Definitions and Examples of Multi-Level Marketing Companies
While some companies operating in the multi-level marketing space are pyramid schemes and violate federal law, legitimate multi-level marketing companies have a real product, and distributors can earn money by selling that product. Although legal multi-level marketing companies also encourage distributors to bring new participants into their “downline,” it is not necessarily required for the distributor to do so to earn money.
How Multi-Level Marketing Companies Work
Multi-level marketing companies rely on the continuous recruitment of more people into the organization so that those at higher levels can earn money from the sales made by newly joined individuals. You may be expected to pay upfront fees to join. You will have sales quotas that you are required to meet, and you may also be expected to bring a certain number of people into the organization who will form your “downline.”
Criticism of Multi-Level Marketing Companies
Multi-level marketing companies are not new. Amway, one of the most famous multi-level marketing companies, dates back to 1959 and was central to the Federal Trade Commission’s decision that helps distinguish legal multi-level marketing companies from illegal pyramid schemes. The prevalence of multi-level marketing companies has increased since then, with brands like doTerra, LuLaRoe, and Scentsy appearing in the public eye. According to data from the Direct Selling Association, approximately 7.7 million Americans generated $40.1 billion in direct sales in 2020, compared to $28.6 billion in 2010.
Considerations for Multi-Level Marketing Companies
Although the data clearly shows that direct sales are not profitable for most people, many individuals join for the promise of financial freedom in a multi-level marketing company. Certainly, there are people who make a living in multi-level marketing. Before joining, here are some things to keep in mind:
- Ensure you understand the company and the product
- Inquire about financial details upfront
- Learn about sales and marketing
Key Takeaways
Multi-level marketing companies are businesses that sell their products or services through direct sales. These companies rely on distributors to generate more sales for the company. Distributors earn money when they sell products to the people they bring in.
Source: https://www.thebalancemoney.com/what-to-know-about-mlm-companies-5100905
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