Multi-Level Marketing

Multi-level marketing

also known as MLM, is a marketing strategy that compensates promoters of companies not only for product sales they personally generate, but also for the sales of others they introduced to the company. The products and company are usually marketed directly to consumers and potential business partners by means of relationship referrals and word of mouth marketing.

Independent, unsalaried salespeople of multi-level marketing, referred to as distributors (or associates, independent business owners, dealers, franchise owners, sales consultants, consultants, independent agents, etc.), represent the parent company and are awarded a commission based upon the volume of product sold through each of their independent businesses (organizations).

Independent distributors develop their organizations by either building an active customer base, who buy direct from the parent company, or by recruiting a downline of independent distributors who also build a customer base, thereby expanding the overall organization.

Distributors earn a commission based on the sales efforts of their organization, which includes their independent sale efforts as well as the leveraged sales efforts of their downline. This arrangement is similar to franchise arrangements where royalties are paid from the sales of individual franchise operations to the franchisor as well as to an area or region manager. Commissions are paid to multi-level marketing distributors according to the company’s compensation plan. There can be multiple levels of people receiving royalties from one person's sales. Additionally, distributors can also earn a profit by retailing products they purchased from the parent company at wholesale price.

Sounds good, doesn't it? And being part of a well-run MLM business can be a lot like being a member of a large extended family.

Why Join an MLM? >> Top 10 Reasons to Join MLM

Here are some downsides to Multi-Level Marketing:

No Friends Left Club

Unfortunately, Multi-Level marketing has earned a poor reputation from the very type of marketing that makes it so successful. Many MLM distributors end up in the No Friends Left or "NFL club". Friends and family tend to avoid the new distributor after growing weary of hearing about there new "opportunity".

Pyramid Schemes and MLM Scams

Not every MLM opportunity is a legitimate business opportunity. Many Pyramid schemes try to present themselves as legitimate MLM opportunities.

Like MLM, a pyramid scheme depend on recruiting people to become distributors of a product or service. Like MLM, the pyramid scheme offers the opportunity to make money by signing up more recruits and by accomplishing certain levels of achievement.

It can be very difficult for the person looking for a business opportunity to tell the difference between a legitimate MLM opportunity and a pyramid scheme at a glance. How do you tell whether it's a legitimate business opportunity or a scam? The difference between MLM plans and pyramid schemes is that pyramid schemes do not offer a genuine product.

In the most legitimate MLM companies, commissions are earned only on sales of the company's products or services. No money may be earned from recruiting alone ("sign-up fees"), though money earned from the sales of members recruited is one attraction of MLM arrangements. If participants are paid primarily from money received from new recruits, or if they are required to buy more product than they are likely to sell, then the company may be a pyramid or Ponzi scheme, which is illegal in most countries.

Hosting Parties

Many successful Multi-level marketing companies utilize home parties or hotel meetings to market their products. This may consist of a distributor hosting the home party in their own home, or through the use of an exisitng customer, whose is not a distributor. Typically this customer will invite their own friends to attend the party. In return they are compensated with free gifts, exclusive items or discounts based on the sales of the entire party.

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