Multi-level Marketing Key Points
- Multi-level Marketing (MLM) is a business model that involves the sale of products or services through a network of distributors.
- It is also known as network marketing, referral marketing, or pyramid selling.
- In MLM, revenue is generated by direct sales and by recruiting new members into the network.
- It is often associated with crypto and blockchain due to the growing number of MLM schemes involving digital currencies.
- Despite its potential for high earnings, MLM has been criticized for its resemblance to illegal pyramid schemes and the financial risk it poses to distributors.
Multi-level Marketing Definition
Multi-level Marketing (MLM) is a controversial marketing strategy in which the sales force is not only compensated for the sales they personally 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.
What is Multi-level Marketing?
MLM is a business model that involves a pyramid structured network of individuals who sell a company’s products. The salespeople are expected to sell products directly to consumers by means of relationship referrals and word of mouth marketing.
They are also encouraged to recruit others to join the company’s distribution chain as fellow salespeople so that these can become down line distributors.
Who uses Multi-level Marketing?
MLM is used by businesses of all sizes, from small start-ups to large established corporations. It is particularly popular in the health and wellness, beauty, and essential oils industries. In the crypto space, some digital currency companies also use MLM strategies to promote their products or platforms.
When is Multi-level Marketing used?
MLM is used whenever a company wants to expand its sales force and reach a larger customer base. It is particularly common in industries where personal selling is effective and scalable, such as in the sale of health supplements or beauty products.
Where is Multi-level Marketing used?
MLM strategies are used worldwide. However, certain countries have regulations against MLM businesses, deeming them similar to pyramid schemes or fraudulent business practices. In the digital world, MLM has found a home within the growing crypto and blockchain industries.
Why is Multi-level Marketing used?
Companies use MLM because it allows them to increase their distribution chain without the need for a large capital investment in hiring and training a large sales force. For individuals, MLM offers the potential for high income and the flexibility to work from home.
How does Multi-level Marketing work?
In MLM, each salesperson is essentially a business owner who sells the company’s products directly to consumers. They earn a commission on their sales, as well as on the sales of the people they recruit into the business. This recruitment aspect is what sets MLM apart from traditional direct selling companies and gives it its controversial reputation.
