Multilevel marketing is a marketing strategy that certain direct sales firms use to persuade existing distributing businesses to sell their products, where the distributors are paid a portion of the sales. The persuaded companies will be the ‘down line’ of that distributor. Besides, distributors earn money by means of direct sales. Read on to know what MLM is and how legitimate it is.
Multilevel marketing, also referred to as MLM, is a controversial yet legit business strategy. An issue with MLM is that pyramid schemes use the funds from fresh recruits in order to pay top-level members rather than people who do the work. Such schemes involve exploiting individuals by acting to be involved in legitimate multiple marketing. It is possible to spot these schemes by the greater attention they put to recruitment as compared to product sales.
How Legitimate Is Multilevel Marketing
There are numerous multi level marketing companies out there, but how would one tell whether or not they are legitimate? A problem in finding out an MLM company’s legitimacy is, knowing whether or not the latter sells their products mainly to customers or their members. The latter parties have to recruit other members to purchase their goods. If they sell to the former, then that company may be a legitimate network marketer. Otherwise, they could just be a pyramid scheme that is not legal.
The FTC (Federal Trade Commission) had been looking into network marketing companies for many years, and it has discovered many having practices that make it tricky to consider as legitimate. As per the World Federation of Direct Selling Associates (WFDSA), there were no less than 116 million representatives among the organization’s members worldwide in 2017. Only some of these independent representatives earn significant incomes from the efforts they put in. This represents the features of an illegal scheme.
In general, you can identify such a scheme by its bigger focus on the recruitment process than on sales.
Although MLM schemes can have numerous members around the world, relatively few make meaningful incomes out of their efforts. These points to the likely involvement of a pyramid scheme in MLM. There are legal several network marketing practices, but the FTC’s findings of many that have questionable legitimate affairs is a cause of concern for the industry. An example of such an affair is running a pyramid scheme.