MULTI LEVEL MARKET Meaning and
Definition
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A multi-level market, also known as a multi-level marketing (MLM) or network marketing, is a business model that features a hierarchical network of individuals who are involved in the selling and distribution of products or services. In this structure, participants are not only responsible for selling the company's offerings but also for recruiting new members into the network, forming a multi-level marketing structure.
At its core, a multi-level market operates through a network of independent distributors who earn income not only from their own sales but also from the sales made by the members they recruit. This structure creates multiple levels or tiers within the distribution network, with the distributors at the top benefiting from the efforts and sales of those beneath them. Commissions and bonuses are typically paid out at various levels based on sales volume and performance.
The distinguishing characteristic of a multi-level market is that it allows participants to not only earn income from their individual sales but also from the sales made by their downline, which refers to the individuals they have recruited and the subsequent levels of recruits below them. This model relies heavily on recruiting new members and building a team, expanding the sales force and quickly growing the network.
While multi-level markets can offer the potential for significant earnings and flexible work arrangements, they have also been criticized for resembling pyramid schemes. To avoid being classified as an illegal pyramid scheme, multi-level markets must generate the majority of their revenue from legitimate product sales to end consumers, rather than primarily relying on recruitment fees.
