Multi Level Marketing

Multi Level Marketing (MLM) is the dirty little secret of Internet Marketing. It is advertising gone bad and gone off to meet the rough kids behind the bike sheds for a smoke. It would be fair to say, though, that a good MLM is an accomplished selling strategy that provides definite returns. It is a fairly simple model that has existed for years: a parent multi-level marketing company will sell market their products/services directly to consumers by means of relationship referral and direct selling.

It is also fair to say that MLM is not dissimilar to a pyramid scheme in the same way stealing is not dissimilar to theft.

In MLM schemes independent nonsalaried sales representatives of the parent company are rewarded a commission relative to the volume of product sold through each of their independent businesses or organisations. These sales reps will ideally develop their organization by building an active customer base who will buy direct from the parent company. This builds direct relationships and is a positive side to MLM. The other option is for the Sales reps to create a waterfall of independent subsidiaries who also build a customer base, expanding the overall organisation, which, in turn, can employ independent subsidiaries who also build a customer base, expanding the overall organisation, which, in turn, can employ independent subsidiaries… In the perfect MLM/pyramid, everybody will be selling everybody else the same product and getting rich because of it. This is by far the easiest way of getting an economy like Albania’s.

These quasi franchises will return profits both to the initial product/service supplier but also to every rung on the ladder back to the original company. In this situations there can be enormous loss of profit towards the bottom of the chain; it rolls down hill is the adage here. In these circumstances, it is not unknown for sales tactics to push the boundaries of the law. In fact, the boundaries are often ripped up into little pieces and posted back to the authorities such is the disregard for law or morality.

The fact that these MLMs are in existence is because it is very hard to distinguish between the legitimate and the illegitimate. Defenders of the MLM format will say that it is illegal pyramid selling schemes portraying themselves as MLMs that are the problem, and to a certain extent they are right. In the most legitimate MLM companies, commissions are earned only on sales of the company’s products or services. If participants are paid primarily from money received from new recruits, or if they are required to buy more products than they are likely to sell, then the company is a pyramid. But, what is the difference between an ambitious seller who thinks he can sell £30,000 worth of double-glazing (say) and a useless sales rep who buys £30,000 of prospective sales with no hope of hitting the target? Herein lies the question – or more specifically a big fat payday for the lawyers.

As a basic rule of thumb, any MLM that offers more money for recruiting than for actually selling the product will be of dubious origins. There is also an association with near fanatical levels of training and corporate banter. Viewers of BBC’s Rogue trader will be familiar with the training tactics designed to fleece unsuspecting elderly people out of thousands of pounds. Indeed many critics have compared these training and sales regimes as akin to cults – many MLM programs feature intense motivational programs, which can be hard to distinguish from cult propaganda.

By and large, if someone comes round to your house and says that it will collapse unless you have your walls covered in “Flake-No-More” paint which he just happens to sell at £10000 per treatment you have encountered a pyramid MLM. In which case you phone up the BBC or just kneecap the bugger.