Multilevel marketing

Multi-level marketing (MLM), also known as network marketing or pyramid selling, is a marketing strategy for the sale of products or services where the revenue of the MLM company is derived from a non-salaried workforce selling the company's products/services, while the earnings of the participants are derived from a pyramid-shaped or binary compensation commission system.

Overview

MLM is a strategy used by some direct sales companies to encourage existing distributors to recruit new distributors who are paid a percentage of their recruits' sales. The recruits are the distributor's "downline." Distributors also make money through direct sales of products to customers. MLM has been a subject of criticism and lawsuits due to its structure and practices.

Characteristics

• Direct selling: MLM companies bypass traditional retail channels and sell products directly to consumers.
• Recruitment: Participants are encouraged to recruit new members to increase their income.
• Compensation plan: Earnings come from direct sales and a percentage of the sales of their recruits.
• Pyramid structure: The MLM's compensation structure may resemble a pyramid, where income levels are highest at the top and decrease at each level down.

Controversies

MLM businesses have been criticized for being pyramid schemes, exploiting members, and focusing more on recruitment than on selling actual products. Critics argue that only a small fraction of participants make significant profits, often at the expense of newcomers. Legal actions have been taken in various countries to regulate or ban MLM practices deemed harmful.

Regulations

The legal distinction between MLMs and traditional pyramid schemes has been characterized by many authorities, including the Federal Trade Commission (FTC) in the United States. Legal MLM models involve genuine sales of products or services to end-users.

MLM Companies in Medicine, Food, and Nutrition

Several MLM companies operate within the health, wellness, medicine, food, and nutrition sectors. These companies market dietary supplements, health products, and wellness solutions through a network of distributors. Examples include:

• Isagenix: Offers dietary supplements and personal care products.
• Herbalife Nutrition: Sells nutritional supplements and personal care products.
• Amway: Known for health, beauty, and home care products.
• Forever Living Products: Markets aloe vera-based drinks and bee-derived cosmetics, dietary supplements, and personal care products.
• Juice Plus: Sells dietary supplements containing concentrated fruit and vegetable juice extracts.

Criticisms Specific to Health and Nutrition MLMs

Health and nutrition MLMs often face scrutiny for making exaggerated claims about the efficacy of their products without sufficient scientific evidence. The emphasis on recruitment over product sales can also lead to unethical practices, such as distributors providing misleading health advice to sell products.

See Also

• Direct sales
• Pyramid scheme
• Ponzi scheme
• Consumer protection

External Links

• Federal Trade Commission: Business Guidance Concerning Multi-Level Marketing