What is a Multi-Level Marketing (MLM) Plan?

When you are taking a plunge into the MLM business, there are a few things that you must be familiar with. A multi-level marketing (MLM) plan is one among them. It is referred to as a plan where a person receives payments or compensations for products he/ she sells. The recruiters in turn, also receive compensation when the sub-recruits make sale.

Though an MLM plan is usually referred to as a pyramid scheme, it differs in some aspects. The presentation of the plan shows one person at the top, with increasing number of people at the lower levels, thus forming the shape of a pyramid.

There are some companies that use the MLM plan as a method to market through the ‘word of mouth’. Under this plan, an individual is recruited primarily, who further recruits more representatives under him. The person earns a compensation based on the individual sales. Besides that, the individual also earns a lower rate of commission for the products that are sold by those that are recruited by him.

The compensation model for an MLM plan may continue for several levels, but usually, it’s no more than five. With the sales achieved at each level, the higher ones receive a lower rate of compensation. If the people in the line are successful in recruiting more representatives under them then there will be more people contributing for the compensation. Thus, it’s a profitable plan for each and every individual who makes sales as well as recruits others under him.

MLM plan has been criticized with the fact that it may take long for a individual in the scheme to earn a livable income from it. However, this may differ from company to company, and the compensation packages offered. Sometimes, building a solid down line takes a long time, but once this is done, you can enjoy a substantial income from it!