What is multi-level marketing? Explain
2/13/2024 6:25:00 AM KanWhizz Team
Multi-level marketing (MLM), also known as network marketing or direct selling, is a business model where individuals earn money through the sale of products or services and by recruiting others into the company as salespeople or distributors. In an MLM structure, participants earn commissions not only for their sales but also for the sales made by the individuals they recruit into the network, as well as for the sales made by the recruits of those they bring in. This forms a hierarchical or "multi-level" compensation system where distributors are incentivized to both sell products themselves and to build and support their network of distributors.
Learn how Multi-level marketing (MLM) typically works:
Product or Service: An MLM company sells a product or service directly to consumers. This could be anything from health supplements and cosmetics to kitchenware or financial services.
Independent Distributors: Individuals sign up as independent distributors for the company. They buy products at wholesale prices and sell them at retail prices, earning a profit on the difference.
Recruitment: Distributors are encouraged to recruit others into the business. They become part of the distributor's "downline." The original distributor earns commissions on the sales made by their downline, as well as bonuses for recruiting new members.
Hierarchy and Commissions: As the network grows, a hierarchy develops with multiple levels of distributors. Each distributor earns commissions not only on their sales but also on the sales made by their downline. The more people they recruit and the more products they sell, the higher their potential earnings.
Training and Support: MLM companies frequently offer training and support programs aimed at empowering distributors to achieve success in their sales endeavors.
It's worth noting that while some MLM companies operate ethically and provide legitimate opportunities for individuals to earn income, others have been criticized for resembling pyramid schemes, where the emphasis is more on recruitment than on selling actual products or services. It's essential for individuals considering joining an MLM company to thoroughly research the company, its products, compensation plan, and reputation before getting involved.