Multi-level marketing (MLM) is a type of direct selling in which independent salespeople are recruited by a company to sell its products. These salespeople are compensated not only for sales they personally generate, but also for the sales of the other salespeople they recruit, creating a pyramid-shaped commission structure. MLM companies have been around for decades, but the industry has come under fire in recent years for allegedly being a pyramid scheme in disguise. Critics say that most people who join MLM companies lose money, and that the companies are more interested in recruiting new members than in selling products. MLM companies defend themselves by pointing to the success of a small minority of members, and by arguing that pyramid scheme laws are designed to protect consumers, not to prevent people from starting or participating in legitimate businesses. Despite the controversy, MLM companies continue to be popular, and the industry is expected to grow in the coming years. This article will provide an overview of MLM companies, how they operate, and the potential benefits and risks of joining one.
Multi-level marketing (MLM) is a marketing strategy in which a company's sales force is compensated not only for sales they generate, but also for the sales of the other salespeople that they recruit. This recruited sales force is referred to as the participant's "downline", and can provide multiple levels of compensation. Other terms used for MLM include network marketing, referral marketing, and affiliate marketing. The structure of MLM depends on a pyramid-shaped commission system. Typically, the company's marketing department generates leads, followed by the sales department. The leads are then passed on to the MLM participant, who then signs up new participants, known as "downline", under them and can earn a commission on every product sold by their downline. The participant's "upline" receives a cut of the commission as well. In order for an MLM to be successful, it must have a large enough "downline" to be able to generate enough sales to offset the costs of the participants, such as their commission on product sales, advertising, and other expenses. MLM participants also need to recruit new participants to build their downline.
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