Successful MLM Companies VS. Unethical Pyramid Schemes
Despite the many reputable firms, network marketing is often associated with the term “pyramid scheme” in the minds of many consumers. It is vital to make the distinction, both to yourself, and your future customers.
Unethical practices by some companies and representatives create an unfair image of Multi Level Marketing (MLM) and Network Marketing. Therefore, we must begin with the negative…
What is a pyramid scheme?
Pyramid schemes are bogus money-making scams in which new participants at the bottom of the pyramid pay money to people at the top. They pay for the chance to move up and profit from payments of others who might join later.
The “investment” to join may range from a small fee to thousands of dollars. Only after the few at the top have collected from everyone do members at the bottom finally move up to have a chance at profiting themselves. Until then, new members are simply poorerby the amount of their out-of pocket expense as the search for new participants continues and new levels are added.
The entire pyramid may collapse before you “advance” the top. In order for everyone in this illegal activity to profit, there would have to be an unending supply of new members. This is not possible, so each new level becomes more likely to lose money.
Why must you avoid pyramid schemes?
- They commit fraud – Participants in a pyramid scheme are, consciously or unconsciously, deceiving those they recruit.
- Money will be lost – The scheme is based on simple mathematics: many losers pay a few winners.
- They are illegal – Besides losing your investment, the operation could be closed down by legal authorities and the participants subject to fines or arrest
How to distinguish legitimate MLM from disguised pyramids?
Pyramid promoters try to make their schemes look like valid multilevel marketing to help you get rich. Multilevel marketing is a lawful and legitimate business method using a network of independent distributors to sell consumer products. You can get rich.
To appear as a multilevel marketing firm, a pyramid scheme includes a “product line”, claiming to be in the business of selling to consumers. But little effort is made to actually market the products. Instead, money is generated in the classic pyramid fashion. Unsuspecting new distributors are recruited and are pushed to purchase large amounts of costly inventory.
Unfortunately, it can be difficult distinguish whether the products have a legitimate consumer market or are cheaply produced, inferior products or untested ‘miracle cures’ to medical problems or other difficulties.
What should be avoided?
- Those who denounce other products or firms.
- Those who confuse you or exploit your lack of knowledge.
- Those who try to convince you to cancel a contract made with someone else.
- Companies charging a large entry fee and promising huge profits.
- Companies pressuring you to purchase large quantities of products.
- Companies selling few or no products.
Advantages of Multi-level Marketing (MLM)
True income opportunities with MLM or Network Marketing
Network Marketing is a form of retailing whereby consumer goods are sold, not in stores by sales staff, but by independent businessmen and women (distributors), who work from home. Distributors set their own hours and earn money by selling products supplied by an established company. Examples include Herbalife, Amway, Mary Kay, and Watkins.
The multilevel structure allows you to build your own salesforce by recruiting, motivating, and training others to sell the same products. Your compensation includes a percentage of the volume of your entire organization (in addition to earnings on your own sales). This formula makes multilevel marketing an attractive opportunity to start your business with comparatively little money.
Personal selling of quality products or services
A genuine MLM program is basically the idea of person selling a product or service to another person. This method offers certain advantages to the consumer. Unlike buying at a retail store, the customer is buying from a person committed to customer service. The seller is not merely a clerk, but a teacher, and provider of information. So MLM or network marketing is a fancy name for direct selling, but with a more lucrative commission structure.
Advantages of MLM as a business model
- Lower set-up costs than franchises or other small businesses
- Low barriers to entry – college industry experience not required
- Work from home with flexible hours
- Even part-time can allow high earnings
- Residual income on your sales and downline
- MLM Company manufactures and ships all products
- Pre-existing business plan is your road map
- Be your own boss – take business in the direction you wish