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Multi-level marketing (MLM) is a marketing strategy in which the sale of a company's products or services is accomplished through non-salaried individuals who are compensated through a binary or pyramid-shaped commission scheme.

Most often known simply as MLM, the sales compensation system may also be known as network marketing, referral marketing or, derogatively, as a pyramid scheme.

Participants in MLM have two potential revenue streams. The first is paid out as a commission for sales made by the participants to their own retail customers. The second is paid from sales made by distributors who the participant has recruited into the MLM. In the hierarchy of multi-level marketing, these participants are known as one's down-line distributors.

In other words, MLM participants are expected to sell products directly to end-users through word-of-mouth or relationship referrals but, more significantly, they are expected to recruit others to join the MLM distribution chain as fellow salespeople, who will the become their down-line distributors. Down-line participants are encouraged to recruit their own down-line salespeople, creating the multiple levels for which multi-level marketing is named.

Due to reports suggesting that only those in the upper levels of the MLM scheme earn significant profits, while more ninety percent of MLM distributors earn very little or nothing from their efforts, and may indeed operate as a loss, after expenses are deducted, multi-level marketing illegal or strictly regulated in some jurisdictions.

Many MLM companies generate billions of dollars in annual revenue, and hundreds of millions of dollars in annual profits, although this comes at the detriment to most of the company's non-salaried workforce. Meanwhile, participants at the very top of the scheme may earn large sums of money through the work of several levels of downline distributors, and these earnings are emphasized during company seminars and conferences.

Multi-level marketing programs are designed for large profits to the owners and shareholders, as well as significant earnings to individual participants at the top levels of the pyramid.

While not all MLM programs are legitimate, MLM businesses operate legally in all fifty states in the US, where they are sometimes referred to as affiliate marketing or home-based business franchising.

The role of this category is not to promote multi-level marketing or to refer viewers to MLM businesses, but to list resources for MLM software. This would be the software that MLM businesses would use to set up their MLM programs, not the programs themselves.

Software used to manage other businesses will be insufficient for operating a direct-selling business. MLM software needs to be able to track the sponsoring relationships between several levels of participants, who may be known as representatives. In the business, this may be referred to as genealogy tracking or lineage management. These participants have both personal sales volume, as well as one or more types of group volume, from downline distributors, which must also be tracked. Of course, the software also needs to be able to calculate and pay commissions and bonuses, according to the company's established compensation plan, which will differ from one company to another. MLM software should also be able to be used to provide participants with useful information for them to run their businesses.

MLM software should include or be able to track representative enrollment, lineage management, inventory management, order processing, rewards program, auto-ship, accounts receivable, compensation plan calculations, contests and incentives, report writing, imports and exports, multi-currency, multi-language, and a corporate system for the back office, as well as the capability of generating and maintaining representative personal websites, which will themselves include a portal, Intranet, and a representative back office.

Just as MLM businesses will differ significantly from one to another, MLM software products are not all the same and, while most MLM software companies will customize their products to meet the needs of the MLM company's compensation plan and other requirements, it is suggested that these details be worked out prior to purchasing or signing onto a particular MLM software product, most of which are available through service-as-a-software (SaaS) models.

The resources listed below are to MLM software companies or specific MLM software products.

 

 

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