Multi-level marketing is a business model where
salespersons like sales consultants, distributors, and even franchise owners
and independent owners work in harmony to increase the sales of the product, on
commission basis. This is more like a franchise arrangement where the sales of
the product depend on the combined effort of each franchise and regional
manager. There are multiple levels of people receiving commission. Usually
there are seven or more levels. Multilevel marketing is basically a combination
of franchise and direct marketing.
This concept started in 1980s when most of the companies
started handling the stocking and distribution issues and started compensating
all the individuals involved. This increased the interest of each member in
promoting sales due to the chance of earning bonuses and since then the
Multilevel Marketing companies have taken the responsibility of taking orders,
shipping goods, and paying revenue. Things became easier with the transition to
Internet. Product promotion, advertising and sales were made online and hence,
the whole process began to be known as online MLM.
There are various MLM compensations plans. According to the
uni-level or stairway breakaway plans there are two types of distributors involved
managers and non-managers. According to the matrix plans, the width of each
level in a distributor’s group is regulated. In binary plans, the limit of each
level’s width has two legs. Commission was paid when both the legs reached a
specific target. In elevator scheme, the distributors pay splits after a
certain number of units have been paid.
