A multi-level marketing (MLM) company is a business that rewards its employees not only for product sales but also for the sales of other employees whom they have drafted into the company, creating a pyramid-style compensation structure.
MLM’s generate their clientele primarily by word-of-mouth, forging very close-knit communities between employees and consumers and often forgoing more traditional modes of advertising on television and on the internet. MLM’s strive for more personal relationships.
The most recognizable MLM is the company AVON, a distributor of cosmetics, perfume, and clothing. Founded in 1886 by David H. McConnell, and then called California Perfume Company, it quickly blossomed into a prosperous corporation with a nationwide reach with offices from New York to San Francisco. During its expansion, the products were advertised door to door by its many representatives; the image of the “Avon Lady”, the trusted representative of Avon’s products, is something of a cultural icon for cheery, flushed 1950’s charm.
The Pampered Chef, aquired in 2002 by Berkshire Hathaway, offers a line of kitchen tools, cookbooks, and food products. Of Pampered Chef’s over 60,000 direct sales force, a good deal of those employees have probably, at one time or another, hosted one of PC’s patented “cooking shows”, where a group of PC’s employees are invited over to the Hostess’s home to learn, share, and promote recipes.
Mary Kay Cosmetics took its cue from Avon with its MLM structure. Its executives surely reviewed Avon’s business model and styled its company accordingly. Based on that Avon enterprise, Mary Kay has taken on a grand life of its own, promoting a vast array of beauty products and steadily recruiting new members.
Not all MLM’s are successful. However, these companies, which all promote personal employee-client relationships, have been successful for years and are still gaining momentum and revenue.