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MLM Software - Why do Suitable MLM Products need such a High Margin?

Permalink 05/11/04 11:34, by admin, Categories: MLM Software, MLM Startup Consulting , Tags: internetnextstep, mlm product, mlm software


Ok, so we talked a little bit about the percentage of margin you need in your product to form a successful MLM company regardless of the MLM Software you choose yesterday.

Lets add a bit to that in first explaining why you need such a huge margin and how it differs from traditional marketing business. Well in our Coca Cola example where does all the money go between the 25 cents and $2.00 retail price?

Advertising and Distribution. A lot of household products have about 80% of the final price you pay tied up in Advertising and Distribution. The advertising budgets of Coca Cola and Pepsi Cola and Tide and Crest and other Proctor and Gamble products are enormous. All you have to do is learn how expensive TV advertising can be and you will quickly come to this realization.

MLM companies typically have no advertising expenses. They sell their products through word of mouth and the commission plan is generally considered the advertising budget.

The other biggy? Distribution. Why can Costco sell stuff so cheap? They eliminate all the middle men. They buy direct from the manufacturer and sell direct to the consumer (oh alright, we will play the game, they sell to the small busines owner)

MLM also eliminates the middle people. The company sells direct to the distributor who either uses the product or sells to someone else. In a lot of newer MLM's the retailing is happening through the company so Distributors are not needing to stock product, just order it and have it drop shipped to the end user.

All MLM (Multi-Level-Marketing) does is take that 80% and generally split it up two different ways. Usually about 50% of wholesale price goes into the Commission plan. The remaining 30% typically goes into product quality. This is mostly true for legitimate Network Marketing companies.

Careful, just because a product is being sold by an MLM company, doesn't mean its product quality is superb, you still need to do your due diligence.

Hope this is helping to clarify what it takes to have a successful product in MLM.

Remember when you have a superb product that fits, the next step is infrastructure for your company cause if your product is great your MLM company could go crazy! Good MLM Software is a key to not having your growth stutter on the way to the top!

We can help on superb MLM Software. Check us out at: Consulting Ltd.
Your MLM Software Experts

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