Multi-level marketing rewards an individual salesperson for both their own personal sales, as well as for those of any member recruited by that individual. There are many umbrella terms used which also refer to this type of marketing strategy. Network marketing, multi-level marketing (MLM), and affiliate marketing are all term used to describe this kind of marketing strategy.
In this type of business, sellers are recruited and, in turn, recruit others in order to maximize their opportunities for sales income. The original individual who recruited continues to benefit from the sales of those recruited by downline and those recruited by their downline, etc. By continuing to reward members for increasing the number of sellers in their network of “downline” with this “multi-level” reward system, an organization encourages its members to enlist more independent distributors and to increase sales for the organization.
Individuals within this system most-often use word-of-mouth advertising and their own personal relationships to produce sales.
The Compensation Plan
There are many names for participants in MLM organizations. Participants might be known as independent business owners (IBOs), franchise owners, independent agents, associates, or a number of other titles. You should definitely click here to learn more about network marketing. These individuals are unpaid for membership and receive no guaranteed annual rewards. These participants are, however, authorized to provide consumers with products and services offered by the organization.
Participants receive income from their own personal sales, as well as commission from the organization, similar to a normal retail sales job at a traditional business. Another way some independent distributors will create profit is by personally purchasing product from the company at special member-pricing and then selling it at an increased retail price to consumers. The productivity of fellow sellers an individual has in their network of downline is also factored into their income, though the specific compensation plans vary between MLM organizations. Independent distributors grow their network of downline marketers in order to increase their own income potential. When many members of an organization recruit additional independent distributors, this results in exponential growth and an increasing large consumer base for the company as a whole.
Single-Level Marketing and Direct Sales
In describing multi-level marketing organizations, many different names and terms were developed by the organizations themselves in attempts to distance themselves from illegal and illegitimate entrepreneurial enterprises such as Ponzi schemes, internet scams, and other fraudulent businesses. It comes as no surprise that there are some misunderstandings about the MLM jargon.
So what is mlm exactly? MLM utilizes direct-selling, however it is only one of many types of systems which do so and should not be confused as a synonym for direct selling. Direct selling and network marketing are just used to describe how MLM organizations choose to distribute and sell their products. The compensation plan, in contrast, is described by the “multi-level marketing” label. Single-level marketing is also different from MLM in that it does not reward salespeople for the sales of others, only for personal sales. Many organizations have transitioned from a single-level marketing compensation plan to a multi-level marketing plan and have found success and an increase in sales.
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