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Direct selling, network marketing, and multi-level marketing

Network marketing and Multi-level marketing have been descrembed by author Dominique Xardel as being synonymous, and as methods of direct selling.According to Xardel, direct selling and network marketing refer to the distribution system, while the term "multi-level marketing" describes the compensation plan.Other terms that are sometimes used to describe multi-level marketing include "word-of-mouth marketing", "interactive distribution", and "relationship marketing". Critics have argued that the use of different terms and "buzzwords" is an effort to distinguish multi-level marketing from illegal Ponzi schemes, chain letters, and consumer fraud scams.Some sources classify multi-level marketing as a form of direct selling rather than being direct selling. The Direct Selling Association, a lobbying group for the multi-level marketing industry, reported that in 1990 twenty-five percent of members used MLM, growing to 77.3 percent in 1999. Companies such as Avon, Electrolux, Tupperware, and Kirby all originally used single level marketing to sell their goods and later introduced multi-level compensation plans.By 2009, 94.2% of members were using MLM, accounting for 99.6% of sellers, and 97.1% of sales. The DSA has approximately 200 members while it is estimated there are over 1,000 firms using multi-level marketing in the United States alone

History

The origin of multi-level marketing is often disputed; but multi-level marketing style businesses existed in the 1920s 1930s with Nutrilite or California Perfume Company renamed as �Avon Products� 1940s with the California Vitamin Company, 1960s, and even as late as the 1970s

Setup

Independent non-salaried participants, referred to as distributors (or associates, independent business owners, dealers, franchise owners, independent agents, etc.), are authorized to distribute the company's products or services. They are awarded their own immediate retail profit from customers plus commission from the company, not downlines, through a multi-level marketing compensation plan, which is based upon the volume of products sold through their own sales efforts as well as that of their downline organization. Independent distributors develop their organizations by either building an active consumer network, who buy direct from the company, or by recruiting a downline of independent distributors who also build a consumer network base, thereby expanding the overall organization. Additionally, distributors can also earn a profit by retailing products they purchased from the company at wholesale price.

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