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Software Vault: The Sapphire Collection
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CEN.TXT
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1994-10-26
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Half A Century Of MLM
Although some people may think all MLM
organizations are pyramid schemes, there are many
genuine operations. As far back as the 1940s,
Nutrilite Systems and Stanley Home Products created
companies in which salespeople received not only
commissions on products they sold directly but also
bonuses or overrides for sales made by people they
recruited. Eventually, this commission structure
expanded to several layers of salespeople.
Two of the largest MLM companies, Amway and
Shaklee, started in the 1950s. Today, each of these
companies has around 1 million distributors. Another
1950's pioneer, Mary Kay Cosmetics, has built huge
success with "party plans," at which demonstrations are
given to several potential customers at one time.
Eventually, some of those customers may become
distributors and sponsor their own parties.
The birth of today's MLM business, though, can be
traced to 1979, when a court upheld the legality of
Amway's sales plan and, by inference, the entire MLM
industry. The key, according to the decision, is that
the organization exist primarily to sell products or
services, not just to line up distributors.
Besides the companies named above, some other
"household word" companies have used MLM, including
Avon and Tupperware as well as subsidiaries of Gillette
and Colgate-Palmolive. Long-distance phone companies
US Sprint and MCI have used MLM in their efforts to
compete with AT&T.
The market for home water-treatment and filtration
systems has virtually been created by MLM companies,
including National Safety Associates. More than 50% of
the water filters sold in the United States are sold
via MLM.