| Multilevel Marketing |
Article Index for Multilevel |
Website Links For Marketing |
Information AboutMultilevel Marketing |
|
OVERVIEW In a typical multi-level marketing or network marketing arrangement, individuals associate with a parent company as an independent contractor and are compensated based on their sales of products or service (as well as the sales achieved by those they bring into the business). In a legitimate MLM company, commissions are earned only on sales to the end-user, who is often also a distributor. No money may be earned from recruiting alone ("sign-up fees"). Some companies produce revenues primarily by attracting new participants or selling them marketing services, as opposed to selling actual products. One must analyze the compensation plan to determine whether participants are paid from actual sales to customers and not from new-recruit bonuses or business support sales. Multi-level marketing has a recognized image problem due to the fact that it is often difficult to distinguish legitimate MLMs from such illegal scams as Pyramid or Ponzi Scheme s. NM/MLM businesses do operate legitimately in all 50 U.S. states and more than 100 other countries, and new businesses may use terms like "affiliate marketing" or "home-based business franchising." HISTORY Amway in particular is a frequent target for critics for generating considerable revenues from selling instructional and motivational materials to its participants. The FTC filed a Lawsuit Against Amway in 1976. Amway's victory paved the way for companies to adopt a multi-level distribution system. The 1980s saw a major shift as companies began managing the stocking and distribution of products as well as commission payments to their members. This allowed members to focus solely on marketing. Today, most MLM companies act as logistics companies that take orders, ship products and calculate and pay commissions. COMPENSATION PLANS Companies have devised various MLM compensation plans over the decades.
FRAUD IN MLM Fraudulent MLM schemes can usually be identified by high entrance fees or requirements to purchase expensive inventories. They often collapse quickly when the merchandise cannot be resold, leaving all but those at the top of the pyramid with sometimes staggering financial losses. SEE ALSO EXTERNAL LINKS |
|
|