In the context of multi-level marketing, otherwise known as MLM, a downline is a person recruited by an agent to join the salesforce.
Under this system, agent is paid for actual product sales, as in other marketing models. What differentiates it from others, though, is that it also requires the recruitment of other distributors who serve as downlines, whose sales benefit those on the higher levels, as well. Monetary compensation or incentives may be given for every downline recruited, and a percentage of downline product sales is paid to the recruiting agent as commission.
Ideally, the objective of multi-level marketing is to maximize product reach and sales by selling the products directly to buyers with the help of referrals and networks. However, it has also been criticized for functioning as pyramid schemes. Some MLM companies, for example, place more emphasis on the recruitment of downlines than on actually selling the products. In such situations, the movement of products is mainly a result of requiring recruits to purchase product packages. Furthermore, such requirements often serve to increase start-up costs for new recruits.
Despite the criticism, however, many MLM companies have succeeded in establishing themselves as legitimate business entities and have given jobs to millions of people. Avon and Mary Kay are just a couple of examples of companies which have successfully expanded on a global scale. These appeal mostly to individuals who wish to start a business with a small capital, as well as those who prefer flexible working hours.
Multi-level marketing may also be referred to as direct selling, network marketing, or downline marketing.