Muiti Level Marketing

Multi-level marketing (MLM) is a marketing strategy in which the sales force is compensated not only for sales they personally generate, but also for the sales of others they recruit, creating a downline of distributors and a hierarchy of multiple levels of compensation. Other terms for MLM include network marketing, direct selling, and referral marketing.

It should be noted that some sources classify Multi-level marketing as a form of direct selling rather than being direct selling. It must be also mentioned that Avon, Electrolux, Tupperware, and Kirby all originally used single level marketing to sell their goods and that multi-level marketing was used in 1945 to sell the vitamin supplement Nutrilite

Michael L. Sheffield in an Feb/Mar 1999 article titled "Comp Plan Conversion: Direct Sales to MLM Compensation Plans" in his Direct Sales Journal cited Neil Offen, president of the Direct Selling Association for the statement that MLM had gone from 25 percent of Direct Selling Association membership in 1990 to 77.3 percent in 1999.

Independent, unsalaried salespeople of multi-level marketing, referred to as distributors (or associates, independent business owners, dealers, franchise owners, sales consultants, consultants, independent agents, etc.), represent the company that produces the products or provides the services they sell. They are awarded a commission based upon the volume of product sold through their own sales efforts as well as that of their downline organization.

Independent distributors develop their organizations by either building an active customer base, who buy direct from the company, or by recruiting a downline of independent distributors who also build a customer base, thereby expanding the overall organization. Additionally, distributors can also earn a profit by retailing products they purchased from the company at wholesale price.