Multi-level marketing (MLM) is a marketing strategy that some direct sales companies use in encouraging their existing distributors to make new recruits (distributors) by paying these existing distributors a percentage based on their recruits’ sales. This means that marketing and sales representatives not only receive some compensation for their own sales but also receive a certain percentage from the sales generated by another salesperson (commonly known as downline).
IMPORTANT – Multi-level marketers take the pains in distinguishing their businesses (which are totally legit) from the pyramid schemes (non-legit ones). In pyramid schemes, recruitment matters. People pay in order to participate and get rewarded after searching for others who are willing to pay and join. At a certain point, the supply of the much-needed new recruits will dry up, forcing the pyramid to collapse. Despite this vice, legitimate multi-level marketers stick to firms that target the sale of real products for income and not charging fees to new recruits.