Why would a company choose the MLM route to product distribution?
There are several good reasons: – Low overhead. There are virtually no up-front advertising costs. Unlike a typical retail company, the MLM company doesn’t have to spend massive amounts of money to “pull” customers in. Instead, it pays distributors to “push” the product out into the marketplace. In addition, the company only has to pay the distributors for *results* — that is, a percentage of products actually sold. Ordinarily an MLM company will use the money that *would* have gone into advertising to pay its distributors. (Using Procter & Gamble as an example: I have an unconfirmed report that says P&G’s sales in 1992 were $25billion. Their advertising budget was $10billion. So they spent 40% of their sales on ads. MLM companies typically pay 40-80% of their sales volume to their distributors.) – Low distribution overhead. Typical retail companies generally use: a series of national, regional, state, and local warehousers to distribute their product to the retail stores. Each of the
