Network Marketing Businesses

Network marketing businesses, also known as multi-level marketing businesses, are distribution driven. Distributors make commissions on their own sales of goods or services; furthermore, when they recruit other distributors into the network, they make a commission on their sales as well. Tupperware and Amway are examples of successful network marketing businesses.

Not All Network Marketing Businesses Are Legitimate

While the aforementioned network marketing businesses have been around for a long time--following legal business practices--not all the others have. In fact, it's quite easy to corrupt a network into a pyramid scheme. When members of the network pay other members of the network anything other than commissions for goods and services--for example, to sign up new recruits--it's known as pyramiding.

Pyramid schemes are illegal. (The name refers to the structure itself; those on the bottom support the elite on the top.) Moreover, they taint the legitimate businesses that use network marketing for positive and legal purposes. As a result, network marketing now has a black eye and not even Mary Kay Cosmetics (another legitimate MLM) can hide it with makeup.

The Federal Trade Commission warns anyone considering joining a business network to proceed with extreme caution. Investigate the company, their products, and their services. A good rule of thumb is to only support a product or service that you yourself would use. There are still many legitimate businesses around, and joining those networks can be financially and socially rewarding.