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What is Multi-Level Marketing?

Jun 15, 2008
Multi-level marketing is a business model. Under these model sales consultants, franchisees, distributors and independent owners all work together in harmony. They work to increase the sale of a particular product or products. They work together on commission basis. Under this arrangement the efforts of all the franchise and regional managers are put together to enhance the sales of the product. Normally there will be seven or more levels of people working in unison and receiving commission. A combination of franchise and direct marketing is Multi-Level Marketing.

The concept of Multi-Level Marketing started from the year 1980. Most of the companies started to pay bonuses to all the individuals who were involved in solving the stock and distribution issue. This brought in interest in many individuals and they started entering the market with a view to earn bonus. This brought about the concept of Multi-Level Marketing. Once the internet started to become popular Multi-Level Marketing became easier. Every aspect of sales was done online and thus it was known as online Multi-Level Marketing.

Compensation programs for Multi-Level Marketing are many. According to the uni level program there are two cases of allocators concerned and they are the managers and the non-managers. According to the template plans, the breadth of each stage in a distributors group is synchronized. In twofold plans, the border of each levels width has two legs. Commission is only paid when both the legs reach their particular target. In elevator plan, the allocators pay divides after a definite number of wholes have been rewarded.

Commissions are given in two ways. The first way is to pay commission only if sales are made. The second mode pays commission after only signing up by the customer. This mode does not require the customer to buy anything. So the second method brought into force the illegal pyramid which is otherwise known as illegitimate Multi-Level Marketing. The in-between members started to tempt the participants to buy more products. But legal precautions are required when dealing with such kind of businesses.

Amway Corporation in the year 1979 was charged of price fixing. They inflated sales claims, while their allocators sold the products at a lesser price. After this FTC interfered and all multi-level companies had to pay commissions for recruiting and not sales. In the year 2006, the Multi-Level Marketing organizations were ordered to provide all the customers all the information with regard to business opportunity. They were also to be told about the Federal Trade Commission so that the customers could be saved from any deceptions.

Laws have become stronger since then. Pyramid scheme was banned in most of the countries. From this time on all the sales people who were newly hired had to bear the cost of initial training and material. The seventy percent rule was enforced. Rules were enforced to the extent that unless and until 70% of the inventory was sold new orders for products cannot be placed. This stopped the members from being overloaded. The members cannot overload their sales for increased their commission.
About the Author
Jitendra Singh Sendhav is an Internet Marketing Professional. Has a variety of marketing experience. He is passionate about helping new comers and experienced marketers improve their return on investment. Want to generate Fresh Live Leads FREE? Click here to know more about the free system
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