Multi
level marketing is known as network marketing. This is a kind of business where
franchising and direct selling are combined. This business makes a person associated
to a company in an independent transaction approach. It is an approach where
the company creates a contactor relationship to the person who wants to expand
his 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 person that 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 compensate 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 to these kind 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 their names for their businesses 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 as a “sign up fee” or for
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, which are
considered the end users of the product and as the distributors.
These criticisms led to the major
changes in the multi level marketing in the early 1980s when many companies
have started to allow their members to concentrate only on marketing and not on
distributing or stocking the product. Most multi level marketing firms nowadays
perform as fulfillment firms by taking the tasks of shipping the product,
paying the commissions and taking orders from their clients.
Many people who are victims of
the 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.
