Multi-level Marketing - Direct Selling, Network Marketing, and Multi-level Marketing

Direct Selling, Network Marketing, and Multi-level Marketing

Network marketing and Multi-level marketing have been described by author Dominique Xardel as being synonymous, and as methods of direct selling. According to Xardel, direct selling and network marketing refer to the distribution system, while the term "multi-level marketing" describes the compensation plan. Other terms that are sometimes used to describe multi-level marketing include "word-of-mouth marketing", "interactive distribution", and "relationship marketing". Critics have argued that the use of different terms and "buzzwords" is an effort to distinguish multi-level marketing from illegal Ponzi schemes, chain letters, and consumer fraud scams. Some sources classify multi-level marketing as a form of direct selling rather than being direct selling.

The Direct Selling Association, a lobbying group for the multi-level marketing industry, reported that in 1990 twenty-five percent of members used MLM, growing to 77.3 percent 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, accounting for 99.6% of sellers, and 97.1% of sales. The DSA has approximately 200 members while it is estimated there are over 1000 firms using multi-level marketing in the US alone.