Multi-level marketing(MLM) also referred to as Network Marketing is a business distribution model that allows a parent
multi-level marketing company to market their products directly to consumers by means of relationship
referral and direct selling.
Independent unsalaried sales people of multi-level marketing
referred to as distributors (associates, independent business owners, franchise
owners, sales consultants, consultants, independent agents, etc.), represent
the parent company and are rewarded a commission relative to the volume of product sold through each of
their independent businesses (organisations).
Independent distributors develop their organisation by either
building an active customer base, who buy direct from the parent company and / or by recruiting a
downline of independent distributors who also build a customer base, expanding the overall
organisation.
Additionally, distributors can also
earn a profit by retailing products which they purchased from the parent company at
wholesale price.
Distributors earn a commission based on the sales efforts of
their organisation, which includes their independent sale efforts as well as the leveraged
sales efforts of their downline.
This arrangement is similar to franchise arrangements where royalties are paid from the sales of individual
franchise operations to the franchisor as well as to an area or region
manager.
Commissions are paid to multi-level marketing distributors
according to the company’s compensation plan.
There can be multiple levels of people receiving royalties from one
person's sales.
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