Multilevel Marketing

Multilevel marketing often doesn't get the respect it deserves in marketing literature. When multilevel marketing companies succeed, their growth is often unbelievable. At least six multilevel marketing companies have reached the $500 million level in sales.

Multilevel marketing companies work like this: The founders begin by recruiting a few good people to go out and find managers to sell their products and to recruit other supervisors. These supervisors then recruit additional salespeople. Let's say that 20 people recruit 6 people each. That means 120 salespeople. Those people then recruit 6 people each, and you have 720 salespeople. If in turn those people all recruit 6 people, you then have almost 5,000 salespeople. All supervisors earn commissions on what they sell as well as on what everyone under them sells. When you get thousands of salespeople selling for you, commissions can be quite large. One company promotes the fact that 1 percent from 100 salespeople is as good as 100 percent from one successful salesperson. Companies often add new products or expand to other countries to keep a continuous growth pattern.

Distribution under multilevel marketing is relatively easy. Often the salespeople will carry inventory in their own homes and deliver products as ordered. Many companies also offer direct shipping to customers using UPS or other delivery firms.

Marketers cannot ignore the success of this sales and distribution strategy. Nu Skin (a seller of health and beauty products) alone will soon have $1 billion in sales. Looking for more growth, the company started a new division, Interior Design Nutrition, to make and sell vitamins and weight-control products. Amway, perhaps one of the most well-known multilevel marketers, has chosen the international route for growth; recently, its sales of home and personal care products increased by over $1 billion in one year.

1			Amway and others have been successful in Japan. To what other countries could you lead such companies so that you could become a top earner?
2			What will happen as multilevel marketing distributors begin selling and recruiting others using the latest in technology such as the Internet?
3			Why do you suppose multilevel marketing hasn't received the same acceptance as other retail innovations such as catalog sales? What could the companies do to improve their image?
4			If multilevel marketing works so well for beauty and health care products, why not use the same concept to sell other products?