Multi-Level Marketing.
                     MULTI-LEVEL MARKETING
What is Multilevel Marketing (MLM)?
• Multilevel marketing (MLM) is a strategy that sells products and services through a 
non-salaried workforce in a pyramid-shaped commission system. The MLM strategy is 
also known as network marketing or referral marketing.
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How Multilevel Marketing Works?
• There are multiple layers of salesforce in multilevel marketing. The salesforce is known 
as distributors, who are independent non-salaried participants. 
• There are two sources of income for a distributor. One is the commission of selling 
products to customers directly. The other one is through recruiting new distributors.
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Pros of Multilevel Marketing
• The multilevel marketing strategy is beneficial to both the companies and the 
distributors. A company can gain access to a large customer base in a wide 
geographical range through multilevel marketing.
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Save sales expenses
• Since the distributors are independent, the company does not need to pay any fixed 
salaries, but only commissions when sales are made, which allows it to save sales 
expenses.
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Make extra income
• To distributors, multilevel marketing allows them to make extra income with sufficient 
flexibility. They can choose to work full-time or part-time to best adapt their schedules.
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Cons of Multilevel Marketing
• The distributors in the lower tiers may find themselves in a disadvantaged position. 
They usually work harder but make much lower incomes than the ones in the upper 
tiers, since the upper-tier distributors share the commission on their sales.
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Lack of sales training or support
• The high degree of flexibility and autonomy also comes with a drawback. Distributors 
only receive limited support from the company. 
• The lack of sales training or support from expertise may make their sales efforts very 
inefficient.
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Lacks control over its salesforce
• A multilevel marketing organization lacks control over its salesforce. It may experience 
damage to its reputation if some of its distributors are acting irresponsibly or not 
keeping trustworthy to customers.
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Pyramid schemes
• Another concern of multilevel marketing is pyramid schemes. Pyramid schemes are 
fraudulent and can cause huge economic losses to participants.
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Multilevel Marketing vs. Pyramid Scheme
• A pyramid scheme looks very similar to multilevel marketing. It also expands the 
business by recruiting several layers of members, which form a pyramid system. 
• However, pyramid schemes are illegal scams, while multilevel marketing is legitimate.
Source: corporatefinanceinstitute.com