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Multi-level marketing (MLM) is a marketing strategy in which the sales force is compensated not only for sales they personally 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. Companies that use MLM models for compensation have been a frequent subject of criticism and lawsuits.
Criticism has focused on their similarity to illegal pyramid schemes, cult-like behaviour, price fixing of products, high initial entry costs (for marketing kit and first products), emphasis on recruitment of others over actual sales, encouraging if not requiring members to purchase and use the company's products, exploitation of personal relationships as both sales and recruiting targets, complex and sometimes exaggerated compensation schemes, the company making major money off its training events and materials, and cult-like techniques which some groups use to enhance their members' enthusiasm and devotion.
Independent non-salaried participants, referred to as distributors (or associates, independent business owners, dealers, franchise owners, independent agents, etc.), are authorised to distribute the company's products or services. They are awarded their own immediate retail profit from customers plus commission from the company, not downlines, through a multi-level marketing compensation plan, which is based upon the volume of products sold through their own sales efforts as well as that of their downline organization.
states that research is your best tool, giving eight steps to follow:-
- Find — and study — the company’s track record
- Learn about the product
- Ask questions
- Understand any restrictions
- Talk to other distributors (beware of shills)
- Consider using a friend or adviser as a neutral sounding board or for a gut check
- Take your time
- Think about whether this plan suits your talents and goals