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How Does Multi-Level Marketing Work?


Multi-level marketing (MLM) is a method for organizing and compensating sales professionals working in a direct-sales business who are involved, in some way, in marketing their organizations’ products and services. Under this plan, salespeople can be compensated for the goods and services they sell to consumers, or for the sales of others that they have introduced to MLM.

The business world benefits from MLM in the following ways:

  • It provides financial opportunities for those who are not part of the employment market.
  • It enables people to develop essential business and management techniques, supplement their income, and work on a flexible schedule.
  • It gives companies a venue for marketing their products and services without having to pay for costly advertising in the media or fight for shelf space at retail locations.

The characteristics of a solid MLM plan include the following:

  • The startup cost is usually quite low, and the only required purchases include sales aids, training material, and, in some cases, a demonstration kit.
  • Overstocking of inventory is not discouraged, and those who no longer want to participate can return unused salable products to the distributer and receive a refund.
  • The main emphasis is placed on selling the companies’ products and services, which meet high standards in their production. They also stand behind what the sell, and dissatisfied customers can return items for a suitable refund or credit, or cancel the service.
  • Claims made to participants regarding potential income are based entirely on facts that can be verified.

Before becoming a distributor, the Federal Trade Commission (FTS) recommends verifying the research behind product claims because you will be legally responsible for every statement you make about the business and what it has to offer.



World Federation of Direct Selling Organizations
Multi-level marketing

Washington State Department of Financial Institutions.
Questions to Ask Yourself when Considering Multi-level Marketing

FTC Consumer Alert: Federal Trade
Lotions And Potions: The Bottom Line About Multi-Level Marketing Plans

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