Multilevel Marketing: Solid Business or Pipe Dream
Multilevel Marketing (MLM) is a business model defined by the idea that an affiliate is responsible for selling a product or service, while at the same time, recruiting new affiliates below them to do the same. There is a very fine line between a legal MLM and an illegal Pyramid scheme. The easiest way to spot the difference lies in whether more emphasis is placed on selling or on recruiting.
Early MLM businesses
One of the very first MLM businesses ever created was AMWAY. This basically defined the model for an MLM business. People were recruited to sell a variety of products and asked to recruit new people into their "downline". A "downline" is the tiers of people below a given affiliate whom that affiliate is supposed to receive a percentage of their sales as well as his own. This was a new concept in business at the time, recruit your own competition and make money off their work! Unfortunately, AMWAY has over time grown to be used as the example of what an MLM should not be.
Another very successful MLM business is Avon. Avon has been around for years and has developed its own unique product lines that generate sales based on reputation and past experience with the products. Avon salespeople are all independent contractors who agree to sell these products at the listed price and buy at a lower price. These independent representatives are also encouraged to recruit new representatives on an ongoing basis. After a person recruits a certain number of people, they are named supervisor and begin to draw a percentage of the sales made by these new recruits.