Network marketing and multi-level marketing have been described by author Dominique Xardel as being synonymous, and as methods of direct selling. According to Xardel, direct selling and network marketing refer to the distribution system, while the term "multi-level marketing" describes the compensation plan.
Multi-level marketing (MLM) is a marketing strategy in which the sales force is compensated not only for sales they 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.Other terms used for MLM include Pyramid selling, Network marketing, and Referral marketing.
Most commonly, the salespeople are expected to sell products directly to consumers by means of relationship referrals and WORD OF MOUTH marketing. Some people use direct selling as a synonym for MLM, although MLM is only one type of direct selling.
Although some companies that use multi-level marketing exploit members of their networks and constitute illegal pyramid schemes.
Not all multilevel marketing plans are legitimate. Some are pyramid schemes. It's best not to get involved in plans where the money you make is based primarily on the number of distributors you recruit and your sales to them, rather than on your sales to people outside the plan who intend to use the products.
Research is your best tool, giving eight steps to follow:
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
