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Multi Level Marketing and Network Marketing explained - vital information for the potential new MLM recruit.

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MLM - a brief definition

In General...

Multi-Level Marketing is not simply a single marketing structure. However, most MLM's have common characteristics. The simplest way to identify an MLM is to check out whether or not a distributor may recruit unlimited people into a downline structure. Unlimited people means unlimited competition. Unlimited competition means unlimited failure.

The First Hallmark...

The classic Multi-Level Marketing scheme may firstly be defined by its reliance on a geometric progression recruiting model for the development of each distributor's sales network. (A geometric progression is a variable mathematical concept. In MLM, its application is limited only by the mathematical capability and the imagination of the MLM scheme's creators. Geometric progressions are also the basis for illegal Chain Letters and pyramid schemes).

The Second Hallmark...

Secondly, MLM marketing schemes will reward the distributor and his upline members financially for the distributor's successful introduction of new distributors into his own group. (The matrix of recruited distributors formed under an MLM distributor from his recruiting is called that distributor's downline. Those in direct linear connection above a given distributor are called that distributor's upline).

The Third Hallmark...

Thirdly, distributors are most often required to purchase and personally use a minimum of their MLM's consumable products every month in order to qualify for recruiting commissions and over-rides. (This requirement ensures an upline income from every new distributor).

The reward or remuneration scheme for recruiting new distributors is integrated with the geometric growth recruiting model to produce an individual marketing scheme's major distributor income characteristics.

The Means of Reward...

The potential for major individual reward is tied largely to the recruiting performance of the individual and that individual's downline. Recruiting is therefore the heart of an MLM distributor's business. This is often called creating leverage or leveraging, and this represents the basis for the promise of great wealth from MLM.

The Retail Aspect...

Most often, a further, and in many cases almost financially incidental, allowance is made to reward people for retailing products to others. This is a simple percentage profit on each product sold. (There is a legal requirement for MLM distributors to retail. Some MLM's may sell their products or services via a "loyalty program". The MLM aspect of their business still requires people to find others to duplicate what they are doing in a geometric progression. There are many variations to MLM marketing structures).

A major fact of MLM is that people might get rich from recruiting, but, at best, can barely make a living from retailing.

The Complex Illusion...

Any MLM is a complex business model that seems to defy the average person's ability to properly envisage and evaluate. Its structure is based on infinite distributor group growth, which in logic is not possible to sustain. As we are dealing with a finite market for finite products, with a finite number of people, finite geographic areas and finite advertising resources, whilst encouraging massive recruiting, it is inevitable that competition within an MLM must eventually over-run the majority of distributors and cause them to give up, or "fail". In other words, a true MLM is self-limiting in its growth by its own design.


To continue the logic, because of the failure rate, any MLM will inevitably reach a point in time where the size of its distributor base is determined by the availablity of potential "new" distributors.

It is interesting that more people turn 21 years of age in America each year than the number of American people who are currently in all MLM's. So there is room yet for MLM growth.

As MLM presentations dwell on the "up" side, and never reveal the "down" side (the failure rate of distributors and the cost to fail), to prospective recruits, people will only learn from their own experiences. As a result, over a period of nearly 50 years, MLM boasts untold millions of business failures world wide.

One sure and certain fact from all of this is that those who do ultimately succeed and make it to the top will predominantly earn their income from those who try and fail, right down through their downline matrix.

Gerald P Nehra, an MLM lawyer, also helps us define a legal MLM here.


Dr Jon M Taylor of the Consumer Awareness Institute in the USA has thoroughly researched the operating characteristics of MLM companies and provides an illuminating insight into the means by which the "rich get richer".  

For the more serious minded individual bent on research in depth, please go to Dr Taylor’s website for more information on this and related subjects.

Geometric Recruiting | Chain Letters | Market Saturation | Advertising | World Figures

Copyright © 2003- Peter A Blood