What is Multi Level Marketing?
Multi-level marketing is also known as network marketing. This is a kind of business where franchising and direct selling are combined. This business makes a person associated with a company in an independent transaction approach. It is an approach where the company creates a contractual relationship with the person who wants to expand their business.
The members make their earnings based on the sales they have reached in that particular product or service. It also includes the sales of the people they have recruited to join the business. Most of the time, the individual who has recruited more members and provided a good sales output on the product is compensated higher because of the effort to transact in two different fields.
There are "pyramid schemes" or Ponzi schemes, which are considered illegal. Most people associate multi-level marketing with these kinds of schemes because they also recognize themselves to be a legitimate networking business. Because of the bad image brought up by these schemes, many prefer to use names for their businesses such as "home-based business franchising" or "affiliate marketing".
Commissions are earned in the process of selling a particular product or service in a legitimate network marketing. There can be no earnings in what they call a "sign-up fee" or just recruiting yourself alone. This kind of marketing is always criticized because of the questionable recruitment process where they get their revenue and profit. They get their sales from members and new members, who are considered the end users of the product and the distributors.
These criticisms led to major changes in multi-level marketing in the early 1980s when many companies started to allow their members to concentrate only on marketing and not on distributing or stocking the product. Most multi-level marketing firms nowadays act as fulfillment firms by taking on the tasks of shipping the product, paying the commissions, and taking orders from their clients.
Many people who are victims of illegal schemes in multi-level marketing are required to buy expensive products, but most of these schemes do not last long because most of the sales are not easily resold.