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 downline of distributors and a hierarchy of multiple levels of compensation.
Most commonly, the salespeople are expected to sell products directly to consumers by means of relationship referrals and word of mouth marketing. Some people equate MLM with direct selling, although MLM is only one type of direct selling.
The mere mention of multilevel marketing instantly turns some people deaf to any further discussion as they are reminded of the infamous Ponzi or pyramid schemes of the mid 20th century. With the age of computers and low employment options, multilevel marketing programs often target those looking for work from home opportunities.
Essentially, at its core, multilevel marketing is similar to franchise opportunities in which franchised dealers pay an initial and monthly franchise fee for the right to sell the companys products.It's generally accepted that the first multi-level marketing plan was introduced in 1945 by the California Vitamin Company (shortly afterwards to become Nutrilite).
Multilevel marketing may sometimes fail by oversaturating the market.Any business must be careful not to overhire,overextend or oversupply a market.People must steer clear from illegal pyramid schemes. Why is pyramiding dangerous? Because plans that pay commissions for recruiting new distributors inevitably collapse when no new distributors can be recruited. And when a plan collapses, most people - except perhaps those at the very top of the pyramid - end up empty-handed."
MLM's are also criticized for being unable to fulfill their promises for the majority of participants due to basic conflicts with Western cultural norms. There are even claims that the success rate for breaking even or even making money are far worse than other types of businesses.
More than a hundred multilevel companies are marketing health-related products. Most claim that their products are effective for preventing or treating disease. A few companies merely suggest that people will feel better, look better, or have more energy if they supplement their diet with extra nutrients. When clear-cut therapeutic claims are made in product literature, the company is an easy target for government enforcement action. Some companies run this risk, hoping that the government won't take action until their customer base is well established. Other companies make no claims in their literature but rely on testimonials, encouraging people to try their products and credit them for any improvement that occurs.