What is meant by multi-level marketing?
Multi-level marketing (MLM), also known as network marketing or pyramid selling, is a business strategy where salespersons earn income through direct sales of products or services, as well as through the recruitment of new salespeople. MLM is structured in a way that resembles a pyramid, with multiple levels of distributors who receive commissions based on their sales and the sales generated by the distributors they recruit into the network.
Here are some key characteristics of multi-level marketing:
Hierarchy or Structure: MLM organizations typically have a hierarchical structure where salespeople are organized into levels or "downlines." Each level is responsible for both selling products and recruiting new members.
Compensation Structure: Distributors earn commissions not only from their direct sales but also from the sales made by those they recruit and the recruits of their recruits, forming multiple levels of commissions. This is often referred to as a "downline."
Recruitment Focus: MLM companies often emphasize recruitment as a significant component of the business model. Distributors are encouraged to build and expand their downlines to increase their earning potential.
Products or Services: MLM companies usually offer tangible products or services. Distributors earn commissions on the sale of these products or services, and sometimes on the recruitment of new distributors.
Controversies: MLM has been controversial, and some critics argue that certain MLM structures resemble pyramid schemes. Pyramid schemes are illegal and unsustainable models where income is primarily generated from recruitment rather than the sale of actual products or services.
It's important for individuals considering involvement in an MLM to carefully research the company and its compensation plan. While some people have achieved success in MLM, others may find it challenging due to factors like market saturation, product quality, or the recruitment-focused nature of the business model. Additionally, potential participants should be cautious and ensure the legitimacy of the MLM company to avoid falling victim to scams or illegal pyramid schemes.