Multi-Level Marketing (MLM) is a marketing strategy in which the sales force is compensated not only for sales they generate, but also for the sales of the other salespeople that they recruit. This recruited sales force is referred to as the participant's "downline", and can provide multiple levels of compensation.
Other terms used for MLM include pyramid selling, network marketing, and referral marketing.
How does MLM works?
MLM works in a high level of marketing stragey that started in 1920's in the United State, in here, independent participants, also known as distributors, members, affiliate, business partner, agents, etc., are authorized to sell the products or services offered by the company in a promise to earn a rewards for every sales they made and their downlines through commissions and bonuses.
since your downline generate you an income, some of the people under this focuses on recruitment. that is why the U.S. Federal Trade Commission (FTC) states "Steer clear of multilevel marketing plans that pay commissions for recruiting new distributors. They're actually illegal pyramid schemes. Why is pyramiding dangerous? Because plans that pay commissions for recruiting new distributors inevitably collapse when no new distributors can be recruited. And when a plan collapses, most people—except perhaps those at the very top of the pyramid—end up empty-handed.
now what is a real MLM company?
in many ways, MLM is legal in nature, as it drives the sales of a company with their unique compensation program, but how can we know if it was a scam or not,
first thing is that, a MLM should not compensate money for recruitment, the very basic foundation of marketing is to sell the product to the people, not by recruiting, meaning a real MLM company sells product instead of recruiting, recruitment bonus should be product discounts or additional item or product, instead of money, when money is involve in the MLM, it already became a pyramiding scam, as the recruitment is the only way to earn.
now that you know what is a good MLM, you must know how to distinguish a networking scam and not.
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