Classic or network company. Why traditional business is increasingly moving to MLM

Lately, specialists from the FlawlessMLM team have been noticing a trend of companies transitioning from the traditional trading model to network marketing. The question arises, why is this happening.

In general, any business is an activity aimed at systematically generating profit. In this sense, network marketing and traditional commerce are similar. Let's consider a list of specific parameters that will show the difference between these types of trading organizations:

Profitability

Most people are convinced that the main thing is to make a profit, but what really matters is the profitability of the business.

Profitability is an indicator that characterizes the efficiency of your business, showing the return on the funds you have invested.

When considering traditional business, it can be said that the main concern is to maintain profitability at the same level and prevent it from falling.

In network marketing, profitability gradually increases for specific partners and for company owners, taking into account that,the terms of the compensation plan are optimized. Specifically, the quality of marketing is important for ensuring turnover, proportionality of profit distribution, optimizing the number and amount of payments compared to the income received.

For example: by collaborating with MLM companies, a distributor buys products for $100. By selling goods, building a team, and earning income from the results of their work, the partner earns $150 over a certain period of time. Deducting expenses, the sponsor's net profit is $50, and the business profitability is 50%. Assuming that the distributor continues to collaborate with the company, their income could reach $250 for a period, where the profit would be $150, and the profitability would be 150%.

For more detailed information about marketing, you can read the article YOUR IDEAL MARKETING PLAN

Accessibility

In traditional business, even to start a small company, large investments are required at the initial stage. At the same time, no one guarantees that the company will be profitable to its owner and how soon it will pay off. Small players need to withstand competition. The amount of energy, time, and resources spent on maintaining a small business, in most cases, is incomparable to the results obtained. But the threat of losing the business and the invested money forces constant extra effort.

In network marketing there are no financial barriers and much less administrative. At the initial stage, participants only need desire, effort, and sometimes a small amount of money, which is incomparable to investments in traditional business.

Promotion

The demand for goods and services nowadays is shaped by millennials. It is widely known that they tend to trust friends' recommendations and opinion leaders when making purchases rather than any advertising. Television and radio commercials, street stands are indifferent to consumers or even cause rejection.

In traditional business, an entrepreneur must carefully plan a complete marketing strategy, set up various communication channels with potential clients, personalize approaches to them, modernize and technologize physical sales points, etc. If possible, consider hiring a team of experienced specialists who will implement everything turnkey, but their services will not be cheap.

In network business, the product is typically promoted through a structure. Independent partners provide presentation and advertising of the products. The multi-level marketing itself is inherently designed as a product promotion system through partners who act as informants-salespeople in exchange for earnings, bonuses, and discounts.

By purchasing the company's products, the consumer not only becomes a consumer but also a partner of the company. Thus, network business solves its main task - finding the end consumer, who can also be a distributor.

It is worth noting that traditional business almost always, to some extent, uses affiliate and referral marketing methods to attract customers and increase sales. Hybridizing a traditional company with MLM elements - a working algorithm for creating a network of sales agents and the possibility to scale up one's business.

The most common are promo codes, cashbacks, and discounts for attracting new customers through referral links. Such programs are available at Monobank, Booking.com, Airbnb, Uber, and many other widely known companies.

Competition and Required Skills

In traditional business, by opening your store, you risk crossing paths with competitors, and they may throw obstacles in your way. Be prepared to acquire all the knowledge independently and invest money in self-education.

In MLM business

, everyone is interested in the success of partners, from the founders of the company to each individual sponsor. Team leaders are interested in the success and profitability of the business of lower-level distributors, as the former can earn passive income from the activity of their structure. Typically, leaders are inherently motivated to train newcomers in business management and do so as efficiently as possible. In a network marketing company, you will never be alone with yourself and your problems, as is often the case in traditional business.

Traditional business is attractive but complex and full of risks. Many former businessmen eventually return to wage work. Network marketing wins due to accessibility, risk minimization, guaranteed training, ease of scaling, and development of the structure of sales agents.

Any business is, first of all, an opportunity, and no one can guarantee success. If a person truly strives to develop and scale their business, then it is easier to do so in MLM business.