part i: the multiple levels of multi-level marketing

this post is the first post in a miniseries of three posts that will be posted over apr 26th-28th here on frank’s new blog. today’s post (part i: “the multiple levels of multi-level marketing”) serves as a basic breakdown of the multi-level marketing concept.

APR 26

the multiple levels of multi-level marketing

merriam-webster does not have a dictionary entry for multi-level marketing. a revealing truth, as it tells us that multi-level marketing 1. as a term does not garner the focus it deserves and 2. is a difficult concept to define. we will do our best over this miniseries trilogy to settle both of these issues. at the very least, we will resolve the former.

level one: also known as (aka)

multi-level marketing is known by many names. some might say this is a worrying sign, but I would point to something else known by many names, a grandmother. also known as grandma, mother, mom, daughter, [her name], [her nickname], mrs. [surname], miss. [maiden name], her, she, maybe sister (or sis), maybe even doctor, and many others. I think my point is clear: a grandmother is not reprehensible even whilst known by many names--let’s reserve judgement until we have looked at all the details. I digress. multi-level marketing is known by many names including: multilevel marketing, pyramid selling, network marketing, referral marketing. it is important to familiarize yourself with these terms and understand their origins before any further discussion of multi-level marketing.

multi-level marketing: the most common and recognizable nomenclature of the term, stemming from the structure and logistics attached to the practical operational structure that comes with this model of business.

multilevel marketing: alternate spelling notably lacking the hyphen. used interchangeably with its other hyphenated form (as detailed previously); features prominently across various web-based and physical mediums.

pyramid selling: similar to a mean, derogatory nickname a bully would give out. meant as a demeaning term connecting multi-level marketing to the infamous “pyramid scheme” (perhaps with good reason? more on that in the coming days)

network marketing: originates from the logistics connected to buying and selling present in multi-level marketing. the moving of products is based on the network one builds and interactions within said network; highlights interpersonal, webbing nature.

referral marketing: alternate take on network marketing, with a greater focus on single sellers and the dynamic association with their down line distributors.

level two: money matters

when you operate as a member of a business utilizing multi-level marketing, how do you get paid? out of fear of over-generalizing, I must note that each company has a different way of handling compensation. that being said, we can look at a few of the more common realities of compensation being implemented in multi-level marketing practices. therefore, compensation plans typically focus on two revenue streams: commissions on direct retail and commissions on down line retail. quite simply, direct retail commission is made from the sale of any product to the general public (anyone who is not in your down line) and down line retail commission is earned from any product sold by members of your down line. alternatively, while not a direct monetary payment like the previous two examples, performance-based incentives can also be implemented by multi-level marketing companies. these include exclusive conference opportunities in hot (attractive) vacation locales.

the amount one can earn as a member of a multi-level marketing company is entirely determined by the scale of retail commission a seller can bring about, and, as one can imagine, this is greatly influenced by the size and dynamism of the network that a member can create.

level three: logistics

here are two important terms to focus on: down line, up line. I may have used these too casually above and should outline what they entail. the down line, as you may have gathered from how it is used above, is everyone who sells products with you as an up line. the up line is everyone above you whose network you sell for as a down line member. kapeesh? the interplay between these directional forces, combined with the quantity of retail moved (the scale of sale, if you will) in the "general public" creates a vast network of movement and countermovement. without a strong logistical approach, the threads on this web are at risk of underperforming; that is to say, collapse. it is a difficult balance to say the least, which is why many struggle in this field of operations (and within this business model in general).

level four (and more): a quick look at regulations

as pointed out by the federal trade commission, it is important to recognize this fact:

not all multilevel marketing plans are legitimate. if the money you make is based on your sales to the public, it may be a legitimate multilevel marketing plan. if the money you make is based on the number of people you recruit and your sales to them, it’s probably not. it could be a pyramid scheme. pyramid schemes are illegal, and the vast majority of participants lose money...one sign of a pyramid scheme is if distributors sell more product to other distributors than to the public — or if they make more money from recruiting than they do from selling.

you can read more on what the federal trade commission has to say about multi-level marketing by clicking here.

having said that, there are also many multi-level marketing plans that are legitimate. it's just about knowing where, and how, to approach it. carefully, might I recommend.

for further discussion on the topic of multi-level marketing, come back tomorrow for part ii: my neighbor the...entrepreneur?

-frank (sched.)