Multi-level marketing

Multi-level marketing (MLM) (also called network marketing (NM)) exhibits a business model which exemplifies direct marketing. Typically, independent business owners (IBOs) become associated with a parent company in a contractor-like relationship. IBOs receive remuneration for shopping within their own business, for selling products and for expanding their network of people ("downline") doing the same. An IBO receives a percentage of the profits generated by the network of all IBOs introduced to the system by him or her, and also of the profits generated by the people introduced by those IBOs, and so on. A points system, where the points represent the volume of products sold through the IBO network, tracks rewards.

Multi-level marketing has a recognised image problem because of difficulties in making a clear distinction between legitimate network marketing and illegal "pyramid schemes" or Ponzi schemes. Nonetheless, many NM/MLM businesses operate legitimately in various parts of the world. See NM_Companies for more information.

Critics contend that some companies produce revenue primarily by attracting new participants, as opposed to selling products. Amway (the world's leading company in network marketing, with annual turnover exceeding USD $1 billion) in particular often receives criticism for generating considerable revenue from selling instructional and motivational materials to its participants. The United States Department of Justice indicted the company, but Amway secured an acquittal.

Excel Communications, a $2 billion-plus Dallas-based company founded in 1988, exemplifies a successful MLM company. The top money-earners for Excel, such as Paul Orberson, Phil Mims, and Chuck Hoover, rank among the highest earners in the history of MLM.

see also: marketing, direct marketing, personal selling, list of marketing topics

External link

• MLM Watch.
• What's Wrong with Multi-Level Marketing by Dean VanDruff\n