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What is MLM?
What is MLM? The abbreviation MLM stands for Multi Level Marketing. It is also known as Network Marketing (NM). MLM is a business model that encompasses positive aspects from both franchising and direct marketing. * Franchising is a business method where a franchisor license trademarks, business methods, know-how etcetera to a franchisee. The franchisee will pay a recurring fee for this, normally an annual fee combined with a certain percentage of gross sales or gross profit. The word franchising comes from the French word for freedom. McDonalds, Subway and 7-Eleven are all examples of well known franchises.
* Direct marketing is a form of marketing where a marketing effort is carried out to generate a specific response that can be easily tracked. Normal marketing is often hard to measure the results of, because it is difficult to know the exact effects of a magazine ad, TV-commercial etc. During direct marketing, customers are encouraged to respond by sending in a response card, call an 800 number, visit a web site or similar. Direct marketing is therefore much easier to track and measure the effects of. In the most common form of MLM, individual participants will associate with a parent company in the form of independent contractors or franchisees. Compensation is based on how much you manage to sell the product or service that the parent company has to offer. If you introduce new participants to the network, you will be compensated for sales carried out by them as well. This method of compensation stems from the franchise system, where it is common for royalties to be paid from franchise operations to each individual franchisor as well as to a manager responsible for that particular region. |
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