Multi level marketing, sometimes known as "network marketing", "relationship marketing" or "matrix marketing", is a system of selling goods and services through self-employed distributors rather than using traditional methods. It is a business model which embodies the idea of direct marketing; a system where products and services are sold directly to the consumer without the use of intermediaries.
Recruits to the scheme are usually invited in by someone they know who is already a distributor. Much use is made of personal friendship/relationship, promotional videos, information packs and "inspirational" seminars.
The promotion focuses on the potential benefits of MLM: be your own boss; set your own hours; no special skills or experience necessary; work from home; benefit from residual income and receive support from more experienced members.
The premise is that the distributor will buy the MLM company's products at wholesale price and sell them on to friends, family and the public at retail price in return for a commission payment.
The potential money the distributor can make is greatly enhanced by the fact that they can also recruit new members and earn extra commission from the sales of all new members they recruit.
If the person they recruit also recruits a new member then further commission can also be earned from them and their recruits and so on. This is the "multi-level" aspect of the scheme. Members recruited below you are known as your "downline" and can go to many levels meaning that there is potential for a huge number of people below you who could all be generating commission for you.
Case studies are usually cited where MLM members have achieved great success and huge incomes, by simply following the company's formula for success. Photographs of Ferraris, Yachts, and Caribbean beach scenes are almost obligatory.
The government's required disclaimer (Statutory Instrument 1997 No. 30 - The Trading Schemes Regulations 1997):
"It is illegal for a promoter or a participant in a trading scheme to persuade anyone to make a payment by promising benefits from getting others to join a scheme. Do not be misled by claims that high earnings are easily achieved."
or more simply:
"Do not be misled by claims that high earnings are easily achieved"
is usually in the small print.
The great money making potential of an MLM scheme is based on an ideal model where a fully developed, active downline is achieved. In reality this is extremely unlikely to occur. (see:what is wrong with multi level marketing)