| Date: |
Monday, January 1, 2001
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| Question/Topic: |
Multilevel marketing
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| Answer/Pointer: |
Multilevel marketing is a method of retailing products directly to consumers--without intermediary retail stores--through a network of distributor-salespeople set up in pyramid fashion. Each distributor is encouraged to recruit and train additional distributors, so that eventually a particular distributor may be responsible for a number of subsidiary salespeople and will earn commissions on their sales as well as on the sales he or she makes. Such successful companies as Mary Kay Cosmetics and Amway, which primarily distributes household items, have developed large sales forces based on this multilevel pattern: increasingly, firms that sell directly to consumers are instituting multilevel operations.
Multilevel marketing companies must be distinguished, however, from pyramid schemes or businesses, whose main object is to recruit new members rather than sell products. In a typical pyramid scheme, new members must pay a large fee to join or to purchase a stock of the product to be sold. Very often the product proves unsalable, but the pyramid's promoters will refuse to repurchase it--unlike the multilevel company, which will buy back unsold merchandise (although very often at a discount from the oroginal price). Members in pyramid schemes may receive commissions for recruiting more people, but only those at the top of the pyramid ultimately profit because the supply of potential participants is limited.
Source: Marketing, by Eric Berkowitz et al. 2d ed., 1989.
Multilevel Marketing International Association (MLMIA)
119 Stanford Ct.
Irvine, CA, 92715
Phone: (949) 854-0484
Fax: (949) 854-7687
www.mlmia.com
info@mlmia.com
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| Librarian: |
LCLCPL
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| Comments: |
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