When I heard about Multi-level marketing (MLM), it was just in abbreviation form and I kept wondering what it meant. The good thing about me is that I never feel stupid when I come across something that is new but I take my time to find more information about it. This is because I know that all of us were born without knowing a single thing.

This is to mean that our brains were totally blank at the beginning then bit by bit we started feeding our brains with information. It is like a computer, when you buy a new one its hard disk is totally blank. Gradually, you start storing the necessary data and programs which you require.

So, the Multi-level marketing (MLM) thing was part of day's challenge till the time I got hold of the mouse and clicked on a page that had the exact words "Multi-level Marketing" and from there I was totally absorbed by it with the aim of knowing every detail about it.

If you're just the same way I was, I'm sure you'll be knowledgeable about it after reading this article. This is nothing complicated and you can define it since the name "Multi-level marketing" has already given you a hint.

Multi-level marketing (MLM) is defined as system on which there are many levels which are composed of salespeople (sales representatives) who are marketing a company's product to consumers and recruiting other salespeople in reward of a compensation such as commissions. According to the definition given on Wikipedia website, "Multi-level marketing (MLM) is a marketing strategy in which the sales force is compensated not only for sales they personally generate, but also for the sales of the other salespeople that they recruit."

These levels are created by the company which trains the first sales representative on how to get customers who in turn trains the second sales representative. After acquiring the necessary skills, the second sales representative trains the third one and this process goes on and on.

In each level, each sales representative is a manager of his own by that I mean he can recruit his own salespeople. The multiple level companies do not pay salaries to the sales representatives. Instead, they pay them commissions based on the number of customers they have acquired.

This is a marketing strategy that intends to lower marketing costs because the company is not incurring expenses which are associated with employing salespeople on a permanent basis. If there are no customers acquired (no sales), then there are no commissions paid to salespeople by the company.

The good thing about it again is that the company is able to expand its market. It is able to distribute its products in a wide market if only more sales representative (salespeople) are acquired and if they're allocated in different regions.

Do you remember the money-making scheme of Charles Ponzi? Oh... yah, many people regard Ponzi scheme as a Multi-level marketing! This is not true since Charles Ponzi's scheme was based on a banking idea and actually it had no any product that it was selling to earn profits and this led it to be insolvent. Charles Ponzi (Carlo Pietro Giovanni Guglielmo Tebaldo) collected deposits from the public without investing it in any business venture. He collected a deposit from an investor to pay returns to another investor (the second investor's deposit was used to pay returns to the first investor.)

Author's Bio: 

Relying on luck to create a successful business is unnecessary. You need to nurture your entrepreneurial spirit, click here and find out more on how you'll nurture your entrepreneurial spirit. The author of this article is Joshua Nyamache and together with other team members they're working on Nikenya website.