What is a Pyramd Scheme? Is Multi Level Marketing a Scam?
Restored from the Empower Network archive (2011–2017), lightly edited to meet our current advertising standards. Views are the original author’s.
What is a Pyramid Scheme?
Is Multi Level Marketing a Scam?
I first want to introduce you to this little cartoon video that I found on YouTube. I thought it was amusing, and reminded me of so many conversations network marketers face these days. It’s entitled, “I still think it is a pyramid scheme…”.
I still think it is a pyramid scheme…”. (Pyramid Scheme Cartoon by Pat Petrini)
If you are an Internet marketer, do any form of affiliate marketing, or work with multilevel marketing, you have probably had this conversation yourself, in some form. I have found that a great deal of people are so quick to judge what they don’t understand. That includes so many more categories than just “pyramid scheme”, actually, but I won’t go there with this blog.
Why is it that for a lot of folks, their mind goes immediately into thinking that your offer is a pyramid scheme? I’ll tell you. It’s ignorance of the facts. They don’t know the definition of the words. I took the liberty of looking up a few terms and I present them to you now.
Pyramid Scheme
pyramid schemeDefinitionpy·ra·mid schemeNOUN1. pyramid scheme: a fraudulent scheme in which the perpetrators recruit people to pay money to those above them in a hierarchy on the expectation that they will get payments from those below. When the number of newly recruited people eventually dwindles, the payment structure collapses.Content above provided byEncarta® World English Dictionary[North American Edition] © & (P) 2009 Microsoft Corporation. All rights reserved. Developed for Microsoft by Bloomsbury Publishing Plc.
The Pyramid Scheme unsustainable. Look at the exponential progression of a classic Pyramid Scheme modeled here:
The pyramid scheme is a non-sustainable business model that involves promising participants payment or services, primarily for enrolling other people into the scheme, rather than supplying any real investment or sale of products or services to the public.
Various forms of pyramid schemes are illegal in many countries too numerous to mention here. These types of schemes have existed for at least a century, some with variations to hide their true nature, and because of this, unfortunately for networkers like ourselves, many people believe that all multilevel marketing plans are also pyramid schemes.
Two overt examples of pyramid schemes are a chain letter and a Ponzi scheme.
IN SUMMARY: a Pyramid Scheme is a system where recruitment is the goal, with NO REAL INVESTMENT and/or NO SALE OF PRODUCTS OR SERVICES exchanging hands.
What is Multilevel Marketing? Is that a Pyramid Scheme?
multilevel marketingmul·ti·lev·el mar·ket·ingNOUN1.pyramid selling system: a method of selling products in which distributors sell to subsidiary distributors, who sell to further distributors, each earning a commission on the direct or indirect salesContent above provided byEncarta® World English Dictionary[North American Edition] © & (P) 2009 Microsoft Corporation. All rightsreserved. Developed for Microsoft by Bloomsbury Publishing Plc.
A Multi-level marketing (MLM) system is a marketing strategy in which the sales force is compensated not only for sales they personally generate, but also for the sales of the other salespeople that they recruit. This recruited sales force is referred to as the participant’s “downline”, and can provide multiple levels of compensation. Multilevel marketing is also known as network marketing, referral marketing, and affiliate marketing.
IN SUMMARY: A Multilevel Marketing system is one where there is investment, and/or there are sales of products or services involved, as well as recruitment.
What is a Pyramid Scheme?
Do you get the bigger picture now? MLM companies are very often confused with pyramid schemes because of their similarities. The big difference, however, is the fact that Multilevel marketing companies have sales of products, investment strategies, or services, whereas the Pyramid Scheme does not. Once you identify the differences, it will be easier to look at a network marketing company and decide whether it is legal or not. Of course, there are more factors involved, so I encourage you to do your homework before becoming involved any marketing companies.
Affiliate marketing : is a type of performance-based marketing in which a business rewards one or more affiliates for each visitor or customer brought about by the affiliate’s own marketing efforts. The industry has four core players: the merchant (also known as ‘retailer’ or ‘brand’), the network (that contains offers for the affiliate to choose from and also takes care of the payments), the publisher (also known as ‘the affiliate’), and the customer. From Wikipedia, the free encyclopedia
Got it?
… for reading my blog!
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I wish you all the very best in everything you do.
See you on the other side.
♥ Peace ♥
JEANNE MELANSON
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