In this post, I will help you distinguish between the two!
I am writing this post out of a lot of concern because In a lot of MLM groups on social media, i.e Facebook, I see a lot of people promoting “Stuff” with headlines like…
“No money down! Enroll in our awesome 5 by 10 Matrix, no selling, no recruiting, our system does it all for you”…
Then some link to some website with no destination, and no backing…
And people fall for these sort of schemes, and then when they backfire, they say its Network Marketing which has failed them.
Pyramid schemes have done so much damage to a lot of people, so it’s clearly obvious you have to understand the difference between legitimate Multi Level Marketing Vs a pyramid scheme BEFORE you join any program!
Legitimate (MLM) Multi Level Marketing Vs Pyramid Scheme …whats the difference?
There is a clear-cut difference between Money games, pyramid schemes and a legitimate Network Marketing Company, and some of the guidelines for such are below.
Go through them, and be careful when making a decision to join anything.
- The company has a good competitive product which can be sold to the end user.
- Money paid out is not based on just recruiting, but on sales of products.
- There is monthly reorder requirement or a minimum volume requirement which should be met by distributors.
- The company should be registered with the direct selling association (DSA) of the USA.
- The company should have been in operation for at least 3 years (since most MLM startups fail after one year), and in my own opinion, have an office near you where you can go and interact with the company representatives.
There are some other guidelines below from the Direct Selling Association (DSA) of the USA which will help guide you on the difference between a legitimate MLM company and a Pyramid Scheme or Money game:
Legitimate direct selling companies contribute to a vibrant marketplace by selling competitive, high-quality products and services and providing a sustainable source of income for those who choose to sell those products.
Specifically they (Legitimate Network Marketing Companies):
- Provide accurate information about the company, its products and what one can expect as a seller of the company’s products and services.
- Charge a nominal fee for a starter kit – the median cost for the start-up kit is $99 and usually includes items such as samples, catalogs, order forms and other tools that help the seller begin selling.
- Have a product or service that is competitive in the marketplace and is purchased by the ultimate user.
- Require sellers to hold little or no inventory and has a buyback policy to protect against inventory loading.
- Base compensation primarily on the sale of products and services to the ultimate user. Compensation can be generated from either your own sales or the sales of others you have recruited.
- Take time to describe the business and give potential sellers adequate time to make a decision – any opportunity worth having will be there tomorrow.
- Legitimate direct selling companies also promote consumer protection and guarantees. Many of these are voluntary standards that exceed the requirements of any regulations created by the Federal Trade Commission (FTC) or mandated by federal or state law.
- Members of the DSA have also pledged to abide by a strict Code of Ethics that outlines a high set of standards for interactions with both sellers and customers.
However, Pyramid schemes take advantage of and defraud people because they:
- Promise large earnings with little effort.
- Promise that one can earn a substantial income merely for recruiting people into the operation.
- May or may not be a “product” to sell, but if there is it generally has little or no actual value.
- Convince people to buy large amounts of inventory which they cannot easily sell to others and is not returnable (this is called “inventory loading”).
- Charge large up-front fees to get involved, either as a direct payment or in the form of an obligatory payment for “products”. Promoters of pyramid schemes will also try to pressure people to sign up immediately by suggesting the same opportunity will not be available later.
- Base compensation primarily on activity (these payments for recruitment are called “headhunting fees”). Participants are convinced to pay to get involved with the promise of receiving “headhunting fees” when they recruit others.
You can read up more from the DSA website here.
CONCLUSION: Multi Level Marketing Vs Pyramid Scheme.
I hope this information has helped you.
Share this with your team, and with any prospects who are looking to get involved in the MLM industry.
If the company you are looking at doesn’t match the above guidelines, you might want to take another look.
As an MLM professional, you need to learn to distinguish between a legitimate Network Marketing company, and a pyramid scheme and money game, posing as a legit MLM company.
It doesn’t matter if the company is giving you cars, or that the company pays commissions.
If its a pyramid scheme it will crash further down the line like TelexFree, Zeekrewards, JustbeenPaid, RocketCashCycler, and Helping Feet International.
Now, its the cryptocurrency MLM scams which are being shut down by US regulators.
Note: I have nothing against bitcoin or cryptocurrency in itself, but buy directly from the marketplace rather than invest in these ponzis.
Remember, we have to be responsible, for ourselves, and for the people, we enroll into any opportunity, so at the end, your integrity and good name are intact.
Did This Blog Help You? If so, I would greatly appreciate if you commented below and shared on Facebook and other social media.
Adewale Adebusoye’s MLM and Internet Marketing Blog
Follow me on Instagram: @adebusoye
Email: ade(at)adebusoye (dot)com