Multilevel Marketing (MLM) is also referred to as referral marketing or a pyramid marketing structure.

When you work with an MLM, you have two options to receive commissions. The first is similar to an affiliate marketer, where you sell the company's products (or services) to others, receiving a percentage of the sales for all products you sell.

The second is to recruit others to join the same MLM program. Every time someone joins, you receive a commission for their sign up. Dependent on the structure, you may receive commissions when the person you recruited makes sales or also recruits others, creating the famous pyramid structure of an MLM.

Most often, MLMs require referrals and word of mouth marketing to build the network or to sell products, specifically because of the setup / structure of the company.

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Though the functional meaning of MLM is Multi Level Marketing but I feel this as a different expression - Multi Love Marketing - which practically means you focus to love the needs of the people and help them achieve those.

Once your clients are satisfied then they will recommend your name to other people in their circle and that becomes Multi Love Marketing and the chain continues where everyone is focusing to love the needs of others in their circle and is helping them get those fulfilled through your valuable contribution

Multi-Level Marketing:

1. Preys on women - 3/4 of participants are women
2. Requures participants to purchase over-priced goods
3. Focuses on recruiting new participants
4. Does not focus on product sales
5. Leaves participants deeply in debt
6. Also known as distributorships

Pyramid Schemes are illegal in the US. The Federal Trade Commission views Any distribution company that focuses on recruiting and Not Sales as a Pyramid Scheme.

Multilevel marketing is a legitimate business strategy, though it is controversial. These schemes involve taking advantage of people by pretending to be engaged in legitimate multilevel or network marketing. An issue in determining the legitimacy of a multilevel marketing company is whether it sells its products primarily to consumers or to its members who must recruit new members to buy their products. If it is the former, the company is likely a legitimate multilevel marketer. The Federal Trade Commission has been investigating multilevel marketing companies for several decades and has found many with practices that are difficult to determine as legitimate. Herbalife Nutrition Ltd. is a high-profile, multilevel marketing company that manufactures and distributes weight-loss and nutritional products, with more than 500,000 distributors. Although the FTC has investigated Herbalife, it was activist investor William Ackman, who shed a national spotlight on the company by shorting $1 billion of the company’s stock in 2012. Ackman accused the company of operating a pyramid scheme and backed his allegations with a bet the company’s stock price would fall under the weight of the scam.
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Multilevel marketing, also known as MLM or network marketing, operates as a business model where independent distributors or salespeople generate income by selling products or services directly to customers and also recruiting new members to form a sales network.

Network marketing follows a hierarchical structure involving uplines and downlines (https://www.epixelmlmsoftware.com/blog/upline-and-downline). Here, the upline or sponsor refers to the individual who introduces a new member into the network. On the other hand, a downline refers to the network of distributors that have been recruited by an existing distributor into the MLM company. Within this system, the upline earns a percentage of the sales generated by their downlines, fostering an interconnected network of individuals driving sales and team building efforts.

MLM businesses operate by employing MLM plans (https://www.epixelmlmsoftware.com/blog/types-of-mlm-compensation-plans) that encompass different compensation structures, spanning binary, unilevel, matrix, board, monoline, generation, and their hybrid adaptations. The choice of a plan may vary based on the company’s profit expectations and the sector of its establishment. Failure to monitor this plan adequately and a lack of analytical business practices could potentially result in the formation of a pyramid scheme.

In this context, MLM businesses must ensure transparency in their compensation plans, provide adequate training and support to distributors on making earning claims, and adhere to legal and compliance guidelines. By prioritizing ethical conduct, MLM businesses can build a positive reputation and contribute to the building of a sustainable business model.

MLM also taps into the inherent power of word-of-mouth marketing, leveraging the authenticity and trust that individuals have in their personal networks. By empowering individuals to become brand advocates, MLM offers a unique blend of flexibility, scalability, and residual income potential. Within this structure, individuals are empowered to pursue entrepreneurial opportunities while working at their own pace and space.