Multilevel marketing, also known as direct marketing or network marketing (MLM), is a way to sell a product to consumers that can be used for independent sales.

 

What Is Multi-Level Marketing?

Multi-level marketing companies use retailers to sell their products. This leaves the responsibility for the sale to independent payment networks.

 

According to the MLM model, distributors are not employees. To do this, they are individual business owners who hire paid networks to help sell products. This wide network of independent distributors is relied upon to acquire multi-level marketing firms.

 

How multi-level marketing works

In multi-level marketing, the selling price is several times. They are known as distributors who are non-profit managers who are not dependent on sales. There are two sources of income for a distributor. One of them is the procurement commission. This is the launch of other new distributors.

 

When a new low is hired, the distributor is not paid. However, sales from low-level distributors also apply. The distributor is compensated by the sales percentage of the lower management company.

 

Many distributors with large-scale low-level management teams do not sell many products. You can get a commission depending on the sales of your lower-level teams. The commission system effectively motivates existing distributors to build or manage lower management teams. This allows the company to launch more sales and thus enter a wider market.

 

Pros and Cons of Multilevel Marketing

A multi-level marketing strategy is beneficial for both companies and distributors. In multi-level marketing, the company has access to a large growth base over a wide geographical range.

 

Distributors do not charge the company any fixed fees for independent use, but only commissions when the sale is made, which allows it to sell.

 

Multi-level marketing allows distributors to generate additional revenue with flexibility. They can choose full-time or part-time management to best fit their schedules.

 

However, the low-level distributor was in an unfavorable position. They work more than them but earn less at the top, and high-level distributors distribute sales commissions.

 

High development comes with a lack of agility and autonomy. Distributors only receive limited support from the company. You can make their sales efforts in sales training or practice very ineffective.

 

Also, a multi-level marketing organization has no control over its sales staff. If some distributors act irresponsibly or do not trust the company, it can damage its reputation.

 

Another concern of multi-level marketing is pyramid schemes. Pyramid schemes are fake and can cause huge economic losses to departments.

 

Multilevel Marketing vs. Pyramid Scheme

The pyramid scheme is very similar to multi-level marketing. It also forms a pyramid system and effectively expands the business of several group members. However, pyramid schemes are illegal scams, and multi-level marketing is legal.

 

The main difference is that the main management of a multi-level marketing company is to sell the actual product or service. On the contrary, a pyramid scheme does not provide any real product or investment.

 

Participants are confident that the company owns a valuable product or investment project. They receive "promised payments" only by low-level employment. The lower the level of employment, the more people are drawn to fraud.

 

Multi-level marketing distributors, even low-level ones, make less money. Payments made to the pyramid scheme lose all the money they pay as a fee investment or "membership".