Direct Network Marketing – Is Direct Network Marketing Just Pyramid Selling?

Direct network marketing, also known as network marketing or multi level marketing (MLM), has had a huge rise in popularity in the past decade. It has been endorsed by major business heavyweights from Donald Trump to Robert Kiyosaki. But, what is it and why has it traditionally had such a bad name?

Let’s look at what a legitimate network marketing business involves. Essentially the company is structured in such a way that distributors (also referred to as associates, consultants, independent business owners etc) are compensated in two ways:

#1 – Commissions From Product Sales

Distributors make a percentage commission based on the company products or services they sell

#2 – From Recruiting Others Into the Company

Distributors make a proportion of the sales from other associates that they have introduced into the company. This is what is referred to as a distributor’s ‘downline’

As more people are recruited the bottom layers grow and it is this that people refer to as the ‘pyramid’. An illegal pyramid scheme is a non-sustainable business model where money is exchanged in return for enrolling other people into the scheme. There is usually no genuine, stand alone retail product or service being provided and eventually the pyramid collapses with the bottom layers losing their money.

Unfortunately it is these illegal pyramid schemes that have given genuine network marketing businesses a bad name. The key issue is whether the commissions paid to all associates is generated primarily from the products the company sells ie: #1 or from recruiting other networkers into the business ie: #2.

Direct network marketing isn’t pyramid selling and can be an incredible business opportunity if you do your research thoroughly. Not all companies are created equal and it pays to take your time to find one that has a range of products you genuinely believe in and can see yourself being proud to represent.