Multilevel Marketing and Crowdinvesting: how do they work?

The main concept of operation of multi-level (also called network) marketing has been well known since 1960-70s. There is a product or service that is delivered to the final consumer with the help of other customers who are also entrepreneurs and make money by selling the product.

It is generally accepted that multilevel marketing allows companies to spread information about goods and services, and distribute goods and services themselves, very quickly. At the same time, such dissemination of information helps increase the demand. This, in turn, makes it possible to expand the consumer audience and make a profit.

For entrepreneurial clients who distribute goods or services, this marketing scheme is also attractive. With the help of multi-level marketing, they can start their own small business with minimum investment.

Some clients, especially in promising and young companies, have the opportunity to climb the career ladder and create their own network of partners receiving additional profit from their marketing activities. Today even more easily, when Internet technologies can be used to expand the network and sell products online.

Education is an important requirement

On the other hand, it is impossible to start earning just like that, even in multilevel marketing. Sheer will is not enough, you also need education, skills, basic experience. Therefore, many novice entrepreneurs try to take specialized training courses at an early stage, investing in their education.

However, in this case, you should not spend too much on your training or on the purchase of network goods, so as not to find yourself in a difficult financial situation – without money and without income. Invest wisely fully understanding your financial capabilities.

Top managers, whose networks of partners number thousands and even tens of thousands of people, serve as role models and commendable examples for newcomers. How do you manage to achieve such performance? You need to spend a lot of effort, you need skills, you need talent and luck.

If novice entrepreneurs have everything mentioned above and make use of modern online technologies and services like Facebook, Telegram, Instagram, some of them may create a network of partners, consisting of hundreds of thousands of people, in 4-5 years. At least in theory.

Features of multilevel marketing

One of the distinctive features of network marketing is investing part of the profit in the development of a network of distributors of goods or services. Depending on the commercial niche and marketing strategy, multilevel marketing participants can invest 15 to 50% of their income in expanding the network.

One of the types of network marketing is affiliate programs when manufacturers of goods or services share a small part of the marginal profit with regular customers who bring new customers to them. This also allows companies to quickly spread information about themselves to their target audience.

Network Marketing in Investments

In some areas, network marketing is the most effective way to disseminate information about a company and distribute products. In some situations, MLM is more effective than traditional online and offline advertising formats.

Network or MLM marketing is also suitable for young and promising companies that don’t have enough budget or time to find their first customers. Companies that previously preferred to use only proven techniques have also begun to take an interest in these market technologies. For example, companies in the investment and financial sector.

Of course, many investment companies have failed to integrate network marketing technologies into their business processes. But there are also organizations for which MLM has become the optimal solution. We are talking primarily about companies that operate in the segment of cryptocurrencies, technologies using blockchain, companies in the segment of crowd investing and crowdfunding.

Network marketing is one of the reasons why the cryptocurrency and blockchain technology sector has been able to develop to its current level over the past 10 years. Now the crypto industry has a turnover of about $1 trillion. And one of the reasons for the growth in cash turnover in recent years is the integration of network marketing concepts.

Crowd-investment prospects

There is reason to believe that multilevel crowd investing will become one of the leading trends in the entrepreneurial field in the next 10 years. This marketing format can be the most effective and promising for new companies that want to quickly enter the market as well as for customers who want to try themselves in business.

In addition, multilevel marketing and crowd investing could be of interest to those entrepreneurs who want to earn income not only from selling products but from the expansion of the partner network. Moreover, the networks with the largest number of active participants could receive the maximum income for companies with multilevel marketing strategy.

In theory, crowdfunding and attracting an audience of ordinary people to entrepreneurial activity in the future could allow millions of citizens not only to earn some money but also pay taxes, stimulate the local budget and the global economy.

Many companies will be able to access billions of potential customers around the world, regardless of geographic location, country or city. Long story short – everyone can win in such a situation.

Problems of multilevel marketing and crowd investing

Traditional companies, especially in the financial and investment sectors, for a number of reasons do not use all modern marketing concepts. This has led to the emergence of a large number of intermediary firms that offer innovative services but operate in offshore jurisdictions.

The problem is that such intermediary companies are not regulated by anyone and often use the funds raised at their own discretion (they stole invested money or income).

There are many examples when such companies, which are not controlled by anyone, embezzled money from partners and customers. Many companies simply disappeared with millions of dollars, and people could not get legal protection, as they cooperated with organizations in offshore zones.

The situation is similar in the cryptocurrency and crowd investment markets. Due to unscrupulous companies that cheated their partners, honest companies using modern marketing strategies could not find investors. Investors, in turn, could not find bona fide companies among the fraudulent companies.

Prospects for multilevel crowdinvesting

If the main problems of innovative marketing concepts can be solved, then within the next decades it will be possible to enjoy all the potential benefits of multilevel marketing and crowd investing. What is needed for this?

1. The market should be operated by intermediary companies, which are regulated by the relevant regulatory authorities of the first-world countries. This is especially true for companies that work in the crypto industry and crowdinvesting.

2. The activities of companies should not only be regulated but also be open, profitable, understandable for investors and target audience of clients.

3. All companies that are engaged in intermediary services in the field of cryptocurrency, investment, crowdfunding must have licenses and certificates issued by competent organizations.

4. Associations should be created that will monitor the activities of all participants in the multilevel marketing market, issue appropriate certificates. Such certificates must indicate that the company operates in accordance with the law, has all the necessary licenses, that its CEO, owner and top managers have passed the necessary checks.

On the other hand, verification and regulation of activities should not be too complex and bureaucratic to render them impracticable. Otherwise, market participants will spend too much time and effort obtaining permits for honest work or work without them.

The main task of regulation is to enable honest companies to find investors, as well as to ensure that market participants operate completely legally, on understandable terms, do not hide income and do not steal money from their partners.

- Author of the Multilevel Crowdinvesting Development Concept and New Economic Evolution of the World
- People’s Major General of the Association Generals of the World for Peace
- Multidisciplinary professional investor
- Master in Network Business Management
- President with the affiliate network of 1,650,000+ people from 176 countries.

Andrey Khovratov