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What Do You Know About Multi-Level Marketing?

Mar 4, 2008
Multi-level marketing (MLM), also referred to as network marketing is a form of direct selling. Basically, MLM is a type of business model that combines direct marketing with franchising. The MLM business functions by enrolling independent distributors to sell products and meanwhile earn additional sales commissions based on the sales of people enrolled into their downline.

New MLM independent distributors may be required to pay for their own training and marketing materials, or to buy a significant amount of inventory to start their career. MLM organizations provide their independent distributors with training materials to help them build their own teams to form a large organization which will bring them lots of money and achieve their financial freedom.

The compensation plans vary from one MLM business to the other, but there are basic plans in place. The Unilevel or Stairstep Breakaway plans are the oldest and most popular in the MLM business. These plans feature two types of distributors either managers or non-managers. The pay method of these plans includes Baseshop overrides where there are overrides of managers from their subordinate non-managers. This method is the same as any other type of sales organization. Generational overrides are overrides of managers from the baseshop of managers who were previously their subordinate.

Most plans compensate at least three generations of such managers. Executive bonuses are commissions for managers who exceed a posted sales quota. Some MLM companies offer matrix compensation plan. For example, a 5x7 matrix allows one to have 5 people on the frontline and can go 7 levels deep.

In recent years, the network marketing business has developed an image problem because of its similarities to the illegal pyramid or other similar schemes. MLM businesses operate in the United States in all 50 states and in more than 150 other countries around the world. There are millions of independent distributors around the world, with weekly signups of more than hundreds of thousands.

Many pyramid schemes try to present themselves as legitimate MLM businesses. In the legitimate MLM companies, commissions are earned only on sales of the company's products and/or services. No money may be earned from recruiting alone through sign-up fees, though money earned from the sales of members recruited is one attraction of MLM arrangements.

A test of the legal requirement is that MLMs follow the so-called 70% rule which prevents members inventory loading in order to qualify for additional bonuses. The 70% rule requires participants to sell 70% of previously purchased inventory before procuring new orders. There are however variations in interpretations of this rule. The Federal Trade Commission offers advice for potential MLM members to help them identify those activities that could be scams.

Therefore, you can be assured that home-based network marketing businesses can work. You have to do a proper research to start with the right one. Many people have already owned their network marketing business as it offers many advantages over traditional businesses. They are already on their path to achieving their hopes and dreams.
About the Author
Kamsani is a network marketeer and enjoys helping people to achieve financial freedom. To download free ebooks on internet marketing and find the best home based business ideas and opportunities so you can work at home, visit: http://www.SuperSuccessIncome.com
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