It is also known as network marketing, and typically operates as follows: the self-employed independent distributor first becomes associated with a parent company, and then attempts to locate and sell to customers and others who may also want to become distributors. One of the main goals of MLM is to sell the product or service and to encourage the client to become an independent distributor and sell the services or product themselves. The prospects that may be interested in becoming distributors are known as MLM leads.
These independent distributors, or business owners, receive compensation for buying the parent companys product or service, selling the product or service to others, and for expanding their network of people through MLM leads. The downline consists of distributors recruited by business owner, who receives commissions based on their sales and the sales of the distributors they subsequently recruit. The upline consists of distributors who are above the business owner in the MLM hierarchy and receive commissions based on his or her sales.
These commissions, also known as benefits or rewards, are tracked through a points system, where the points represent the total volume of products or services sold through the business owners network. If a business owner can recruit more independent distributors, he or she will receive more benefits or rewards.