Multilevel Marketing

Multilevel marketing has received a bad rap lately--no thanks to the pyramid schemes that have used it as a springboard to illegal activities. Multilevel, or network, marketing, depends heavily on recruitment; distributors sell goods or services for a commission and then recruit others to do the same. Here's the kicker: they also make a percentage when the people they recruit make sales, too.

Some people argue that multilevel marketing (MLM) is illogical: why would a business person enroll other people to sell the same thing in the same market? Think about it--if I opened a McDonald's, would it be wise to have a customer of mine open another one across the street? It would make a lot of sense if I kept all my customers and made a percentage on the sales to the new customers.

Multilevel Marketing Gone Bad

MLM has a number of supporters and critics, who can argue for days about the benefits or paradoxes of it. On the one hand you have Tupperware and Mary Kay; these are long-time businesses that have thrived on network marketing and proven that it can--and does--work. On the other hand, you have people who tweak multilevel marketing plans into pyramid schemes.

Take a look at a pyramid: small on the top, much larger on the bottom. An MLM distributor has many people beneath them--they recruit people who recruit people under them, and so on--but sometimes the commissions don't make their way down the line the way they should. It's fairly easy, and more common than it should be, to commit fraud with MLM, so be very careful.