Multi-Level Marketing

Explore the Strategy of Multi-Level Marketing

Multi-Level marketing

You receive a postcard from your friend inviting you to the party. While the party sounds like fun, the card mentions something that seems out of place to you -- a sales pitch. You decide to attend the party anyway, hoping to reconnect with some friends and leave shortly after the required sales pitch.

Yet, three hours later, you walk out the door with nearly a hundred dollars’ worth of merchandise. What’s more, you’re thinking about asking your friend about what it would take for you to become a consultant and join in on the business.

What is multi-level marketing?

Multi-level marketing (MLM) is known by a variety of names: network marketing, referral marketing—and more pejoratively (and/or when done unethically), pyramid marketing. In this structure, marketing and sales reps not only receive compensation for their own sales, but also receive a percentage of the sales generated by other salespeople they recruit (commonly known as one’s “downline”). (See also Referral Marketing)

Consultants involved in multi-level marketing usually sell products directly to consumers through relationships and word of mouth. Nearly 9 out of every 10 consultants are part-time, and work out of the home as distributors of a given line of products. Many multi-level companies also employ a “party plan” strategy, where consultants (and possibly also the consultant’s “upline”) invite friends and other interested customers in the area to a party at the consultant’s home (or other available location). Many products are demonstrated, everyone has a good time, and by the end of the party the consultant has hopefully made several sales—and possibly even recruited a new consultant (who in turn become that salesperson’s downline).

Examples of Multi-level Companies

  • Avon
  • Herbalife
  • Mary Kay
  • National Safety Associates (NSA) / Juice Plus
  • The Pampered Chef
  • Primerica
  • Tupperware
  • World Financial Group (WFG)

Who employs multi-level marketing?

Although MLM is most commonly associated with direct-selling distributorships and/or party planning companies, some major financial/insurance companies also employ this strategy, including Primerica and World Financial Group (WFG). Although party plan consultants will certainly gain valuable grass-roots marketing experience, the college-educated marketer will seek positions within these larger financial companies, or at the corporate level of an MLM company.

Consultants/distributors are predominantly women, although the proportion has begun to shift in recent years. In 2007, the percentage of male direct sellers was at 13.6 percent, and by 2011 it increased to nearly 22 percent.

For what kinds of customers is multi-level marketing effective?

Because of its relational aspect, the products usually involved, and the gender of the consultants themselves, women are the predominant target for MLM strategies. However, the gender proportion shifts significantly in the case of financial and/or insurance companies. When it’s time to develop a financial portfolio or consider a term life-insurance policy, it’s usually a joint decision made by husband and wife, or by the head of the household regardless of gender.

In terms of economic background, MLM customers profile according to the products or services being offered, but generally trend toward a middle-class audience. Most people can afford to purchase Tupperware or Mary Kay, and may want attend a party to check out the products regardless.

However, a Pampered Chef demonstration or Creative Memories scrapbooking party (which often requires a fee for basic supplies) will appeal to demographics with a more disposable money, but not an audience with luxury tastes.

How is a multi-level marketing campaign developed?

Although the bulk of the selling is done by individuals—whether it’s to individuals or to groups—MLM is highly focuses on the presentation of a brand. Nearly every MLM presentation begins by talking about the company itself, before moving on to the individual products. (See also Product Marketing)

At the corporate level, MLM professionals develop an easily communicated mission and image, and create resources that facilitate that communication. The key to knowing how to communicate this message to customers is knowing and understanding them. Therefore, effective MLM begins with data, and builds upon that data throughout a campaign. With the sales and customer information generated at each presentation, companies can better discern what products to acquire and/or develop, how to best portray them to their audience, and how to tailor their message to different market segments.

Establishing—and regularly updating—the company brand is critical to the success of the campaign. Multi-level marketers will identify the company’s primary goods and services, and then research the target market whose needs they’re meeting. Marketers and creative alike will make certain that the “personality” of the brand resonates with the general personality of the target customer; likewise, messaging will be regularly adjusted to reflect customers’ changing and growing interests.

A brand's reputation relies as much on the quality of a product as communication with the consumer. No marketing strategy can overcome poor products or service. Thus, consultants/distributors must be effectively trained, not only so they’re excited about the company and its products, but so they’re knowledgeable and can demonstrate those products confidently. Much of this will be accomplished through consultants’ direct uplines (as filtered through their upline’s uplines); however, the creation of attractive and easy-to-understand catalogs, brochures, direct-mail pieces and other marketing items will enable the consultant to quikly develop a professional image. (See also Catalog Marketing)

What career titles work with multi-level marketing strategies?

Consultants make up the vast majority of MLM jobs. However, The Direct Selling Association (DSA) reports that the average annual income for consultants is about $2,400; in addition, roughly 90 percent of all consultants earn less than $5,000 annually. Not exactly the stuff through which marketing careers are made—although it could prove to be valuable entry-level experience.

Prominent careers in MLM can be developed higher up the chain and/or at the corporate level, including the following:

Project Managers

What type of salary should I expect?

  • Project Manager
    Median annual pay: $116,010
    Top earners: $187,199+
  • Marketing Intelligence Manager
    Median annual pay: $72,660
    Top earners: $108,090+
  • Art Director
    Median annual pay: $82,770
    Top earners: $163,430+

Source: U.S. Bureau of Labor Statistics

Project Managers ensure on-time deliverables for MLM consultants, and usually serve as liaisons between corporate headquarters and international markets.

What do they do?

  • ensure all deliverables are on time, and meet budget and market requirements
  • collaborate with international market staff, to ensure both smooth execution in the local markets and compliance with local laws
  • manage relationships with all project stakeholders, from external clients to internal consultants, and coordinate implementation across all key functional groups
  • keep stakeholders informed of progress and issues, in order to manage expectations

Education and experience

Project managers will have at least a bachelor's degree in business or computer science; certification in project management and/or SAP (systems applications and products) is also highly desirable. Fluency in one or more foreign languages may also be required, depending upon the international market(s) you work with. In addition, in terms of corporate-level management positions, five to seven years of international project management and/or MLM experience will be required.

Marketing Intelligence Managers

Marketing Intelligence Managers develop and manage data analysis against the company’s marketing initiatives, and integrate project results into the business planning process.

What do they do?

  • implement relevant analytic projects for internal corporate clients, as well as for clients in local markets and regions
  • work with key stakeholders to provide forecasts and recommendations for portfolio optimization and new product phase-in
  • identify appropriate methodologies for analysis and actionable business applications, both locally and globally
  • facilitate collection, manipulation, and quality control of various data pieces for use in global marketing intelligence projects

Education and experience

Intelligence managers will need at least a B.S. in marketing, business, economics, or some related field; an M.B.A. or master’s degree in statistics is a plus. Intelligence managers will also need an educational background and several years’ experience in a variety of statistical methodologies and analytics, as well as strong writing and presentation skills.

Art Directors

Art Directors develop the look of the MTM company and its products, keeping branding consistent across all marketing platforms.

What do they do?

  • conceptualize and develop ongoing branding and packaging for all product launches and new initiatives
  • direct all projects handled by the creative department (and used directly by MTM consultants) including catalogs, design, and other promotional collateral
  • manage artistic staff and freelance designers
  • stay abreast of advertising design trends, and use those features to adapt or upgrade existing product design and branding efforts

Education and experience

Most art directors have at least a bachelor’s degree in graphic design, marketing, or a related field. Classes in marketing, art, and computer science will help art directors gain a better perspective of what consumers (and employers) are looking for. Art directors will also have five to seven years of experience in graphic design and art project management, preferably in their industry, before moving into department management.

How can a marketing school help you in this field?

At the corporate level, multi-level marketing communicates a clear picture of the company and its products to consultants—and by extension, to its customers and potential future consultants. The goal of MLM is not only to excite consumers about a product, but to attract a percentage of people to the possibility of selling that products. Therefore, the art of persuasion is fundamental to MLM—an art honed in marketing programs across the country.

Marketing programs emphasize courses in communication; marketing students will also practice and develop their communications and presentation skills in other classes. Communications courses teach students how to connect to audiences through a wide variety of media channels. You’ll also receive invaluable instructor feedback that will help you to further improve your skills and adapt your message.

A marketing program will also teach you how to acquire and interpret meaningful data, including how to obtain and analyze marketing lists. By applying the right analytic and statistical tools, you’ll be able to better target an MLM campaign—as well as better target domestic and overseas vendors who can help to service your company’s needs (and your customers’ demands).

So contact your college “upline”—including counselors and admissions offers—and find out how a marketing program can help you in your future career.

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