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Maslow's Hierarchy of Needs Next:   Maslow's Hierarchy of Needs What is a Ponzi Scheme?  



Multi-Level-Marketing also known as MLM or Network Marketing is not an illegal pyramid scheme, yet features a pyramid like recruitment structure.


This is a system that is unlike conventional marketing, whereby products are sold in a shop; they are marketed and sold by agents within a MLM network. The product does have value and generates profits. These profits are then distributed not only to the selling agent, but also, on a sliding scale, proportionally, to the up-line that introduced the representative making the sale.

The product is offered exclusively to members within the network and is not available elsewhere. This in effect means that the agent is looking to sell the product and recruit new sellers. The products are often nutritional supplements, cosmetic products or consumables like cleaning materials. To be successful sales must be made and new agents recruited to qualify for the commission.

This thereby takes the form of a “legal” pyramid design, as the customers and new people introduced are often family, friends and complete strangers. As in the “illegal” pyramid concept, the receptive customer base can soon be saturated and many fail to make a success of the enterprise. At this level participants purchase their own product, receiving a due discount, but the earning potential is limited to the introduction of new sales people.

This system is also commonly compared to Affiliate Marketing, yet despite the similarities between these systems Affiliate Marketing features a significantly diffrent payment and selling structure to Multi Level Marketing.

The failing of this system is amongst others:

• A similar product is commonly available cheaper elsewhere
• The driving force is to recruit new members to be successful
• The receptive market will eventually be saturated
• Recruits are not in the position to reach the target market
• Economic pressures such as a reduction in spending power
• Souring relationships with family and friends






Maslow's Hierarchy of Needs Next:   Maslow's Hierarchy of Needs What is a Ponzi Scheme?  

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