To Define MLM, you must look at the business model. This model allows a parent marketing company the opportunity to market its products to the consumer by creating a relationship by referral and or directly selling of its products. Today, MLM companies are worldwide efforts and they exist all over the Internet, also.

MLM distributors do not make a salary or an hourly wage. To Define MLM also includes the positions in the marketing firm. Many of the positions of an MLM include independent agents, business owners, franchise owners, associates, consultants, and more. All of these positions are normally referenced as distributors.

A distributor is responsible for developing his or her organization. He or she can expand the organization or work on developing a large active customer base. A distributor must create a network of people below them by recruiting others to become distributors also.

To Define MLM, recruiting other people as distributors does not guarantee money. These recruited distributors must also build a customer base. The customers must be active buying customers who are purchasing products. A distributor has the potential to make a significant amount of money as his or her network is created. Once the network is large enough, many people can be receiving commissions from just one person's sales.

The compensation plan can Define MLM types. The different ways that distributors in a compensation plan can be paid include breakaway plans, matrix plans, binary, or elevator schemes. The most popular compensation plans that have been around the longest and Define MLM plans the best are the breakaway methods. This is broken into three different payment methods, also including overrides at a base level, generational, and executive.

Most sales organizations use this method as a commission pay for managers from their subordinates. Generational compensation is when the manager takes a percentage of the commission from the base override and gives it to his or her manager. The executive bonuses are paid when a manager exceeds a certain amount in sales for a time period.

A matrix compensation plan has a limit to the number of people that a distributor can recruit in his or her network. Once the person meets the limit of people, then their additional recruits are given to someone else, even though that person did not recruit them. Payment can reach a limit also with a matrix compensation plan.

A binary compensation plan is limited, also. The payments are usually fixed and they are based on the amount of money the two different branches below them are achieving in sales. When the sales in both of the branches match, the commissions will be paid.

Another compensation method that would Define MLM is being paid by an elevator scheme. This is when the distributor will pay to participate. The people above this person will receive the monies and so on.

When you Define MLM, it is important to explain that the possibilities can be endless if you build up a large enough network and you are not limited in your compensation plan.