However, distributors in a multi-level marketing company face much higher entrepreneurial risks than salespeople in traditional direct sales jobs, as commissions are usually their sole source of income. Many distributors are very happy with this flat hierarchy because they feel they have more direct contact with senior management. Distributors at higher levels have no managerial authority over participants at lower levels. Unlike the hierarchies in a traditional company, the levels in a multi-level marketing model only govern how commissions are shared. As a result, distributors at higher levels often generate more income from the commissions on the sales their recruits make than they do from their own sales. Even the CEO should receive a portion of the commission in addition to the actual value of the goods. This principle continues all the way up to the top of the pyramid. The person who recruited the distributor also receives a partial commission, and their sponsor also gets a percentage of the sale. When a distributor makes a sale, they receive a commission. The company’s sales manager has a small team of salaried employees who recruit freelance distributors, who in turn recruit new partners.

The term multi-level marketing refers to the different levels within the pyramid-like organizational structure. Word of mouth is as important as it is in influencer marketing or viral marketing. Like micro-influencers in online marketing, distributors in MLM influence their friends. Independent distributors are often better brand ambassadors than celebrities are. The idea behind multi-level marketing is to use the distributors’ personal networks for targeted referral marketing, according to the principle: “You’re more likely to believe a friend than an advertising agency.” Most of these recruits are satisfied customers themselves, who are offered bonuses, favorable purchase conditions, and high commissions. In contrast to traditional direct sales, where sales representatives are employed by a company, the multi-level marketing model uses freelance distributors who work full- or part-time.

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