What Exactly is MLM?
MLM ~ Multi-level marketing , (also called network marketing, direct selling and referral marketing) is a term that describes the marketing structure a company uses to promote it’s products. The structure is designed to create a marketing and sales force by compensating reps of a company not only for product sales they personally generate, but also over-ride sales of other reps they introduce to the company. This creates a downline of distributors and a hierchey of multiple levels of compensation that builds through relationship referrals and word of mouth marketing.
Isn’t MLM a Pyramid and Illegal?
In one simple word ~ NO! MLM/Network Marketing has proven itself as a very successful and viable business model. MLM businesses operate in the United States in all 50 states and in more than 100 other countries
The FTC defines MLM as a way of selling goods and services through distributors. These plans typically promise that people who sign up as distributors will get commissions two ways – on their own sales and on the sales their recruits have made.
The FTC defines an Illegal Pryamid Scheme as a form of multi-level marketing involving paying commissions to distributors only for recruiting new distributors. Pyramid schemes are illegal in most states because the plans inevitably collapse when no new distributors can be recruited. When a plan collapses, most people – except those at the top of the pyramid – lose their money.
The difference being a Legitimate MLM/Network Marketing company pays commissions for the retail sales of goods or services, not for recruiting new distributors.
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