Multi Level Marketing
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 others they recruit, creating a down line of distributors and a hierarchy of multiple levels of compensation. Other terms 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 for direct selling as a synonym for MLM, although is only one type of direct selling, which started centuries ago with peddling.
MLM companies have been a frequent subject of criticism as well as the target of lawsuits. Criticism has focused on their similarity to illegal pyramid schemes, price fixing of products, high initial start-up costs, emphasis on recruitment of lower-tiered salespeople over actual sales, encouraging if not requiring salespeople to purchase and use the company’s products, the potential exploitation of personal relationships which are used as new sales and recruiting targets, complex and sometimes exaggerated compensation schemes, and cult-like techniques which some groups use to enhance their members ‘ enthusiasm and devotion.
In contrast to MLM is single-level marketing, where the salesperson is rewarded for selling the product directly to the consumer.