MLM stands for Multi Level Marketing and is also known as Network Marketing. A company is considered MLM where the products or services are distributed by independent contractors also known as distributors. These distributors are compensated based on their own sales as well as the sales of other distributors they have recruited and trained.
The terms "multi level" and "network" come from this concept of recruiting and training a huge group of distributors (also known as a downline) as your own sales force within this company. The idea, of course, is to build a huge downline that will a mass a large customer base. Obviously, the person who has the most customers in his/her network is compensated the best. Compensation plans very from company to company but if you build your downline the right way you can reap a huge reward. The problem in network marketing arises when people focus solely on recruiting recruiters and training them to recruit. Neglecting to acquire customers and to train your downline to do the same results in no compensation. Legitimate MLM companies only payout when customers are acquired not when a downline distributor is acquired.
A lot of the negativity towards network marketing arises because of lack of understanding of this one issue. Old and new recruits alike should treat their mlm venture just like a business and focus and both building a downline (sales force) and training them to acquire customers to build a huge customer base. Network marketers should seek out the proper mlm training to best set themselves up for success!
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