What is MLM and Network Marketing

What MLM is Not

Let’s look at what MLM isn’t. It is not a legitimate means of direct selling. What I mean in direct selling the majority of the profits go to the individual selling the product. I have tried MLM and worked very hard signing people up and making sales, for little or no return.

What is MLM and Network Marketing

MLM (Multi Level Marketing) is also known as Pyramid Selling, and Network Marketing, Research shows this is a very controversial means of marketing in which profit earned by the salesperson, distributor or small business owner etc comes from two streams of the MLM’s custom compensation package.

The two ways of generating an income from an MLM opportunity.

  • The network is shaped as a pyramid, your income is based on the sales of persons below you which you need to recruit. The persons are considered your downline distributors. The sales from your downline distributors, typically consist of sales to end users and or their downline distributors.
  • Or commissions from your direct sale and/or your personal usage of the product.

The MLM I was personally involved in I was to buy and use their product and recruit persons under myself that would buy and use the product and recruit a downline of their own who would do the same. I spent a lot of money on product and used the internet to make sales which I received little to no money for my hard work.

MLM Business Models

Within the MLM business model, the commission received from the MLM pyramid (receiving from the What is MLM and Network Marketingsales of one’s downline) can be a very profitable revenue stream, but at the same time, the statistics show the probable source of money is not paid to the salesperson. On the other hand, the revenue received from the direct sale of your own work is the least profitable. The vast amount of the people that participate in the MLM (over 99%), however they end up with either very little or no net profit (with a large proportion operating at a net loss after expenses are deducted), while only¬† a few in the upper levels of the MLM pyramid earn a significant profit.

History of MLM

The origination of the Multi Level Marketing technique is most often disputed, but doing business with the style of Multi Level Marketing occurred in 1930 (California Vitamin Company) which was later renamed to Nutrilite or the California Perfume Company that was renamed later to Avon Products.

Here is a link to the FTC (Federal Trade Commission) and their warning of MLM.

From The FTC

Here is an excerpt from the FTC

and it would expand coverage to include work-at-home schemes. The revised proposal, however, would not reach multi-level marketing companies or certain companies that may have been swept inadvertently into scope of the April 2006 proposal. The revised proposed rule also streamlines the requirement to disclose material information by eliminating requirements to disclose the number of cancellations and refund requests that a business opportunity seller receives or the litigation history of sales personnel.

You can find the whole press release here: https://www.ftc.gov/news-events/press-releases/2008/03/ftc-approves-federal-register-notice-seeking-comments-revised

Better Income Option Other Than MLM

If you are looking for a better option to avoid the MLM network check out my post here.

 

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