Multi Level Marketing: Will it Really Benefit My Business?

 

Updated on Jun 17th, 2022
13 Mins Read

“Your value will be not what you know; it will be what you share.” ― Ginni Rometty, CEO, IBM

So, you own a business. You generate healthy revenues but, somehow, your growth has stagnated. You’re looking for newer ways to boost sales but aren’t sure how. Then, a near-other-worldly advice reaches you: “Try Multilevel Marketing (MLM)!”

You’re curious but unsure. Isn’t MLM a sham? You trust the credentials of your advisor, nevertheless. The doubt keeps on surfacing. It’s something you cannot wrap your head around. You finally decide to research and Google “Will MLM really help my business?”

You’ve reached precisely where you need to be! All of your doubts and queries will soon be resolved.

Something to know before we delve deeper

Multilevel Marketing doesn’t equate to a pyramid scheme. If you’re uninitiated, you may ask what is a pyramid scheme? It’s an illegal business model that makes unsuspecting investors fall prey to dubious marketing plans. In a pyramid scheme, a participant enrols other unsuspecting investors with a promise of payment. As the genealogy tree advances, the organizer of the scheme collects money from new participants and distributes it to existing ones. This is done based on the payment structure of the pyramid scheme’s unique model.

Though pyramid schemes tap the advantages of multilevel marketing, MLM is far beyond them. Unlike pyramid schemes, MLM businesses involve real products people purchase – whether or not they have an active downline (people whom they have referred). For instance, Amway, founded in 1959, is an MLM company that sells health, beauty, homecare, and other FMCG products and generates $8.9 billion in annual revenues. The company has eliminated its conventional marketing spends (such as OOH ads, TV commercials, etc.) and redistributes this revenue amongst its customers. People buy its products as per their unique needs and promote the brand through word of mouth. It creates a win-win scenario for everyone.

Since pyramid schemes are illegal, it’s critical to note that an MLM software provider may reserve the rights to terminate your services if you are found involved in such malpractices. Remember, with great power, comes great responsibility. So, use MLM solutions for the betterment of community and not otherwise.

Now, with a clear conscience, let’s get back to business.

How can MLM benefit my company?

Don’t let your business grow ten-times in ten years. With MLM, you can realize this growth in three years or even less. But first things first, let’s understand multi level marketing with your business as a template.

Suppose you extend lumber services in California. In addition to lumber yards and hardware stores, you also provide delivery services, custom millwork, consultations, and commercial credit to your customers. You have a network of distributors and service providers (truckers, financial service providers, etc.) whom you pay compensation based on their services availed. A fair share of business also flows in through your online platform.

The demand is usually steady but there are multiple variables involved. For instance, a distributor may perform well at times and other times procure nothing throughout the year. Business development and client retention also turns out to be a challenge with you adopting different strategies to maximize sales. Similarly, the performance of your loyalty program always varies. The overall end-result, however, yields near-consistent revenues.

To understand how MLM will benefit your business, first you need to understand a few aspects.

The Prerequisites for Multilevel Marketing

1. Establish a thorough understanding of your business operations:

It may sound silly. But it’s important to understand your business operations thoroughly. This is because you are about to modify your business model. If you know how your business machinery operates in detail, you can better evaluate what works in your favor and what does not. It will help you make informed decisions that lead to superior optimizations.

2. Be absolutely clear about your sales funnel and how it works:

MLM software solutions primarily integrate with your sales funnel. Understanding your sales funnel empowers you to create a simplified genealogy tree. As a result, you can establish and understand the relationships between different operators in your network. It gives you the ability to create a differential MLM plan that creates perfect synergies between your business, its end-customers, and everyone in the middle!

For instance, in our template business model, your distributors may be connected with other potential customers such as woodwork workshops, builders, carpenters, etc. However, they may not be willing to connect you directly with them as it may affect their compensation.

Similarly, your direct customers have no incentive to connect you with their known contacts who can increase your volume. If you understand such relations, you can devise MLM plans that not only address such issues but also capitalize on them. It will help you enhance your sales funnel, and even adjust your future MLM strategy to generate the desired results.

3. Know Your Volumes:

Lastly, one of the most important factors to keep in mind is how much incoming sales volume you can absorb. This is the most critical yet least assessed factor that has a far-reaching impact.

A well-designed MLM strategy creates an exponential growth curve in terms of demand. However, say you’re unable to absorb this incoming demand. Then, after initial success, your network will neither engage with you nor recommend your product/services to others. This is because MLM is a game of direct marketing and word of mouth. People don’t want their word to get undermined, especially when their livelihood depends on it.

Again, drawing correlations from the previous example, suppose your sawmill has an annual capacity of 50 million board feet (MMBF). Make sure that your MLM strategy is designed and implemented such that you do not exceed this limit. Better yet, keep channel partnerships in place as a fail-safe to ensure all deliveries – even if there’s overordering. This will build trust and loyalty amongst your distributors and customers. Everyone will treat you as a reliable partner.

How to Create the Perfect MLM Strategy?

Once you’ve incorporated the above mentioned points, you are ready for the next step(s). They are:

1. Simplify Your Business Model:

Being a business leader, you understand that all sorts of complexities increase with time. Multiple moving blocks are added into the system as per the growing business needs. So, first and foremost, simplify your business model. You should be able to create a diagram of all operations in a page or two.

Note: Create diagrams with moving arrows and avoid written sentences at all costs. Use them only where you need to note down something.

Remember, you have to jot down each and every process of your business from top to bottom. Be as detailed as you can. If needed, create flow charts for all departments and business units.

2. Gather Insights:

You will be amazed to see how many insights you can gather with this simplified and condensed representation of your business. For instance, you may realize that though you have been focusing on your sales team, your business’ dependency on your delivery partners is creating a major bottleneck. It is making you lose out on urgent orders, or a significant chunk of incremental business. So, you need to better compensate the latter to make quick deliveries.

Gather and note down all such insights based on your business sense. You may take the help of department heads or ground workers. Your diligence is going to be the key to success of your MLM plan and, ultimately, your business.

3. Understand Your Margins:

Margins play a major role in MLM. Establish an understanding of your margins and how they get distributed throughout your business structure. Though your sales team and distributors may be driving sales, everything from raw material sourcing, fulfillment, manufacturing, operations, HR management, and so on is contributing to your operations and hence, operational expenses. If possible, create clear-cut divisions of how your overall margin is getting distributed across each department or business unit. You can then estimate the unit economics of that particular business function or individual.

This will help you realize how much scope you have when it comes to creating compensation plans, especially while creating differential ones.

4. Identify Major Bottlenecks:

List all major bottlenecks and prioritize them. Give higher preference to the bottlenecks that may give you definite results in a predetermined time frame.

For instance, you may identify that lackluster pitch decks of your sales team are the source of a low conversion rate. So, you can mandate reporting managers to review and rate pitch decks. Then, based on the available margin, you can incentivize your sales team for great presentations that drive conversion.

Based on your unique business, you may also identify that though your customers are purchasing, they are not recommending your product to others. In such cases, you can deploy an MLM strategy that motivates them to do so.

5. Create Your MLM Masterplan:

Now comes the most interesting part. Create long-term and short-term strategies of how you wish to address these bottlenecks using the best MLM plans.You can either choose a unified approach to MLM or create hybrid models. For instance, you can leverage the Binary or Matrix MLM compensation for distributors and a Stairstep Breakaway plan for your end-customers. You can also build a strong network marketing team with hybrid models.

Make sure that you set your short-term and long-term objectives as well. Both of these objectives must synergize with each other while demarcating a clear path of how you’re going to implement your MLM strategy gradually. A complete overhaul at once may make it hard for you to understand which strategies to go ahead with, which ones to modify, and which ones to drop. It may further cause a far-reaching impact on your business if adequate fail-safes are not in place. For instance, if you fail to meet the increased demand, your customers may negatively review your company.

Your MLM masterplan will ascertain that you remain result-oriented and hit the gas only when you can absorb the imminent growth.

6. Get Yourself the Best MLM Solution:

Lastly, make sure that you get yourself the best MLM solution. A good MLM software can easily integrate with your eCommerce system. It will have regulatory compliance, role management, email integrations, member management, social sharing capabilities, in-built security features, multi-vendor eCommerce, and other key features. It should be easy to install and use, and you should be able to customize it based on your unique business-specific use case(s).

It’s highly desirable if your solution provider also empowers you to drive superior engagement and retention. Some leading players in the market do so with in-demand features and incentives such as repurchase rewards, target-based income, club income, cashback, multi-currency payment gateways, coupon management, social sharing, and shipping management to name a few. They also offer in-depth reports and real-time analytics that help you make informed decisions and better navigate your MLM strategy.

Check out the list of all MLM software features that can make you the master of business growth.

Conclusion:

Using multilevel marketing, you can take your business to unprecedented highs. It ensures that your employees, customers, and visitors become your true growth partners. To know more, click here now!

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