Knowing What MLM Means

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By: Scam Risk - Expert Reviewer

In this generation of the modern internet age, almost everyone wants to do business online. Since many people venture on this kind of platform to do business, the competition is higher, and not everyone succeeds. They needed people to do business with them and strategize how to do such in a small amount of time. 

MLM, also known as Multilevel Marketing or Network Marketing, is a system and strategy used to sell products and encourage direct sales distributors to expand it. They do this expansion by recruiting new distributors and train them to continue recruiting and grow sales. These recruits are called distributor’s downline and paid a certain percentage of their sales called commission.

With this program, one company can have hundreds and thousands of members from different parts of the world, but not all members can have the same income or takeaways since it depends on an individual’s effort. Anyone who wants to join in this kind of business should be cautious and investigate and research the legitimacy of the MLM because not all multi-level marketing programs are legal.

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Table of Contents

How MLM Works

Although the typical MLM program starts with recruitment where a distributor invites you in a meeting introducing their product and how the program works if you’re interested in making it a business, it can also start through products tested and experienced by an individual. 

Earning money in MLM takes place on the sales of the MLM’s products and through your recruits who also make by selling the products, in which you receive a percentage of their generated sales. When your recruits become distributors, too, and start recruiting more members for your team, you’ll receive a portion of the income they also generate – sales or recruitments.

The people who signed up for a particular Multi-level Marketing program and company became distributors and called downlines. Those who recruited the member and all who are above him in the recruitment chain are called uplines – they offer training for you to earn and recruit on your own.

Cons of MLM

Some MLM companies have experienced low returns of investment joining the program because, according to their experience, only a few people will earn. The rest of them lose money with frozen sales. What causes this is the MLM program’s built-in feature, which is the pay to play. Expenses are higher for the distributor because of the requirement to purchase an x amount of products and services to get the commission and bonus and move a level higher or in rank. Aside from the product requirements, bills for the next training, books, and other so-called tools needed to succeed and meet each rank’s requirements are an extra expense on the distributor’s part. 

These calls for an investigation before you invest because a legitimate MLM focuses on product sales than recruitments.

What is the Hype in MLM?

There are a list of good reasons why someone joins in the Multi-level Marketing program, such as easy money and incentives. They assure an eternal return of funds when a distributor works hard in recruiting more distributors and produces many sales. Eventually, your downlines’ recruit and sales will do the work for you.

Joining the MLM program is very inexpensive. Anyone who wants to start a business with a multi-level company goes for products already established sales and customers. That is way easier to venture on than to create your own business or franchise one.

The Multi-level Marketing program offers beautiful rewards like trips to your dream vacation destination, cash bonuses, cars, and a lot more.

MLM Success

Here are some companies that started and got bigger using the Multi-level Marketing program: 

  • Herbalife Ltd, a multi-level marketing corporation known for its developed dietary supplements, founded in February 1980. In 2019, the sales revenue of the company reached $4.88 billion. The distributor’s membership increased by 57 %, and most of them are Gen Z members; they added to the 8,900+ members from 2018. They also added cosmetic products and skincare items to the lists of products they offer.
  • Amway, a multi-level marketing company, was founded in 1959 for their home care, beauty, and health products. In 2019, the company’s sales revenue reached $8.4 billion and continued to invest at $500 million more this year, 2020. They also extended their offers with food and beverage products. As of 2019, too, Amway got bigger with its 16,000 members and counting.
  • Avon Products, Inc, a multi-level marketing company founded in 1886, is known for its beauty products and personal and household care products. In 2019, the company’s sales revenue reached $4.7 billion with its growing members of 23,000. 

The Direct Selling Association (DSA) of the United States chose the 25 – Largest Companies as of December 2020. It includes the two companies mentioned above – Amway and Herbalife Ltd. DSA also recognized the companies’ outstanding programs to boost their sales. Amway got the award 2020 CSR Vision for Tomorrow for their Project Light Speed. 

Legitimacy of MLM

One Multi-level Marketing Company’s legitimacy is always an issue and subject for investigation for the Federal Trade Commission (FTC). A legal MLM usually focuses on the product’s sales more than the number of recruitments a distributor does. 

So if you happen to join or plan to participate in an MLM company that focuses more on recruitments, you better start investigating before investing because you don’t want to be one of the pyramid schemes’ victims.

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