MLMFacts

MLM is not a business – it’s a type of compensation plan and a marketing strategy used to attract agents to promote a particular companies products and services.  While MLM and Network Marketing are often considered synonyms, they’re not really the same thing either. Network Marketing is a strategy of marketing products through networks of people, typically via word of mouth.

Multilevel Marketing on the other hand, refers to the way people who do network marketing get compensated - that is, they get paid not only on sales they personally create for a company (single level) but also on sales they help create through recruiting and training other agents and helping them recruit and train other agents and so on – in other words, they get paid on multiple levels of sales, hence multilevel marketing.

The reputation of  legitimate companies using MLM compensation plans suffer today from the myriad of pyramid schemes and other scams claiming to be “MLM companies”.  In my opinion, legitimate companies should not refer to themselves as “MLM companies”, but instead refer to themselves as “direct selling” companies in a particular “industry”. For example, Amway and Herbalife are direct selling companies, primarily operating in the health & beauty industries. ACN, Inc. is a direct selling company operating in the telecommunications industry. By using a multi-level compensation plan they encourage people to become agents as the income potential is higher than a single-level compensation plan. Multilevel plans also of course encourage people to recruit more agents to increase their income potential.

Unlike pyramid scams though, recruiting people isn’t the goal – it’s simply a marketing strategy to help increase product sales.