Science Fair Project 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.
Some of the companies known to use multi-level marketing:
- 4Life  
- Amway or Quixtar
- Equinox (MLM)
- Excel Communications
- Financial Freedom Society, Inc formerly Retire Quickly
- Kleeneze 
- Mary Kay
- The Pampered Chef
- Pre-Paid Legal
- Tahitian Noni International 
- Vector Marketing (sells Cutco knives; known for its aggressive targeting of college students with promises of "summer work")
- World Financial Group
- Strong Future International
MLM, Party Plan, Direct Sales & Network Marketing Companies
- Direct Selling Association (US), DSA Member company list.
- Direct Sellers Association (CANADA), DSA Member company list.
- Direct Selling Association (UK).
- List of US companies with summaries, product categories, additional related resources.
- List of International companies, product categories, additional related resources.
Over the course of decades, companies have devised various MLM compensation plans:
- Breakaway plan . This plan features two types of distributors: managers and non-managers and three types of pay:
- Baseshop overrides are overrides of managers from their subordinate non-managers. This is no different from any sales organisation.
- Generational overrides are overrides of managers from managers who were previously their subordinate. Most plans compensate at least three generations of such managers.
- Executive bonuses. Additional commission to managers who exceed a sales quota. For example, 2% of the total company sales revenue goes to a bonus pool which is shared monthly pro-rata to managers who exceed $10,000 in that month.
- Matrix plan . This plan limits the width of each level in a distributor's group, hereby forcing strong distributors to pile their recruits over people who did not sponsor them.
- Binary plan . This plan limits the width of each level to two legs. Commissions are based on "cycles" where a distributor is paid a fixed amount whenever both legs achieve a certain number of sales units each.
- One, two, four, eight pyramid structure . This plan features a "game board" where each participating distributor would pay in one or more product units, and that the "one" would receive consideration when the "eight" had paid in. After this the structure would split, the "two" advance to the "one" position and an additional "eight" would be required for each of the structures before the "one" would be paid and the structures again split.
- Network Business School Free Ezine, Real training for Success in MLM and Internet Marketing Systems.Amy Amsden-President International Trainer, Author, and Success Coach
- MLM Watch — a skeptical guide to multilevel marketing, by Stephen Barrett
- What's Wrong with Multi-Level Marketing by Dean VanDruff
- Discussions and articles about multi-level marketing
- MLM Survivors an online community of former distributors who share an overall negative experience in MLM
- MLM Watchdog An MLM Watchdog site with a pro-MLM approach. Exposes corruption in the industry
- Pyramid Scheme Alert An MLM Watchdog site with a less favorable overall view on MLM. Claims that many seemingly legit MLMs operate outside of their legal boundaries
- Multilevel Mischief An article making the claim that few can actually succeed in MLM.
- Anti-MLM Zealots: Do They Have a Point? An article claiming that those who oppose MLM tend to do so out of ignorance
- Pros and Cons of MLM article Lists why detractors and supporters of MLM feel as they do
- Pre-Paid Legal's product and business opportunity A compilation of 3rd party information on Pre-Paid Legal. Typical of the type of negative and positive information available on MLMs.
- Let's Get the Word Out Photo Group - View or post Amway Quixtar comments and photos at Flickr
- Merchants of Deception (MOD) - A heralding true Amway Quixtar story (free PDF eBook by Eric Scheibeler)
- Let's Get the Word Out! - An innovative grassroots movement to help Amway Quixtar and multi-level marketing victims
- Technorati 'MLM' tag site - gathers blog posts, links and images related to MLM multi-level marketing
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