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Marketing Definitions: What is Multi-Level Marketing?

Multi-Leveling Marketing is One Type of Network Marketing Structure

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Definition: Multi-level marketing (MLM) is a type of network marketing in which a business is built by creating a tiered network of independent distributors to promote and sell a company's products or services.

Independent distributors are micro-marketers who recruit, train, and manage other marketers. These marketers in turn, must also find their own micro-marketers in order to make money.

To be classified as a MLM system, at least two sales levels (also referred to as "tiers") must exist. For example, if you start an MLM business, you are at the top - level one. If you recruit someone they become the second level. Each time they make a sale they make money and you get a portion of their sales.

Distributors at the top level make the most money; those at the bottom level make the least.

MLM systems are regulated by federal and state laws which are often violated by a growing number of MLM companies.

Also Known As: MLM, magnetic marketing, or magnetic sponsoring. Multi-level marketing is often mistakenly used interchangeably with "network marketing." MLM is only one type of networking marketing; not all networking marketing is multi-level marketing.

Alternate Spellings: Multilevel Marketing, MLM

Example: Jordan joined the YourWay marketing network to sell their vitamin products and build a small business as an independent distributor. To make money, she recruited other entrepreneurs to sell products under her. Through multi-level networking, Jordan was a paid a bonus for each new member she recruited and a small percentage of every sale her recruits made.

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