What is MLM? Multi-level marketing (MLM) is any marketing plan where most of the income is obtained by getting other people to join the plan, rather than by selling any product.
Is Network Marketing the same as MLM?
Most people cannot differentiate between the two. MLM has had a poor press for years and most punters know it is not going to work in the long haul. Network market systems require all of their people to sell company products to a given value, as well as to recruit new people.
How can Multi Level Marketing work?
In 2007 a MLM operation was running in Ireland. Someone recruits you. You had to pay €1000 to the person above your recruiter in the chain. You then had to recruit at least ten more 10 people, each of whom paid the person who recruited you 1000 euro. Each of your ten or more recruits recruited 10 more people who paid you €1000 each. It is easier to follow the outline below.
LEVEL 1
It started off with 1 person (THE ORIGINATOR) with an idea to persuade people to send him €1000 each. Imagine if that first person recruited 100 others (LEVEL 1 PEOPLE), who did not have to pay anything. So far no money has changed hands, so finding a hundred people willing to go for the plan would be easy.
Total number in plan is 101
LEVEL 2
Each of those hundred recruits persuades ten people (LEVEL 2 PEOPLE) to join in, with the promise of riches to come. Each new recruit sends €1000 to the Originator. The Originator receives €100,000.
Total number in plan is 1,000 +101 ... 1101
LEVEL 3
Each Level 2 recruit persuades ten people each to send the Level 1 person who recruited him €1000. Each Level 2 Person receives €10,000
Total number in plan is 10,000 + 1,000 + 101 ...11,101
LEVEL 4
Each Level 3 recruit persuades ten people each to send the Level 2 person who recruited him €1000. Each Level 3 Person receives €10,000
Total number in plan is 100,000 + 10,000 + 1,000 + 101 ...111,101
LEVEL 5
Each Level 4 recruit persuades ten people each to send the Level 3 person who recruited him €1000. Each Level 4 Person receives €10,000
Total number in plan is 1,000,000 + 100,000 + 10,000 + 1,000 + 101 ...1,111,101
LEVEL 6
Each Level 5 recruit persuades ten people each to send the Level 4 person who recruited him €1000. Each Level 5 Person receives €10,000
Total number in plan is 10,000,000 + 1,000,000 + 100,000 + 10,000 + 1,000 + 101 ...11,111,101
At levels 4, 5 and 6 problems start to emerge. Ireland only has a population of about five million and that includes babes in arms!
The people at the first few levels might have managed to turn €1000 into €10,000. The originator got €100,000 for no outlay at all. The story of early recruits making money as though they were printing it spread far and fast. Everybody wanted part of the idea. These late entrants to the scheme just lost €1,000 each and found out the hard way why MLM is illegal in most countries.
