Multiple level marketing or MLM or network marketing is a marketing arrangement where the sales force is compensated both for the sales they make directly to customers and for the sales made by other sales people whom they sponsor. Each individual sales person can build a sales organization referred to as a “down line”. A successful sales person will build a hierarchy of multiple levels that forms a pyramid shape. A part of the sales revenue will paid to each level of the organization. There are a variety of compensation structures among multiple level marketing companies.

The company’s products are not for sale in retail stores. Instead the products are marketed directly to consumers and potential business partners by means of referrals and word of mouth. There are a wide variety of products sold by multi-level companies. Everything from household cleaning products, cell phone service, and gold coins are sold by multi-level marketing companies. There are a variety of structures and compensation methods available. The most common plans are uni-level, stair step breakaway, matrix, binary plans. There are also hybrid plans that takes elements of many of these structures.

Network marketing has a proven track record as an effective marketing model. There are many success tales about individuals making fortunes build network marketing businesses. There are studies made by prominent professors at some of the best business schools have shown that network marketing structures are very effective. There have been some myths about multi-level marketing that claim that it is an illegal pyramid schemes. Nothing can be further than the truth. Negative attitudes like this should be ignored. Network marketing is a perfectly legal, ethical and legitimate business that have helped numerous people achieve financial independence.

The simplest structure is the uni-level plot. You can sponsor one group called a “front line.” Every distributor you recruit is part of your front line. There is no limit to size of your front line. Multiple levels of a sales organization are formed as your front line associates recruit their front line and so on down the hierarchy. Normally, commissions are paid to a certain depth, usually between five and seven levels deep.

Another structure encourages large volume of sales is known as the stair step breakaway plot. With this structure, once an associate earns a predefined level of revenue, they will break away from their sponsor’s group to start their own group. For example, let us assume a breakaway level of income is $50,0000. A sponsors B and C. B attains $50,0000 in sales and “breaks away” from A’s group. A will no longer share the revenue with B’s sales although he probably will still receive a smaller override commission.

A plot that is growing in popularity and is very similar to the stair step breakaway is known as the forced matrix plot. Under a forced matrix plot a sponsor may only have no more than a defined maximum of associates in their front line. Once you have reach the maximum number of associates and new associates you recruit are placed under the next available position under one of your front line associates. The purpose of this structure is to encourage cooperation among associates, team work and organization building.

A binary plot is a forced matrix plot where you are allowed only two front-line associates. If you add more than two associates the excess is placed at levels below your front line. This event is called “spillover” and it is an attractive feature of the binary plot because you need to only sponsor two associates to qualify for the compensation plot. A limitation to the binary plot is that it requires your two down lines to be balanced in the number of sales.

The purpose of any business is to maximize its profits through the sales of it goods and services. A network marketing business is no different. It strives to expand its customer base and to maximized profits. A network marketing business also has a purpose to make new entrepreneurs. This is a tremendous opportunity for those who have the ambition, ability and energy to achieve.

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