Network Marketing (sometimes called multi-level marketing or MLM) is a business distribution model that allows a parent company to market its products and/or services directly to customer by means of relationship referrals and direct selling.

The diagram to the right shows how more traditional retail models work, with all the links in between the company and the end user, or customer.  Each link in between the company and the end user takes some profit which means that a product that only take pence to produce will probably end up costing many times that cost to the end user.

In the Network Marketing model, the company is either the product/service manufacturer and/or the wholesaler.  They supply the products to the distributor, who then supplies it direct to the end user.  This means the company saves a lot of money by cutting out the 'middlemen' and the these savings are passed on to the distributor network as retail profit and other volume and team bonuses.

Network Marketing (MLM) & Pyramid Selling

MLM has been around, at least in principle, since the late 1920s and early 1930s. After World War II, it began to rise to greater prominence when enlightened managements recognised the extraordinary leverage and equity that MLM could provide - when properly applied for the benefit of all involved.

In the late 1950's and into the 1960's, a few disreputable drop-outs from legitimate MLM companies became frustrated by the fact that the ethics of MLM prevented them from exploiting others - so they devised the Pyramid Selling system. They recognised the potential for huge personal profits if the rules were changed. Now the key appeal was to greed - at the expense of others.

The irony of their scheme was that no-one victimised by it could legitimately call ‘foul!’ because they were, in fact, victims of their own greed. Willing to turn a blind eye to any personal misgivings, they sought to get rich by introducing others, just as willing (and greedy), into the scheme. For the predators behind the system, it was a dream come true. For a short time at least… until the bubble burst.

Some of the legitimate MLM companies concerned that the Pyramid operators were undermining the integrity they had so carefully nurtured, drew the attention of the authorities to the problem. Victims were also beginning to complain to the government and media. Before long, the scams were outlawed, and have remained illegal ever since.

>>> Find out more about how Network Marketing (MLM) works