What Is MLM?

Answer:
MLM is short for Multi-Level Marketing, also called network marketing.

This is a marketing structure that is used by some companies as a part of their overall marketing strategy.

This sales structure is designed so that the marketing and sales force not only sells product, but also works to bring additional marketing and sales personnel in order to increase the company’s reach. The sales personnel will receive commissions for the products they sell, and also an additional commission for products sold by sales personnel that they brought into the company. This creates a downline of distributors, as well as a hierarchy of multiple levels of compensation. The more people that people you recruit bring in people under them, your compensation will continue to grow. The easiest way to think of this hierarchy is to think of a pine tree, with you at the top of the tree. You gain nutrients (money) from everyone below you. Marketing is usually done directly to consumers and businesses through relationships and word of mouth marketing.

The salespeople are independent contractors and are not paid a direct salary. They work as representatives of the company as they sell its products and services. The commission they receive is based on the volume of product that they sell, as well as the sales of their downline organization.

This business plan of distributors earning commissions based of their sales efforts as well as leveraging the sales of their downline people is very similar to a franchise arrangement where the individual franchisee receives a commission based on their sales, and an additional commission is paid to an area or regional manager. With a multi-level marketing distributorship, individuals at multiple levels of the marketing structure will receive royalties from a single person’s sales.

Multi-level marketing businesses are found in all 50 states, as well as over 100 countries. They may use terms such as “affiliate marketing” or “home based business franchising,” but in essence, they are also MLM companies. Before joining one of these companies, make sure you do some due diligence in order to make sure that they are legitimate. Many pyramid schemes try to present themselves as if they are MLM companies.

Receiving commissions for simply recruiting is illegal in most states in the United States. In order to get around this, a company that uses multi-level marketing has to ensure that commissions are only paid for sales of company products and services if they operate across state lines. If they pay commissions based on recruiting new members, this is a red flag that you are probably looking at a pyramid scheme that you should avoid.


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