It's a business
system* that
delivers a manufacturer's products or services directly to its target market,
without the typical, multi-stage distribution systems of conventional businesses.
So it's a form of direct selling. (Note: Many network marketers seem to think that MLM and Direct Selling are synonymous — that network marketing is the only form of direct selling. Wrong. That's like saying that Walmart is the only form of retail selling. All it shows is their ignorance.)
The manufacturer's products or services are not YOUR business... they're the manufacturer's business. Your MLM business
is a vehicle that
identifies consumers who need the manufacturer's products or services
gets those consumers to want those products or services (because no matter how much they need them, until they want them they won't buy them)
ensures delivery of those products or services to those consumers and delivery of the
wholsesale price to the manufacturer.
It's that basic and simple.
Anything else is just confusion and complication of your real MLM business.
The manufacturer's products or services are nothing more than the payload you
carry inside your vehicle, from the manufacturer to the consumer, as shown in
this handy diagram of your business vehicle.
In a conventional business, the marketing mix is the Customer Relationships wheel. It has seven nuts holding it in place. All seven nuts need to be in place
for your vehicle to make it to your destination. The same seven nuts apply to your
MLM business. The
differences are shown in purple:
Nut#1: Market Research
Identifying
the needs of customers and identifying products and services to satisfy those needs
MLM companies
need to conduct market research as well. The advantage is that, once established,
their distributor networks become an effective market research resource when utilised
properly. This helps keep costs to a minimum without loss of efficacy.
Nut#2: Testing
Ensuring
that all aspects of the business, not just the products and services, will produce
effective results.
MLM companies
usually conduct more rigorous testing because public expectations of MLM products
are unusually high, and are usually subject to much broader guarantees or warranties
than other products. However, their testing can be more focused, because they don't
have the same breadth of marketing and promotional activities and costs, so costs
associated with testing are able to be reduced.
Nut#3: Pricing
Ensuring
that the pricing strategy will deliver value for money to consumers, and profit for
the manufacturer/supplier.
MLM companies
need to attend to this important feature as well. The rewards for their distributor
networks come into this aspect of the mix.
Nut#4: Distribution
The means
by which the products/services and consumers are brought together at the same time
and place.
This is the
major point of difference between MLM and conventional systems. Instead of a complex
system of wholesalers, warehouses, distribution centres, freight companies and retailers
– with all the added costs at each point of handling – MLM companies normally deliver
direct to either the distributor or the customer. The savings in infrastructure,
multiple handling, storage and transport are huge. In many cases, delivery can be
made by regular postal or parcel delivery services.
Nut#5: Advertising
The highest-leverage
selling process, in which consumers are pulled toward the products/services and their
benefits.
Most MLM
companies do very little advertising in comparison to more conventional companies,
since word of mouth referral is the primary promotional medium. This represents enormous
savings, which are normally channelled into network rewards.
Nut#6: Visual Merchandising
The second-highest-leverage
selling process, in which the products/services and their benefits are pushed toward
consumers. This is usually associated with store layout, point-of-sale materials,
literature, etc.
In MLM, visual
merchandising is limited to the distributor’s personal presentation and the presentation
materials and literature provided by the company. Once again, this saves significantly
on costs.
Nut#7: Personal
Selling Skills
The lowest-leverage
selling process, which closes any gap left by advertising and visual merchandising.
Crucially important for products or services which need to be demonstrated, or about
which consumers need to be educated. Traditionally, sales people are employees or
commission agents. Depending on the type of business, added costs are incurred in
training, vehicles, support systems, travelling and accommodation costs and more.
In MLM, the
distributor network trains itself and provides all of its own transport, etc. While
companies often provide training, costs are minimised by economies of scale, by the
use of audio-visual or electronic media, newsletters and magazines, etc. In comparison
to conventional selling skills, MLM distributors require very little – most “selling”
is limited to showing and telling. The products generally sell themselves, and word
of mouth referral by customers is high.
The savings made by MLM companies
over conventional
distribution methods enable them to pass on higher rewards to their distributor networks.
In addition to these savings, there’s a major benefit in this system for MLM companies… the relationships they enjoy with their distributor organisations.
There’s a
synergy in this dynamic relationship that delivers extraordinary benefits to both
parties, and ensures that they work together for their common good.
The
reality is, though, that it’s in the area of distribution – bringing
the products/services and consumers together at the same time and place
– that MLM differs significantly from more conventional manufacturing
and marketing businesses. Instead of a retail store or warehouse, products
are delivered directly to
the consumer.
(* MLM is not an "industry" as so many MLMers seem to think. It's
a business system. Click
here to learn more.)
The
Marketing Mix
