Multilevel Marketing: Why It Works

Multilevel marketing, also known as direct marketing or network marketing, is one of the most popular and successful business models of all time. It is a proven strategy for selling goods and services. Existing members of MLM promote and sell their products to other individuals and bring new members into the business. Members are paid a percentage of the sales of their recruits. New recruits become the distributor’s downline, or network, and are encouraged to make sales to earn money.

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Many MLM companies are legitimate, but some run illegally as pyramid schemes.

So, let's check:

What Is the Multilevel Marketing

Multi-level marketing companies use people instead of retail stores to sell products to customers. It leaves sales responsibility in the hands of an independent distributor network.

In the MLM model business, distributors are not employees of the company. Instead, they are business owners who employ their own dealer network to help sell their products. MLM companies rely on this extensive network of independent distributors to generate revenue.

How Multilevel Marketing Works

MLM companies sell products and services person-to-person sales. That means you're selling directly to others - from home, a client's home, or online.

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When participating in an MLM program, the company may refer to you as an independent "participant," "distributor," or "contractor."

You can make money in two ways:

Distributors are not paid when new (downline) members are registered. But the distributor is compensated by a percentage from his downline team's sales.

Many distributors with large downline teams can sell the product itself without selling it. Instead, they can earn good commissions from the sales of their downline teams. The commission system effectively motivates existing distributors to build or expand their downline teams.This will allow the company to employ more sales force and gain access to a larger customer base.

Multi-level marketing is legal in most countries. But countries such as Bangladesh, China, and Saudi Arabia banned this business model. MLMs are legitimate and legal businesses whose members make money from the sale of actual products and also from commissions on products sold by distributors that they recruit.

Multilevel Marketing Vs. Pyramid Scheme

Multilevel marketing (MLM) is controversial and is often compared to pyramid schemes. However, in essence, strategies of MLM are legal while pyramid schemes are not.

The main differences between MLM and illegal pyramid schemes are:

While MLM strategies may require salespeople to purchase a minimum amount of a product, pyramid schemes require a substantial investment before a business owner can sign a contract and start working.

While MLM business practices involve research and strategies that focus on target consumers that salespeople can sell to, pyramid schemes have little or no focus on the end consumer.

In pyramid schemes, representatives only receive commissions for recruiting additional members under them.

Examples of Businesses That Use MLM

Those days, there are thousands of Multilevel Marketing companies in the world. Many of them make revenues of over $100 million every year.

Top MLM companies in 2022:

Pros of Multilevel Marketing

Cons of Multilevel Marketing