Multi-level marketing (MLM), also known as network marketing or pyramid selling, is a marketing strategy for the sale of products or services in which the revenue of the MLM company is derived from a non-salaried workforce in a pyramid-shaped commission system. MLM encourages existing members to promote and sell products to others, and members at all levels receive some form of commission, as long as the chain keeps going. The more layers there are, the more money people can make, with the person or people at the top earning the most while those who sit toward the bottom earn fewer commission dollars.
However, MLM is a controversial marketing strategy, and companies that use the MLM business model have been a frequent subject of criticism and lawsuits. Legal claims against MLM companies have included, among other things, their similarity to traditional illegal pyramid schemes, price fixing of products or services, collusion, and racketeering in backroom. Although an MLM company holds out those few top individual participants as evidence of how participation in the MLM could lead to success, the MLM business model depends on the failure of the overwhelming majority of all other participants, through the injecting of money from their own pockets, so that it can become the revenue and profit of the MLM company, of which the MLM company shares only a small proportion with a few individuals at the top of the MLM participant pyramid.
If you are considering joining an MLM, it is important to know that some MLMs, even ones that aren’t pyramid schemes, may not be a wise investment. Other MLMs may not be a good fit for your interests and lifestyle. It is recommended to ask yourself some questions before joining an MLM, such as whether you want to be a salesperson, whether you are comfortable with the companys compensation plan, and whether you have researched the company and its products thoroughly.
