Multi level Marketing

Multi Level Marketing (Network Marketing) is a multi faceted business model that markets its products directly to customers, in addition to an indirect approach through a relationship referral, also known as distributors. Focus in this business model concentrates on the number of distributors, which is as significantly important as the volume of products with which to offer.  The idea just as with any business plan is to create as much sales as possible.  Each level within the multi level marketing network employs an incentive to encourage dependants to sell and recruit.  Commissions are paid to each distributor based on sales, active participants, recruits, as well as volume of product.

There are various deviations of this particular business model that differ, in effect, by the regulations of commissions paid out to the distributors.  Popular variations of the Multi Level Marketing model include: the Unilevel or Stairstep Breakaway, the Matrix, the Binary, and the Elevator.  The main idea remains the same behind each one of these business models, which is to gain as many marketing opportunities for a wide range of products through a multi platform level of distributors who recruit more distributors.

Multi Level Marketing business models have fell under scrutiny for their emulation of pyramid schemes such as Amway during the 1970s.  Many characteristics of the Multi Level Marketing business model are similar in nature, which is to recruit as many distributors as possible to purchase the product advertised by the company.  Many common themes these two share are: an excited sales offer, inadequate information relevant to the company, overpriced product, get rich quick schemes, meetings are held at fast food restaurants, and statements that early participants can sit back and watch the money come flowing in.

A distinguishing feature between Pyramid schemes and Multi Level Marketing models is that you do not pay to become a recruit in the Multi Level Marketing model.  One other major qualifier the FTC (Federal Trade Commission) passed in lieu to a pyramid scheme is the 70% rule, which states that active participants (distributors) sell at least 70% of their inventory before they are able to put in for new orders.  However, there is a gray area that still exists between the two models, which is why there is still a general public concern that Multi Level Marketing business models are pyramid schemes in disguise. 

There are four major issues that directly impact the success of the Multi Level Marketing business model: market saturation, its pyramid scheme resemblance, the morality and ethics involved in handling the business, and emotional ties to selling.  Many of the Multi Level Marketing models offer a product that is already out on the market and does not have a very successful chance of increasing sales due to already weak demand of the product.  The second issue involved directly impacts a company’s ability to grow when it is labeled as a pyramid scheme.  The negative connotations are so strong and resentment so deep for pyramid schemes that companies often fail to shake the label.  Third, the immoral recruitment practices of new distributors due to the idea of selling a product already in overabundance on the market seems impractical and immoral and draws links to pyramid schemes.  Lastly, companies such as Amway left such an enduring negative memory of pyramid schemes that any resemblance of a pyramid company brings negative emotions running forward.