", who in turn employ their own "representatives", and so on and so forth through many levels. In turn, each of these people are solely responsible for the income that they earn from actively promoting the products and opportunities of the overall MLM company.

This method of selling has both positive and negative effects overall, but taking a historical perspective for a moment allows us to see that despite this, the method has been extremely effective - at least for the company at the top of the pedestal.

Just wait one second though. It's all very well to admit that this distribution model is indeed a success, but why is it so successful? Why is it that we would not be able to achieve the same volume of sales with a few retail outlets scattered around each city - worldwide? The answer to this question is actually not a simple one.

The first approach we could take is to say that the products sold by MLM companies are uniquely sophisticated, and hence each one needs to be explained before a sale could possibly result. This explanation could hold some weight - but I have seen many MLM companies promoting general, every-day products and groceries that need absolutely no explanation whatsoever. Therefore, this theory only partly begins to explain the phenomenon of the networking marketing distribution model.

Another approach taken by critics of MLM's, claims that the company at the top of the ladder can't be bothered spending any money on their own promotion. A few moments worth of research will quickly find that actually, MLM advertising is just as wide spread as conventional company advertising.

Admittedly, the company does not advertise it's products, but instead focuses on the opportunities it is allowing for individuals to start their own business. Arguably though, a switch of resources from this latter focus to a more material oriented concentration would probably generate a good percentage of current sales anyway - so once again, we are left at a dead end.

Indeed, at this point, I would like to put forward my own idea as to why network marketing works so well as a distribution model. It's because of a phenomena I like to call - market penetration. You see, conventional advertising through traditional mediums, such as TV, radio, print, etc - are all targeted at one person - the viewer. If someone isn't listening to the radio when my advertisement plays, they simply don't hear the ad. If someone doesn't buy the magazine I chose to advertise in, they simply don't see the ad.

This is where network marketing is effective. The people in you downline are out there, actively scouting out potential customers in the community. This in itself is a highly targeted endeavour - one which ultimately results in a higher conversion rate, better leads, and cost efficiencies.

Given that simple idea, I believe that by cutting traditional advertising costs and working on a commission based payment structure, networking marketing is by far a cheaper, better, and more effective type of franchise than any potential competitor could ever dream of being.

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