MLM vs. Network Marketing

Attribute	MLM	Network Marketing
Business Model	Direct selling strategy where distributors earn income through sales and recruiting	Business model where individuals build a network of customers and distributors to earn commissions
Compensation Structure	Typically involves multiple levels of compensation for sales and recruitment efforts	Compensation is often based on sales volume and team performance
Focus	Emphasis on building a downline network and recruiting new distributors	Focus on building relationships with customers and distributors to drive sales
Regulation	Subject to regulations and scrutiny due to potential pyramid scheme concerns	Regulated by laws governing direct selling and multi-level marketing practices
Training and Support	Companies often provide training and support for distributors to grow their business	Support and training are typically offered to help distributors succeed in sales and recruitment

Definition

MLM, which stands for Multi-Level Marketing, is a business model where salespeople earn commissions on their own sales as well as the sales of the people they recruit into the business. Network Marketing, on the other hand, is a business model where salespeople earn commissions on their own sales and the sales of the people in their network, regardless of whether they personally recruited them or not.

Compensation Structure

In MLM, the compensation structure typically involves multiple levels of commissions, with higher levels earning more than lower levels. This can create a pyramid-like structure where those at the top benefit the most. In Network Marketing, the compensation structure is usually more linear, with everyone in the network having the potential to earn the same amount per sale.

Recruitment

In MLM, recruitment is a key component of success, as salespeople earn commissions on the sales of those they recruit. This can lead to a focus on recruiting rather than selling products. In Network Marketing, recruitment is still important, but the emphasis is more on building a strong network of customers who continue to purchase products over time.

Training and Support

In MLM, training and support for new recruits can vary widely depending on the company and the upline. Some MLM companies provide extensive training and support, while others leave new recruits to fend for themselves. In Network Marketing, there is often a greater emphasis on training and support, with companies providing resources and tools to help salespeople succeed.

Product Focus

In MLM, the focus is often on recruiting new salespeople and building a downline, which can sometimes overshadow the actual products being sold. In Network Marketing, the focus is typically more on the products themselves, with salespeople encouraged to build relationships with customers and provide value through the products they sell.

Regulation

MLM has faced criticism and legal challenges in the past due to its resemblance to pyramid schemes. Some MLM companies have been shut down by regulators for operating illegally. Network Marketing, on the other hand, is generally seen as a legitimate business model and is not as heavily scrutinized by regulators.

Success Rate

The success rate in MLM is often low, with many salespeople failing to make a profit or even losing money. This is due to the emphasis on recruitment and the pyramid-like structure of many MLM companies. In Network Marketing, the success rate is generally higher, as the focus is more on selling products and building relationships with customers.

Conclusion

While MLM and Network Marketing share some similarities, such as the ability to earn commissions on the sales of others, there are also key differences between the two business models. MLM tends to focus more on recruitment and can have a pyramid-like structure, while Network Marketing places a greater emphasis on selling products and building relationships with customers. Ultimately, the success of both models depends on the individual salesperson and their ability to effectively market and sell products.