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"Multi-level marketing (MLM), also known as Network Marketing, is a marketing strategy
that compensates promoters of direct selling companies not only for product sales they
personally generate, but also for the sales of others they introduced to the company.
The products and company are usually marketed directly to consumers and potential
business partners by means of relationship referrals and word of mouth marketing..
Independent, unsalaried salespeople of multi-level marketing, referred to as distributors
(or associates, independent business owners, dealers, franchise owners, sales consultants,
consultants, independent agents, etc.), represent the parent company and are awarded a
commission based upon the volume of product sold through each of their independent businesses
Independent distributors develop their organizations by either building an active customer
base, who buy direct from the parent company, or by recruiting a downline of independent
distributors who also build a customer base, thereby expanding the overall organization.
Additionally, distributors can also earn a profit by retailing products they purchased from
the parent company at wholesale price.
Distributors earn a commission based on the sales efforts of their organization, which
includes their independent sale efforts as well as the leveraged sales efforts of their downline.
This arrangement is similar to franchise arrangements where royalties are paid from the sales of
individual franchise operations to the franchisor as well as to an area or region manager.
Commissions are paid to multi-level marketing distributors according to the company’s compensation plan.
There can be multiple levels of people receiving royalties from one person's sales.
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May 18th. 2009
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