What is the full form of MLM

MLM: Multi-Level Marketing

MLM stands for multi-level marketing. It is the direct sales strategy used by businesses instead of selling through retail outlets. In this approach, the leading distributors recruit salespersons who sell the goods and services of the company, in return for which the distributor gets a certain percentage of commission on the sales made by the recruited salesperson.

Various companies like Amway, Forever Living, Vestige, Future Maker, Tupperware, Herbalife, Avon, RCM, etc., utilize multi-level marketing techniques.

How does MLM work?

Multi-level Marketing is a business strategy of selling goods and services through a network of sales personnel, who are made authorized members and paid a special commission based on their sales.

Under this strategy, there is a primary distributor who makes a network of salespeople. These salespeople are recruited and asked to do mainly two jobs; the first is to sell the products and services of the company, which the distributor gives them on payment of a total bill of the product. Ultimately, the distributor sells those goods and services to its immediate salesperson and gets the commission for the sale of goods by the company. Then the salespersons sell those goods further to get their money back with some profit.

The second task the salesperson is asked to do is to add more and more salespersons under them to whom they sell the goods, who then sell those goods to others. Through this, the salesperson immediate to the distributor gets a certain amount of commission on the sale of goods done by its immediate salesperson.

Ultimately, this whole process can be summed up as a network in which there is a distributor of the company; sometimes, the leading distributor can be the company itself, who sells the goods and services of the company to its immediate downline recruit or salesperson, who further sell those goods and services to its downline recruit and the person on the upline receives a commission on every sale made by its downline recruit. So, they are encouraged to recruit the maximum number of salespersons to earn a high commission on the sales of others without doing much labour.

Difference between legitimate MLM and Pyramid Scheme

In a legitimate multi-level marketing company, the focus is more on the sales of the product and services, and the recruitment of new members is the secondary activity, where goods and services are sold to everybody, whether that person is a member or an outsider. This sale practice is entirely legal, and there is no objection to it.

A pyramid Scheme is illegal, as in this, the company's focus is more on recruiting new people rather than selling products to a third party. In this, the recruited member is given the product for the money they paid, and the company takes no responsibility if the person cannot sell those products and make new members. Thus, the capital of the recruited salesperson is lost, and he gets no help from the company, which is why it is referred to as a fraudulent business strategy, which traps innocent people and results in the loss of their money.

Advantages of Multi-level Marketing

• Freedom of operation as per own plan.
• Opportunity to earn extra income along with the current job.
• Satisfaction of working for oneself, not for others.
• Chance to meet and interact with new people every day.
• Tax advantages.
• No need to pay franchise fees.
• Constant support and training from upline members to increase sales.

Disadvantages of Multi-level Marketing

• Growth is prolonged, not the same as promised by the upline members.
• High chances of fraudulent activity.
• Every time there is a risk of under or overstocking of the products.
• No control of the company over the members of the sales.
• Due to no advertising, salespeople find it difficult to sell products and build the brand.
• Challenging to convince others to become a member and purchase the product.

Interesting facts about multi-level marketing

• The first multi-level marketing company was Southwestern company, established in 1855.
• About 30% of the multi-level marketing companies have a positive revenue growth rate.
• Among the top 100 multi-level marketing companies, about 55% are from the United States of America, followed by China, which accounts for 12% of the MLM companies on the list.
• The top 3 MLM companies in the world based on revenue in 2021 included Amway, Natura Cosmeticos and Herbalife.
• You can find an Amway product in 1 out of every five households in the USA.
• About 60% workforce in Natura includes women.
• Amway tops the web search trend among MLM companies.
• In 2021, the USA topped among the different countries in global sales by MLM companies, which accounted for around 23% of the total global sales, followed by Korea, then Germany.
• The Asia-Pacific region accounts for 41.95 of total global sales by MLM companies.
• In 2021, the total global sales accounted for around $186 billion by MLM companies.
• The year-on-year growth recorded by MLM companies in 2021 was 1.5%.