There is a lot of confusion prevailing in MLM and the marketing industry about MLM being a direct selling form. While the promoters of MLM and the lobbying arm, the Direct Selling Association, have put in a lot of effort to convince lawmakers and tax strategists that MLM is a form of direct selling because they have much to gain. However, people with a lot of experience in the field of marketing beg to differ. They think that MLM is nothing but a pyramid scheme and is not a true form of direct selling.
People are mostly arguing that MLM is not selling any product, this one fact that has deemed many MLM programs illegal. The law requires a marketing program to sell some physical product or some service in exchange for legally adequate compensation. If there is no product and people are buying into a program in the hope of recruiting others and making a profit from their contribution to the kitty, the program is doomed right from the beginning. People who enter the program at the fag end of the deal are only destined to lose their investment. There are, however, people who disagree.
The lawmakers call MLM ‘recruiting MLM’, which requires a person to recruit many people down the line to generate a reasonable income. They agree,e though, that selling is a part of recruiting people in building that much required down the line.
Direct sales can take your product out in the market and sell it to people without further selling it to others. At the same time, MLM requires people to sell the product further to profit every time someone sells the product. In direct sales, once a product is sold, the company closes the sale. In MLM, once the product is sold, the company waits for the customer to sell it again to make another profit. This process continues every time a new customer buys the product.
A legislator once created a commotion to comment that MLM is no more a direct selling process than a pig is a horse. He argued that whenever someone approaches you with a product he wants you to buy and in the same breath mentions that it would be a great business opportunity for you to join — that is nothing but MLM, through direct selling is involved too if the prospective customer buys and never joins the ‘good business opportunity.
The controversy of whether MLM is actually direct selling or a pyramid scheme will continue for eternity. Nevertheless, as long as people can make an honest living,g there should be no interference from vested political interests.
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