MLM companies are organizations that utilize a sales system where the salespeople earn commission on their own sales in addition to a smaller commission on sales generated by people they recruit to become salespeople for the organization. MLM stands for multi-level marketing, and MLM companies believe that this sales system is the most effective way to sell their particular products. Well-known MLM companies include Mary Kay Cosmetics, Avon and Tupperware.
In MLM, goods and services are sold through a network of salespeople known as distributors. Distributors often sell their products through their social and business networks. MLM is designed to work based on strong recruitment efforts. Since products are sold door to door or through the social and business networks of the salespeople, the more massive the sales force, the higher the sales volume. Individuals typically get involved with MLM by being recruited by a distributor or attending a company meeting. MLM salespeople have an upline and a downline. The upline consists of the distributor who recruited the salesperson and those above him in the recruitment chain. Everyone in the upline receives a commission on the salesperson's production. The downline consists of the distributors the salesperson recruited and all the people below them in the recruitment chain. The salesperson receives a commission on the sales of everyone in his downline.