Multi-level Marketing Definition
Multi-level Marketing (MLM), also known as network marketing, is a business model that involves selling products or services through a network of distributors. These distributors earn income through direct sales of products or services and the sales made by the distributors they recruit into the business. This creates multiple levels of compensation in the form of a pyramid structure.
Multi-level Marketing Key Points
- MLM involves selling products or services through a network of distributors.
- Distributors earn income through direct sales and the sales made by their recruits.
- The business model creates a pyramid structure of multiple levels of compensation.
- It’s a legal business model, but it’s often associated with pyramid schemes, which are illegal.
What is Multi-level Marketing?
Multi-level Marketing is a strategy that some direct sales companies use to encourage their existing distributors to recruit new distributors by paying the existing distributors a percentage of their recruits’ sales. The recruits are known as a distributor’s “downline”. All distributors also make money through direct sales of products to customers.
Why is Multi-level Marketing used?
MLM is used as a strategy by companies to increase their sales force without the burden of increasing their payroll. Instead of paying for advertising or retail space, MLM companies pay their distributors to bring in more distributors. This model can be attractive to individuals looking for flexible work or business opportunities.
Where is Multi-level Marketing used?
MLM is used worldwide in various industries, including health and wellness, beauty and cosmetics, home goods, and more. It’s often associated with direct sales or home-based business opportunities.
Who uses Multi-level Marketing?
Both companies and individuals use MLM. Companies use it as a business model to increase their sales and distribution. Individuals, often called distributors or associates, use MLM as a way to earn income, either through direct sales of products or services or by recruiting others into the business.
When is Multi-level Marketing used?
MLM is used when a company wants to expand its sales force and reach without the need for a traditional marketing and distribution channels. For individuals, MLM can be used as a part-time job, a way to earn extra income, or even a full-time career opportunity.
How does Multi-level Marketing work?
In MLM, a distributor is recruited by a company to sell its products or services. This distributor then recruits other distributors, forming a “downline”. The original distributor earns a percentage of all sales made by their downline, in addition to their own sales. This process continues, creating multiple levels of distributors and a pyramid-like structure of compensation.
