From Wikipedia, the free encyclopedia.
Multi-level marketing (MLM) (also called
network marketing (NM)) exhibits a business model which
exemplifies direct marketing.
Typically, independent business owners (IBOs) become
associated with a parent company in a contractor-like relationship.
IBOs receive remuneration for shopping within their own business, for selling products and for
expanding their network of people ("downline")
doing the same. An IBO receives a percentage of the profits generated by the
network of all IBOs introduced to the system by him or her, and also of the
profits generated by the people introduced by those IBOs, and so on. A points
system, where the points represent the volume of products sold through the IBO
network, tracks rewards.
Multi-level marketing has a recognised image problem because of difficulties
in making a clear distinction between legitimate network marketing and illegal
"pyramid schemes" or Ponzi
schemes. Nonetheless, many NM/MLM businesses operate legitimately in various
parts of the world. See List of
network marketing companies for more information.
Critics contend that some companies produce revenue primarily by attracting
new participants, as opposed to selling products. Amway (the world's leading company
in network marketing, with annual turnover
exceeding USD $1 billion) in particular often receives criticism for generating
considerable revenue from selling instructional and motivational materials to
its participants. The United
States Department of Justice indicted the company, but Amway secured an acquittal.
