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There is a common question that network marketers encounter:
Isn't this just a pyramid scheme? The answer is simple. No.
What Is A Pyramid Scheme?
Network marketers are fond of saying:
If you want to see a pyramid, go to Egypt! Yes, there are some famous ones in Egypt that I hope to see some day.
Yet the sad truth is that this particular money scheme is one that many of us have encountered in our lives. Hence the question and the caution. Pyramid schemes are not business models, and do not involve an exchange of money for goods and services. You enter at the bottom of the "pyramid" in hopes of rising to the top where you may be able to collect large sums of money - from the people entering at the bottom. Where is the product?
What value do you receive for your money? Because there is no value, the whole thing eventually "bottoms out." |
These schemes have been around for at least a hundred years, and are illegal in many countries, including the United States, Canada and the U.K.
That's a very short description of what has become a rather sophisticated enterprise. If you would like to know more, please read this report to the Federal Trade Commission:
Pyramid Schemes.
How Is MLM Different?
Multi level marketing companies, unlike pyramids, Ponzi schemes or chain letters, have a real product to sell. MLM's offer retail sales to the public, without requirement to join the network marketing company. Network marketing with its multilevel marketing structure, is a legal business model, providing value to the consumer, and opportunity to the independent representative. |
In network marketing, commissions paid are for sales of actual products, not for recruiting.
The consumer also has the option to become a distributor or independent representative for the company, thus offering the same products to other consumers. The misunderstanding comes about because of the appearance of the multi level marketing structure. While there are naturally more distributors at the lower levels, they each have equal opportunity for advancement to equivalent ranks, and higher rates of commission, as those above them. |
And unlike the corporate model, there's always room at the top.
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