THE MULTILEVEL MARKETING (MLM)
THE BIRTH OF A NEW SYSTEM COMMERCIAL
was born in 1934 in the United States, and is developing gradually from 1959 to 1975.
Though belonging to the world of direct sales, this type of marketing has some nice features, which have allowed spread all over the world, involving thousands of companies and people.
WHAT IS MLM?
To explain what it is you have to think about the traditional market, in which the distribution of any goods or services is generally entrusted to some intermediate figures. The product passes from person to person (eg importing the national, regional representative of the , local wholesaler, retailer), each time coming closer to the final consumer. Of course, at each step product price increases.
can be calculated that on average, about 70-80% of the final price of a product is due to the distribution .
This has created the conditions for the emergence of ever more aggressive forms of commerce, generally aimed at shortening the distribution channel . E 'is precisely the case of direct marketing (mail order, telesales, e-commerce) that the large and very large distribution. This does not always translate into effective decrease in prices: the more often the aim pursued is a more or different types of income. In fact, a manufacturer that crosses its network of distribution could certainly also charge prices much lower than market, but probably would never reach those customers that only a widespread distribution, distributed in the area, can meet. Shopping centers then sell some products at prices even coming aq uello cost (or even a loss!), But this is due to a strategy of attracting customers (on other products, the profit margin is higher).
The MLM, even though technically it is akin to direct marketing, is actually a middle ground between the solutions examined. The distribution network is made up of traditional intermediaries, and at the same time, the company is not far from customers and geographically isolated.
are the same consumers who become distributors also .
Obviously this is possible because the consumer needs to be fully satisfied, and this is why almost all MLM companies distrib uiscono high quality products with a high added value and with a range of exclusive benefits including: discounts, information, special conditions, payment facilities, prizes, awards, etc..
The difference between product cost and retail price, that 70-80% which was previously absorbed by the brokers and is instead managed by the company, which puts it back in circulation among its consumers / distributors in the form of discounts, incentives and various services to distribution.
THE word of mouth marketing
The MLM is also called "word of mouth marketing" because the knowledge of the company and its products, rather than rely on advertising in the media is left to individual consumers. Very often the success of a product or brand is decided by word of mouth from satisfied consumers, but the customer never participates in the income that he himself helped to create. Everyone has to advise a friend to a movie or a book that we liked especially, film producers and publishers, but surely they have never paid a commission of € advertising activity.
The MLM is based instead on this principle, making it a method: each customer, along with the benefits already listed (exclusive conditions of various kinds) has several options to be paid from and profit-sharing production and therefore constitute an appendix, an active consumer rather than, as usual, passive.
THE MECHANISM OF PROFITS
In the traditional market price of a product is formed independently (or at least that should happen) from the interaction between different actors, and rarely the company had the opportunity to fix the exact amount Final is not surprising that the exact same product costs much more from a retailer around the corner in a big shopping center.
In MLM but the company handles all aspects of "a world you" and then also sets the selling price, then calculating a percentage discount and commissions. Each end user can therefore rest assured to buy exactly prices and conditions laid down by the company, and each charge is assured of receiving the discounts and commissions which he is entitled, automatically calculated by keeping track of all transactions made.
The commissions are calculated on the volume of product sales, primarily in two forms:
- on direct sales to third parties of products (direct distribution);
- concerning new consumers that have exactly the same advantages and the same distribution opportunities (indirect distribution).
Direct distribution is to offer to persons not associated with the company and its products. Since, as we have seen, the final price was predetermined to the distributor is entitled to a commission on sales.
indirect distribution is rather closely related to the mechanism of "buzz" since consumers associate enjoys unique advantages and specific oltr and direct selling have the opportunity to advertise the program association with the company. The new member will be entitled to these benefits too, and may choose to turn to advertising products and the partnership program.
The commissions are calculated on the indirect revenue generated by the "network" of consumers / distributors created by word of mouth, not only on the people involved, but also on those associated with their , and so on. Each company its compensation plan (generally called plan marketing) and its rules on compensation and salary allows up to 3, 5, 10 or infinite "layers" deep. The interesting thing is that most MLM companies to encourage word of mouth and it is possible (not easy, but possible) to create a network of customers / distributors of thousands of people. In this case the right to receive commissions even small (few percent) on a very large volume of sales, resulting in substantial gains.
In summary
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