MLM, short for multilevel marketing, is a strategy used to market goods and services. In this strategy, the sales team is rewarded for their sales as well as any referrals they make. MLM is also referred to as referral marketing, network marketing or pyramid selling.
In the past, pyramid schemes have been used as a means of generating income for kingpins at the top of the pyramid at the expense of new recruits. For instance, the initiator could recruit two people, who in turn would each recruit two others. The new recruits might be required pay a registration fee after which they go fishing for two recruits each. As the people recruit others under their downlinks—which are also linked further up in multiple levels—compensation would then come to those with most referrals higher in the pyramid. This has therefore earned pyramid schemes a bad name, considering the fact that these schemes rarely involved the actual selling of any products.
Some legitimate businesses embrace network marketing strategy based on real selling of products. With proper licensing, one can start a business or alternatively join a network marketing company. In order to realize optimum benefits from this strategy, one comes up with multiple levels of compensation e.g. level 1, level 2, level 3 and so on. One level could possibly involve wholesalers and a second level involving distributors. This way, the MLM strategy may allow distributors to get commissions when they recruit.
Network marketing is one way in which several companies have generated big revenues. With the ability to network exponentially, it becomes easier to reach out to more and more people and the distribution of products and services in this manner is easy. Nevertheless, the strategy has its challenges. To start with, not everybody will be pleased by your offer. As a rule of thumb, you are advised to identify among your audience, those distributors and customers who are interested in the products or services. This way, you will attract and retain a wide client base.