Dear All,
Multi-level marketing
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 others they recruit, creating a downline of distributors and a hierarchy of multiple levels of compensation. It follows a chain structure whereby the originator of the chain gets paid for every lower link that he or persons he has tapped. Other terms for MLM include network marketing, direct selling, and referral marketing
Although the products and company are supposed to be marketed directly to consumers and potential business partners by means of relationship referrals and word of mouth marketing, critics have charged that MLMs are nothing more than pyramid schemes and money-making schemes
MLM companies have been a frequent subject of criticism as well as the target of lawsuits. Criticism has focused on their similarity to illegal pyramid schemes, price-fixing of products, high initial start-up costs, emphasis on recruitment of lower-tiered salespeople over actual sales, encouraging if not requiring salespeople to purchase and use the company's products, potential exploitation of personal relationships which are used as new sales and recruiting targets, complex and sometimes exaggerated compensation schemes, and cult-like techniques which some groups use to enhance their members' enthusiasm and devotion.
For further information please refer
Regards,
CA Rahul Joglekar
Partner
Gokhale & Sathe
Chartered Accountants
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