Multi Level Marketing (MLM)

Multi level marketing is a sales model in which independent reps sell products directly to end customers and also recruit new reps. Those new reps then sit in a multi tier hierarchy that channels commissions to higher levels. It is also called network marketing or structural sales and is widespread in industries such as cosmetics and nutritional supplements.

How the system is built

Classic reps earn money in two ways: through direct sales to end customers and through commission on the sales of the reps they recruited. Depending on the provider there are many levels, ranks and bonuses. These structures are legal where pay is genuinely tied to product sales and not to plain recruitment.

Where the line to a pyramid scheme runs

A pyramid scheme exists when compensation is largely based on recruiting rather than real product sales. Such schemes are illegal in many countries. Reputable MLM providers clearly document product sales and disclose their compensation plans. Anyone considering joining should review realistic income studies and legal assessments.

In everyday marketing

In day to day marketing MLM should not be confused with classic online marketing. Reach building in direct marketing through email, list marketing or sweepstakes follows different rules and has strict legal requirements such as consent, ad disclosure and the right to revoke. Mixing the two creates legal and reputational risk.