Multilevel Marketing: a Legitimate Business Opportunity

Topics: Multi-level marketing, Pyramid scheme, Business model Pages: 7 (2450 words) Published: June 27, 2013
Multilevel Marketing: A Legitimate Business Opportunity
Caleb Bowers
Belhaven University
BSM 392 – Business Research Methods
Professor: Dr. Parker
April 18, 2013

The following article has been written to provide information and further scholarship in which supports the hypothesis that a direct sales job with a multilevel marketing company is a legitimate job opportunity and can provide a viable business model for starting and maintaining one’s own personal business. This article addresses some of the common misconceptions that are often associated with multilevel marketing companies. Lastly the article provides a method  and a process in which to recognize and identify a legitimate opportunity from an illegal pyramid scheme.  Introduction

While it is considered to be a form of Direct Selling it is often referred to by many different names: multilevel marketing (MLM), network marketing (NM), and network marketing direct selling organization (NMDS). It is commonly misunderstood and regardless of what it is called multilevel marketing is often a disparaged form of direct selling which can be more simply defined as a form of retail distribution in which the selling of it’s products or services is done face-to-face or person-to-person away from a fixed retail location (Albaum 1989). One of the misconceptions and most common allegations is that multilevel marketing companies may be illegal pyramid schemes and that such companies are unethical. This paper addresses the characteristics of multilevel marketing companies that are often criticized and misrepresented and presents an argument from an objective, non-biased perspective that multilevel marketing companies are in fact a legitimate, viable and ethical model of doing business.  In order to do so, this paper presents the origins of multilevel marketing and a basic overview of the multilevel marketing industry. Secondly, it presents some of the issues and legalities that the industry faces. Thirdly, it presents a method that an individual can use to identify a legitimate and viable multilevel marketing opportunity as well as identify and determine if an opportunity is an illegitimate opportunity and an illegal pyramid scheme. Literature Review: Multilevel Marketing & Pyramid Schemes             Multilevel Marketing, also referred to as network marketing, is a form of retail direct selling specifically face-to-face or person-to-person selling away from a fixed retail location that additionally has a multilevel compensation structure (Albaum 1989.) Multilevel Marketing is considered to be a particular retail channel of distribution wherein salespeople or distributors are in business for themselves and operating as independent contractors (Albaum 1989).   Network marketing and direct selling companies that offer multilevel compensation programs have been in existence now for over 70 years. The first direct sales company to introduce a multilevel compensation plan was a company called Nutrilite, which was founded in 1941 by a scientist by the name of Carl Rehnborg (Biggart, 1990.)  Rehnborg believed that nutritional supplements were important and that people could improve their health by including them into their diet. However, while this would most likely seem to be common knowledge by today’s standards in 1941 it was something that was considered to be controversial at the time. Rehnborg believed that his nutritional supplements that were made from natural resources were superior to those at the present time that were synthetically produced. In order to sell his product and accurately educate consumers he needed to disseminate a lot of information in order to sell his natural vitamin supplements when he was presently competing against much cheaper synthetic alternatives.  Rehnborg believed that the most effective way to educate consumers on the benefits of vitamin supplements in addition to the advantages of natural supplements over synthetics was...

References: Barkaes, C.B. (1997), “Multlevel Marketing and Antifraud Statutes: Legal Enterprises
            Pyramid Schemes?” Journal of the Academy of Marketing Science, 25 (2), 176-177.
Biggart, N.W. (1990), Charismatic capitalism:Direct selling organizations in america,
            Chicago: University of Chicago Press.
Dyer, W. Gibb (2001), “Network Marketing: An Effective Business Model for Family-Owned
            Businesses?” Family Business Review, 14(2), 97.
 Peterson, R.A, Albaum, G., & Ridgway, N.M. (1989). Consumers who buy from direct sales companies. Journal of Retailing, 65(2), Summer 1989.
World Federation of Direct Selling Associations (2012) Multi-level Marketing,
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World Federation of Direct Selling Associations (2011) Pyramid Selling, available
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Wortruba, T.R.  (1990a). Full-time vs. part-time salespeople: a common on job
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