What is Network Marketing/MLM Marketing?

Marketing is defined as the process of researching, promoting, selling and distributing a product or service. It also includes advertizing, publicity, promotion, pricing, sales and distribution of the product or service. Network Marketing, as the name indicates, is a business model based on a network(s) of independent, autonomous and nonsalaried distributors or salespeople who sell the product or service to customers on behalf of a big firm or company. There are a number of plans or remuneration systems and the firm or company awards compensation or commission accordingly.

Multi Level Marketing takes this concept further by having a big chain or pyramidal structure of distributors who not only sell the product or service to customers but also recruit new distributors down the line to carry on the task. In many cases, distributors build their own SOHO type firms to train recruits and motivate them to build up a customer base and network of their own. Therefore, commissions earned here are on the basis of not just the distributor’s own personal efforts but also the sales of the people recruited by him/her, which is to say that a whole number of people along the line or structure benefit from one sale.

In its early days this type of marketing was looked down upon and considered illegal. A few scams, notably the Ponzi scheme of the ‘20s, too added to its notoriety. Even now, though MLM is widely accepted as a legitimate business activity, there are certain restrictions against it in the US and the EU to prevent frauds and scams and keep businesses within an ethical framework. One of the important restrictions in the US is against pyramiding, i.e. earning commissions by recruiting new distributors, so it is important to ensure that commissions are given only on the sale of the company’s product or service.

A majority of the traditional big businesses and firms in a wide range of sectors-communications services, financial programs (e.g. insurance), weight loss programs, home appliances, kitchen products, etc-now use MLM to enlarge their customer base and so enhance sales. The very fact that around 13 million US citizens (as attested by the Direct Selling Association) are employed within this model bears ample testimony to the popularity of MLM. Additionally, since MLM is essentially skill based, it is ideal for enthusiastic people who have good marketing skills but are currently unemployed or want to enhance their incomes.