When people talk about MLM, they tend to assume that it’s a “Pyramid Scheme”. These people assume the words, “Pyramid Scheme” and that it’s a scam. This is not true.
In this blog post, I will break down the differences between a “Pyramid Scheme” and an MLM.
What is a true pyramid scheme?
A pyramid scheme is a non-sustainable business. It involves the exchange of money, in the form of a sign-up fee. It has no product or service, often knowing as a Ponzi Scheme.
Are pyramid schemes illegal?
All pyramid schemes are ILLEGAL! The only people that are able to make money on a pyramid scheme are the people at the top of the pyramid. Pyramid schemes offer no product or service.
There is no possible way for new distributors to generate honest income. The end result is that people can spend several thousand dollars to enroll in one of these scams. Then to end up losing everything.
What are the differences between a pyramid scheme and a Multi-Level Marketing (MLM) program?
These schemes are the promise of sky-high returns in a short period of time and doing nothing. All while encouraging others to do the same.
The players behind a pyramid scheme may go to great lengths to make the program look like a real MLM program. Despite their claims to have real products or services to sell. These criminals use money coming in from new recruits to pay off early-stage investors.
Distributors can earn income through the company’s products and services. They can do this without recruiting distributors. Hence direct selling tied into the program.
Still unclear on the MLM business model?
The main reason for this type of business model is to reduce the cost of advertising. We can all agree that effective advertising can cost a bundle.
Many new companies do not have this much capital in the beginning. MLM companies can compensate their distributors via “word of mouth.” The company can save money on advertising.
They can give their distributors an incentive, in the form of money. Enrolling new distributors to promote and use the company’s product.
A Pyramid Scheme recruits members with a promise of payments for enrolling others. As recruiting multiplies, most members are unable to profit. This is why pyramid schemes are unsustainable and often illegal.
Now it’s your turn!
Have you come across people who do not understand what a real MLM entails?
What did you do to handle their concerns?
Please share your feedback in the comments section below!