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Is Multi-Level Marketing a Pyramid Scheme or a Legitimate Business Model?

Bob Withers
Aug 1, 2008
MLM is an acronym for Multi-Level Marketing, sometimes called Network Marketing or Consumer Direct Marketing, or Seller Assisted Marketing. It is essentially any business where payouts occur at two or more levels. MLM is not a pyramid scheme and is nothing more than a company who has distributors, independent business owners, franchise owners, independent agents and so on.

It is a legitimate business model, but some people have chosen to create cons and rip-offs using this model thus giving it the bad reputation it carries in some business circles and online today. It is a very attractive business model to most because it sells hope and the dream of residual income for life. It is the best option for many for owning their own business and attaining real economic independence.

The main premise or idea behind MLM is that hard work at the outset yields residual income for life. It is a perfectly legitimate business model which is basically a channel of distribution for goods and services that also can have a franchise opportunity attached. Multi-Level Marketing is still essentially a person-to-person system of marketing and is a way to get undue credibility by exploiting people's personal friendships and relationships by networking.

It is also defined by its rewarding people to recruit others in multiple levels and the idea is that people not only try to sell their product, but try to recruit others to sell the product as well. On the other hand pyramid schemes contain no products or services, or they include bogus products in order to justify the continuation of the opportunity.

Another criticism of MLM is the exploitation of our relatives and friends urging them to join our opportunity which often stresses relationships unnecessarily and is considered by many to be a questionable marketing tactic. One MLM practice still in use today by some Financial Planning and Insurance companies consists of writing a list of 100 family and friends and trying to solicit them to attend your can't miss network marketing business opportunity meeting.

One of the biggest problems facing Network Marketing is that they seem to attract and even prey upon people who are down and out and desperate, and who can least afford to lose their money by purchasing memberships in these dubious programs. These people are usually drawn to a story built around a legitimate company which elicits an understanding of the unique benefits offered by the company's products.

This creates the enthusiasm to share the story with others and therefore draw them into the opportunity. As a result, there is common belief that MLM is a feasible business investment or career choice for nearly everyone and that the odds of financial success in the endeavor are comparable or better than other employment or business enterprises. The marketing thrust is accordingly directed to prospective distributors, rather than pushing people to purchase the product.

The major thrust is selling the opportunity because of the impracticality of door-to-door selling. This is why MLM is a business that just keeps reselling the opportunity to sign up more distributors. The theory behind it is that the larger the network of distributors, the more product the business will be able to sell. Whether you agree or disagree with Multi-Level Marketing, it has been around in one form or another for a long time and it will be around in one form or another for a long time to come.
About the Author
Bob Withers is a professional sales and marketing person with over twenty years in the field. He has also turned his sights on internet marketing to apply his trade. If you want to get in touch with Bob or learn more about home business and affiliate marketing please visit:
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