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What is a Downline?

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  • Written By: Erin J. Hill
  • Edited By: Bronwyn Harris
  • Last Modified Date: 18 September 2016
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A downline is a term generally used in multi-level marketing (MLM) to describe the consultants or representatives who work under another representative. For example, if Susan begins working for a company and then recruits five others to work under her for the same company, those five people are her downline. In the MLM business model, owners or representatives typically earn most of their revenues through their downlines rather than by selling products or services alone.

MLM is similar to what is described as a “pyramid scheme,” but with a few modifications. Both models require members to sign other members as a source of income, but with a pyramid scheme there is no actual product or service being offered. Members earn money from the members under them by collecting the sign-up fee and nothing else. In a MLM model, there are actual products that members sell through the Internet, party hosting, and other methods.

Aside from earning commissions on sales and recruiting members, representatives in a MLM company also earn commissions on sales and recruitment attained by their downline. This is also the primary way reps work their way up within the company, with a bigger downline earning reps higher commission rates and added perks like a new title and bonuses. This gives representatives incentives to work harder at recruiting rather than selling, which benefits the company’s owners and higher directors because they too are earning commissions for every new recruit.

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There are some disadvantages to a MLM-based business. The main ones are that MLM businesses have a very high turnover rate and that income is at least partially based on the work ethic of others. Since many recruits do not earn the money expected when signing up, the number of people who give up on these businesses and drop out is generally high. This results in recruiters losing members, which in turn can cause them to lose their minimum income quotas needed in order to maintain a higher status.

MLM business models are also set up in a way that the income of one member is partially based on how hard others work. Recruiters are responsible for helping their downline succeed because their income is also based on how well their members recruit and sell products. This is helpful if the other team members are hardworking but others only join the companies to receive discounted products or because they believe that very little work is involved in order to make money.

Many downline-based pyramid schemes and MLM companies have been reported as scams, so it is recommended that potential members research each company carefully before signing up. Even companies who operate legally often exaggerate the typical income of their members and understate the amount of work is actually involved in running the business. Any potential members should learn the average income, number of hours spent to obtain the income, and overall success rate of any businesses being considered.

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Bhutan
Post 3

@Subway11 - I wanted to add that although MLM companies do get a bad rap, there are many people that have been able to make a good living with them.

My father-in–law’s maid became a supervisor at an MLM company and was able to earn enough to build a home in her native Honduras.

I think that this type of opportunity can also work for a stay at home mom because they do get to socialize and do parties in order to get prospects to buy and they might earn some extra income along with a nice discount on the product line.

subway11
Post 2

@BrickBack - I know what you mean. If you work in a store, at least you know that the customer is somewhat interested, but with an MLM you have to be the one to introduce the product to the customer.

I also think that some of these MLM companies might not be legitimate. I recently read that if no one in the company sells anything and all they do is get commission on the people that sign up then it is considered a pyramid scheme.

I would also stay away from any company that used high pressure tactics in order to get me to sign up. I think that you have to know a lot about the company’s history before you sign up with them.

BrickBack
Post 1

I think that building the MLM downline is the only way to make a decent income in network marketing. You might get commission on the products that you personally sell but if you recruit people to work under you then you will get a percentage of everything that they sell.

These percentages add up and many district level managers that have worked for an MLM for years can have a team of 25 members or more. This is a tough business that requires a lot of initiative and an outgoing personality. People that succeed and run their MLM opportunity like a business perform much better than those that run it like a job.

I think a lot of people quit these business opportunities because they thought they would be making more money. I know that I could never work with an MLM because I would always feel like I am bothering people.

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