What is Network Marketing?

QDynamics Global Corporation uses network marketing, also known as Multi-Level Marketing (MLM), to distribute its products.

Wikipedia.org defines multi-level marketing as 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.

Most commonly, the salesperson are expected to sell products directly to consumers by means of relationship referrals and word of mouth marketing.  Some people equate MLM with direct selling, although MLM is only one type of direct selling.

The Direct Selling Association (DSA), an American industry body, reported that in 1990 twenty-five percent of members used MLM, growing to 77.3% in 1999.  Companies such as Avon, Electrolux, Tupperware, and Kirby all originally used single level marketing to sell their goods and later introduced multi-level compensation plans.  By 2009, 94.2% of members were using MLM, aacounting for 99.6% of sellers, and 97.1% of sales.  The DSA has approximately 200 members while it is estimated there are over 1,000 firms using multi-level marketing in the US alone.

History
It is generally accepted that the first multi-level marketing plan was introduced in 1945 by the California Vitamin Company (shortly afterwards to become Nutrilite).  The plan allowed Nutrilite distributors with at least 25 regular customers to recruit new distributors and draw a 3 percent commission from their sales.  Unlike traditional direct selling, this was an ongoing payment whenever the customer re-ordered, allowing direct sellers to build a sales organization that could generate a residual-like income.

Setup
Independent, unsalaried salesperson of multi-level marketing, referred to as distributors (or associates, independent business owners, dealers, franchise owners, sales consultants, consultants, independent agents, etc.) represent the company that produces the products or provides the services they sell.  They are awarded a commission based upon the volume of product sold through their own sales efforts as well as that of their downline organization.

Independent distributors develop their organizations by either building an active customer base, who buy direct from the company, or by recruiting a downline of independent distributors who also build a customer base, thereby expanding the overall organization.  Additionally, distributors can also earn a profit by retailing products they purchased from the company at wholesale price.