What is Multi-Level Marketing (MLM) about? Is MLM a scam?

Are you curious to know about the MLM scheme? In this blog we are going to deal with all the aspects of MLM and touch every point that disturbs people. Many people get confused between the Pyramid and MLM scheme. Therefore, this blog will guide you to understand the difference between both schemes. Other questions we are going to touch are, what is the definition of MLM? What is MLM about? Is MLM a scam? What is the difference between the MLM and Pyramid scheme. Let’s start our adventure to know the working of one the most used strategy in the business world.

Definition of the MLM scheme

MLM or Multi-level Marketing is business strategy that works on the shoulder of the members of the company. The members directly sell the product of the companies to others and make new member under them. It is kind of recruiting a person which is known as the distributors “downline”.

So how it works? The company encourages members to sell their product and earn a commission on the every sale of their recruits. All distributors also earn money through their direct sales. In MLM focus is purely upon the sale of the product. If company does not make any profit then how will it be able to provide commission to its members? The company earns revenue via sale of product and earns profit on that and then they pay commission from their profit.


When distributors make a sale or direct sale, receives a percentage of commission which depends upon the sales volume. Moreover, they receive commission according to the sale of their distributors which are downline. As name suggests multi-level, the company offers a member commission on multi-level downline. The company is providing an opportunity to earn passive money or income on the hard work of your recruits. As company provide commission on each level. Some MLM companies pay commission up to 5 levels and some 10levels. The percentage of commission will reduce with every level. The company is the one which benefited from this strategy because they are selling their product and more sales is recorded and their revenue increase with increasing number of direct sale. They do not have to make advertisement and there is no inter-mediator; therefore, the save a lots of money on that front and they distribute the money among their members. The best example of MLM scheme is the Amway.

The answer to the next question is MLM a scam or not, is BIG ‘NO’. It is 100% legitimate business strategy that is used by various companies that are working genuinely, though there is come controversy also present. The first problem is regarding the Pyramid Scheme which somehow looks like a MLM strategy. Many people get confused between the Pyramid scheme and the MLM. In the market whether it is online or offline there are myriad companies present that working on the business model that mimic to be an MLM company. In reality they are working under a pyramid scheme which is an illegal scheme. To understand a company is actually a MLM or not then observe the company working and its focus.

In a genuine and legitimate MLM company their main focus is always to make more sale of their product. Their revenue and profit depends totally on the sale of their product from which they pay some percentage to the members as a commission. On the other hand the company working in a pyramid scheme main focus is to make new members instead of their sales. If you encounter any company whose main focus is not to sale of the product but making new recruits then you should beware of such company because it is not an MLM scheme; it is a Pyramid scheme.

In Pyramid scheme companies pays the commission to its members from the money invested by the new recruit without making a sale or profit.  To judge a company is working on pyramid scheme or not, spot that the company greater focus is making a scale or recruiting the new people. If the company is working on the latter then it is working under a Pyramid scheme. Also, if you find any compensation plan of any company that looks like they are using the new member money to pay the commission to their old members then it is 100% pyramid scheme without any doubt.

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Difference between multi level marketing and a pyramid scheme

There are many companies working that have blurred the line that mark MLM and Pyramid scheme as a different identity. Let us talk more about the difference between the MLM and pyramid schemes.

The main and sole aim of any business is to make profit. If any company is not making profit then you cannot believe that they will be going to share their revenue with their members. It is the Profit for which everyone works very hard. The legit companies that use MLM as their strategy tried to save their money in advertisement and pay the commission to their members on every sale made by them and member in downline. The MLM companies try to sell their product to real person or consumer. By real we mean, the members are not fake and the members made by them are unique person.

You will find some companies whose compensation plans are totally focused and obsessed on making new recruitment instead the sale of their product. They encourage people to buy their products instead of selling their products to the real consumers. Such companies are working in a pyramid scheme. To know more about the pyramid scheme you can visit our blog on Pyramid Scheme by clicking the link: https://onlineincomeresources.com/what-is-pyramid-scheme

The Federal Trade Commission (FTC) is an institution which is investigating about such schemes for many years. They have found many companies that erased the line between the MLM and pyramids schemes. Such companies are making people confuse. It is because of such companies people did not understand easily the difference between the MLM and Pyramid scheme and they thing both of them are synonym to each other. In reality it is not.


Many people when come into the contact of people that are working in a MLM company then they believe that it is very easy to earn good money from them. Even some people show dreams of making very good passive income. Some people go beyond limit and show the dream of getting retired in early 40s because down the line recruitments will be making money for you and you do not have to work after that. But through our research we found very different and surprising data. Lets us consider an Industry data that told us people working in MLM scheme around the globe are million in numbers. The irony is only few people are able to earn good money from which they can make a living.

After reading the data of different MLM companies we found out that only 5% of members in each MLM companies are making worthy income. This number is not very motivating. From above statements we can understood that earning money via MLM scheme is not easy. Lots of hard work and patience is needed to earn good money via them. People who get confused between the Pyramid and MLM companies end up with losing their own money. It is because people working under the Pyramid scheme are scammers. It is not child’s play to earn money via MLM. Even the hard work is does not guarantee the worthy returns in the MLM work. Many starts very good but the mistake they do, is that they sell the product to their relatives. After some time, a point is come when their recruits become saturated and after that they do not find any people to sell their product. After it they leave the company without making new recruits and their earning reduce to zero. Member has to be very active to make different recruits and his/her recruits should also work actively to give them a good return.

Still, there are many people also present that earn very good money while working for any MLM company. There are many success stories also available. The best point in MLM scheme is that it is legit scheme and got scam from them is very low.

If you want to know how different companies are working on Pyramid Scheme and hybrid pyramid scheme in which company works on Ponzi as well as Pyramid scheme then you can visit our webpage containing the list of such sites by clicking the link: https://onlineincomeresources.com/not-recommended

There are some Legit and Trusted sites also listed in our websites that help people to earn money online. To know about such sites you can visit our page by clicking the link: https://onlineincomeresources.com/legitimate-work-at-home-opportunities

If you looking to know about the site which help people not only to earn a fulltime income online but also help them to built their online business then we recommend you to join the Wealthy Affiliate Company.  This company is working from last 13 years and they are still working expeditiously. To know more about the Wealthy Affiliate Company, please do visit our webpage containing its review by clicking the link: https://onlineincomeresources.com/the-wealthy-affiliate-review-scam-or-legit

If you have any doubt regarding MLM sites then please ask from us by writing your problem in our Comment Box. We will be happy to help you out.


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