Multi-level marketing (MLM) or network marketing programs are a method of selling goods or services through distributors. These programs typically promise that if you sign up as a distributor, you'll receive commissions for your sales and those of people you recruit to become distributors. These recruits are referred to as your "downline." Some multi-level marketing programs are legitimate. However, others are illegal pyramid schemes. In pyramids, earned commissions are based on number of distributors recruited. Most of product sales are made to these distributors--not to consumers in general. The underlying goods and services, which vary from car leases to cosmetics to vitamins, serve only to make schemes look legitimate.
Joining a pyramid is a risky proposition because vast majority of participants lose money to pay for rewards of a lucky few. Most people end up with nothing to show for their money except expensive products or marketing materials they're pressured into buying.
If you're thinking about joining what appears to be a legitimate multi-level marketing program, take time to check out everything about program. For example:
What's company's track record? What product does it sell? Does it sell products to general public? Does it have evidence to back up claims it makes about its product? Is product competitively priced? Is it likely to appeal to a large customer base? How much is investment to join program? Is there a minimum monthly sales commitment to earn a commission? Will you be required to recruit new distributors to earn your commission?
Be skeptical if a distributor tells you that for price of a "start-up kit" of inventory and sales literature--and sometimes a commitment to sell a specific amount of product or service each month--you'll be on road to riches. Many times participants spend a lot of money to "build their business" by participating in training programs, buying sales leads or purchasing products themselves. Far too often, their own purchases are all they will ever see for their investments.
Also, if you decide to become a distributor, you are legally responsible for claims you make about company, its products and business opportunities it offers. That applies even if you're repeating claims you read in a company brochure or advertisement. The Federal Trade Commission advises you to verify research behind any claims about a product's performance before repeating those claims to a potential customer.