What is Multi-Level Marketing?
Multi-level Marketing, or MLM, is a marketing strategy which creates a down line of distributors and a hierarchy of multiple levels of compensation.
The sales force is compensated not only for their own sales but also for the sales of the people they help recruit.
Firms, having a large product base, often cannot employ equivalent sales force; and believe they would be better off without the traditional approach.
Hence, they implement MLM to survive competition from multi-nationals.
MLM is also known as Network Marketing because it utilizes a network of individual customers to hit other potential customers.
In other words, every individual customer serves as a sales representative. Multi-Level Marketing Vs. Pyramid Marketing
People often confuse MLM with pyramid marketing; however there is very clear distinction between the two approaches: pyramid marketing is about getting your money and then using you to recruit other distributors; MLM, on the other hand, is about moving the product through a larger network of distributors so that the business can increase sales volume.
Another difference between MLM and pyramid marketing is that Pyramid marketing requires each level to DOUBLE before a new level is created so it isn't fair to people lower down in the levels and also unethical.
MLM, however, awards a commission based upon the volume of product sold through own sales efforts as well as that of the down line organization.
