Types of structural sales

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The explanation of the differences between the types of structured sales should shed some light on the supposed darkness of MLM & Co.

MLM stands for multi-level marketing, NM for network marketing. Older readers will probably remember the book series "Was ist Was" (What is What), which is exactly what we will explain below.

Network marketing

Network marketing is a term often used synonymously with MLM for all sales systems that use networks. Network marketing does not necessarily have to involve a multi-level commission model like MLM, but can also be a pure single-level sales model in which consultants only receive commissions for their own sales. Network marketing can be more focused on direct sales and maintaining relationships with customers, with less emphasis on recruiting new distributors.

On a small scale ...

Anyone who recommends what they consider to be the "best pizza" in town, for example, builds up a network of "pizza lovers". The pizza baker is happy about more customers and will issue referral vouchers in future. For example, if you generate 5 new customers, you get a free pizza for five of these vouchers. Word gets around and soon the pizza baker may have to expand in order to be able to serve his customers not only as a delivery service, but also on site in his own premises.

What began here as a small recommendation campaign out of sympathy and conviction of taste has developed into a still small but growing network whose structure will continue to develop, also in terms of "remuneration".

It is conceivable, for example, that the initial referrer is no longer able to eat so much pizza and - also for health reasons - agrees with the pizza baker that he will receive a small amount of money instead of the free pizza. This solution is also welcomed by others, even if the pizza tastes so good!

Gradually, there is a bonus for the recommendation of the recommendation, the recommendation of the recommendation of the recommendation and so on. And voilà, a network marketing - or MLM - has been established.

How fairly the remuneration model is designed remains the decisive criterion for the weal or woe of this model.
As long as everyone looks out for each other and makes sure that their fellow human beings are doing well, that they are not taken advantage of, but receive mutual support and are paid fairly, nothing stands in the way of the healthy development of such a company.

... as on a large scale

MLM

Each sales partner builds up his own network. From the turnover of their own sales and those of the partners they have recruited. The aim is for everyone involved to work well together as a team so that everyone benefits from the actions of their team in order to be successful together with satisfied customers.

As the number of active partners (team) increases, his network and income grow. Each self-employed partner can work at their own discretion and with their own schedule. The more motivated you are, the more participants and / or turnover you can generate.

A "passive" income is often propagated. This refers to the percentage of sales that are not generated by oneself.
It is often forgotten that the partners also need to be trained and supported. Depending on the proactivity, this is a very time-consuming aspect that needs to be covered conscientiously through personal commitment.

Depending on the sales product, it may be necessary to maintain storage capacity and premises for packaging and shipping, as well as infrastructure for administrative and accounting tasks. This also incurs costs that need to be covered.

The fluctuation can be correspondingly high, because not everyone may be so committed that they are able to cope with the overhead both financially and in terms of time, especially in the initial months,

There are very few companies that completely take over all administrative tasks, including warehousing and shipping, invoicing, monitoring incoming payments, customer service, hotline, etc., leaving their independent local partners free to concentrate on their actual task of looking after their prospective and existing customers.

SLM

In contrast to MLM, the business partner only earns commission on his own sales, but not on those of any recruited partners. You are a lone fighter.

The aim is therefore to acquire customers and sell the products in order to generate income.

Success will depend on the intensity of his customer service and their level of satisfaction.

Of course, "passive" income is not possible, as there are no other business partners "under" you.

Here too, the administrative, accounting, warehousing and shipping aspects are important, both financially and in terms of time.

Step distribution

Sales partners rise in the hierarchy with increasing numbers of recruited partners in a specific level plan. Each level is assigned a percentage commission that increases with each higher level and / or offers bonuses.

The definition of commission levels / bonuses is a challenge for the company if injustices are to be avoided and all partners are to be equally motivated at every level.

Customer service and satisfaction usually suffer, as there is a risk that the sales partner will focus primarily on the next level to be reached, rather than - at the very least - customer satisfaction.

Matrix marketing

Here, there is a predefined number of equal positions per level (e.g. three positions on the first level), with a maximum of 5 levels, for example. As soon as all positions are filled, a new level (matrix) is made available.

The sales partner generates his own sales, but also participates in the subsequent levels and their sales partners. This allows a team spirit to develop in order to support each other and thus grow.

The finite nature of the matrix (defined by the finite number of partners per level, as well as the levels themselves) prevents infinite expansion. Nevertheless, depending on the size of the matrix, management can become complex.

Hybrid systems

Hybrid systems attempt to combine the advantages of each of the above sales systems and thus optimize their own system individually. The resulting flexibility allows good and rapid adaptation to changing market conditions.

Remuneration plans are correspondingly complex and, if you want to do justice to all employees as far as possible, complicated. However, they often offer several options for remuneration. Naturally, it takes more time to familiarize yourself with these structures. On the other hand, there are optimizations with regard to strategies for placing team members which, if they are well thought out and far-sighted, can be advantageous for everyone involved.

A "passive" income is possible, even if the word "passive" is misleading, because "nothing comes from nothing" also applies here.

As larger teams generally interact, the team concept is also of fundamental importance across teams. For the sake of clarity, large teams are split into smaller ones.

The focus is on mutual support and a high level of customer satisfaction in order to be able to use its strengths in a targeted manner and yet for the benefit of all.

The possibility of participating without "recruiting" partners underlines the customer-friendly structure, provided that the company behind it enables and supports this.

Conclusion

Whatever "structure" a sales organization pursues, as long as it remunerates work fairly and justly, hardly anyone will want to deny the sales form.

Nobody sees anything wrong if the manufacturer of a product in a distant foreign country commissions importers at the first distribution "level", who in turn involve country representatives, wholesalers, chain stores, sales representatives and retailers as further "levels" in the distribution process.

This means that there are already six levels. Each of these partners adds their contribution to the price, which ultimately results in the sales price for the end customer - plus the government levies known as VAT.

All of these "tiers" operate independently, work for their own account and only purchase the product. Each of them performs all the administrative tasks and associated infrastructure that are reflected in the price mark-up, in addition to the profit margin, which is also added.

While each of these parties has to buy the product from his superior "level" before he can sell it to his subordinate level at a mark-up, the MLM partner may not bear this burden if the company commissions him solely on the basis of his consulting activity, which results in the sale of goods by the company, and also keeps him free of any obligations for warehousing, dispatch processing, invoicing, etc.

Possibly because the majority of MLM-based companies, as well as the distribution chain manufacturer, importer ... retailer, do not offer exactly this and pass it on to the "partner".

The risk for the resale of the purchased goods is borne by the respective retailer, as is the case with a structured distributor, if he is forced to first build up a stock of goods for sale from which he wants to make a profit. If he does not sell the goods to the end consumer, he is left holding the bag.

Cooperation with companies operating in this way should be well thought out and the risk carefully calculated. If you are less willing to take risks, you should look for companies that are more likely to follow the hybrid approach described above and keep the partner free from all the imponderables.