Sometimes MLM is called referral marketing, network marketing or pyramid selling.
“Unless there’s a sale, nobody gets paid!” If you manufacture shoes, you must get the word out that you have shoes for sale! One non MLM method to get the word out is to buy expensive advertisements and hire an army of salesmen. Another popular inexpensive way to increase your shoe sales is to offer rewards/commissions to individuals (non-employees) who send you customers interested in your products. eBay and Amazon are two widely known companies that reward individuals for helping them generate sales. What do you call an independent sales person that helps eBay or amazon make sales and collects commissions? An affiliate! Is eBay or Amazon MLM? No.
What Is MLM Then?
eBay and Amazon are not MLM because they only pay you for the sales you helped generate. You only get paid for your “direct sales”. What other kind of sales are there? What is an example of indirect sales? Suppose you made good money at home as an eBay affiliate and let your good friend in on what you were doing. So he signs up as an affiliate and proceeds to make money from home online. Will eBay send you a reward for teaching your friend how to make money as an affiliate? Will eBay reward you for the (indirect) sales he makes? No. If your shoe business used an MLM marketing strategy you would not only reward your affiliates for the sales they generate, you would also compensate your affiliates for the new affiliates they introduce. ( Like Mary Kay, Amway, Avon, Amsoil, Melaleuca, The Pamperered Chef, Nu Skin, Tupperware, Watkins etc)
Is MLM Legal/Legit In The US?
Do You Think MLM Is A Pyramid Scheme?
There’s MLM businesses operating in all U.S. states. It is estimated there are over 1,000 firms using multi-level marketing in the United States alone. Affiliates make money from home without employees, no accounts receivable, no accounts payable and no inventory. However the U.S. Federal Trade Commission (FTC) warns: Steer clear of multilevel marketing plans that only focus on income potential or guarantee a fixed return.
This video has been used in courtroom to help explain what is MLM:
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