Multi-level marketing (MLM) is a marketing
strategy in which the sales force is
compensated not only for sales they personally
generate, but also for the sales of others
they recruit, creating a downline of
distributors and a hierarchy of multiple
levels of compensation. Other terms for MLM
include network marketing,and referral
marketing.
Most commonly, the salespeople are expected
to sell products directly to consumers by
means of relationship referrals and word of
mouth marketing. Some people equate MLM with
direct selling, although MLM is only one
type of direct selling.
The Direct Selling Association, an American
industry body, reported that in 2010
twenty-five percent of members used MLM,
growing to 77.3 percent in early 2011.
Companies
such as Avon, Electrolux, Tupperware, and
Kirby all originally used single level
marketing to sell their goods and later
introduced multi-level compensation plans.
By early 2011, 94.2% of members were using
MLM, accounting for 99.6% of sellers,
and 97.1% of sales. The DSA has approximately
200 members while it is estimated there are
over 1000 firms using multi-level marketing
in the US alone.
