The Truth About Network Marketing vs. Pyramid Schemes

Let’s be honest, we have all at one point or another thought all work at home businesses are a pyramid scheme! Most of us have grown up thinking there is something wrong with them, that they are ripping us off, that they are only valuable if you get in on the “ground” floor and so many others things.

We hit a few of the things people think here. Today we are going to dig a little deeper into each of these. Let’s work together to find out the truth about network marketing vs. pyramid schemes.

A: I have no clue what a pyramid scheme really is. Is this true for you? Do you know what one is? I knew that they were bad but I had no idea how to know if it was actually a pyramid scheme (also know as a ponzi scheme). Here it is: the gist of a pyramid scheme is that the money funnels upward, there isn’t a product they sell (the focus is on recruiting people), the start up fee is typically large and they ask for more again and again, the best place time to join is at the start of the company, promise big gains for little to no work and are very aggressive when trying to recruit you.

Have you ever encountered any of that?

B: Pyramid schemes and network marketing are the same. When I would hear the words like MLM, network marketing, pyramid scheme, ponzi scheme, until a few years ago – they all meant the same thing to me. Even though I had done many MLM companies over the years, I had never made any gains. I felt they were all the same. They were all out to just take my money. I had paid into all of them to be a distributor. Some of them required you buy products to sell to customers. Some of them required you spend a certain amount each month to get paid. The list is long. But the truth is this:

Multi-level Marketing (MLM) is a marketing strategy designed to promote their product by through distributors, offering multiple levels of compensation.

Pyramid schemes are, however, fraudulent schemes, disguising as an MLM strategy. The difference between a pyramid scheme and a lawful MLM program is that there is no real product that is sold in a pyramid scheme, and commissions are based only on the number of new individuals one introduces into the scheme.

credit: diffen.com

Have you ever found yourself on the losing side of a pyramid scheme? As much as I hate to admit it, I have been before.

C: I would never buy from a work at home company because they are all out to rip you off. Let me point out that if you like a product, if you have done your research, if you feel safe buying it, if you are okay with the price they are asking then you are probable not getting ripped off. However if you are being pushed to make the choice right this second, if you are being told the offer is only on the table for a few hours, if you are not being allowed to walk away and make a good, level headed decision, then there is a good possibility you are being ripped off.

1. Focus is More on Recruiting than Selling

2. Poor Training

3. Pressure to Pay for More

4. Sales Tactics Brought to Bear on You

5. Seems Too Good To Be True

credit: Jim Wang

D: I don’t know what network marketing really is but I hear it is bad. If you listen to people who don’t really know what it is, you will usually hear how bad it is. Yes there are bad MLM companies out there. It isn’t really that they are bad, it is just the business model they choose to keep for their distributors. I personally will not be involved (again) with one that requires you keep your products stocked. I personally will not be involved (again) with one that requires you place an order of a certain amount each month in order to get paid. The best suggestion I can make for you is, do your research. They are not “bad” companies. You just have to make sure that if you are joining one, it is the right one for you. You just have to make sure that if you are purchasing products from one, it is the right one for you.

Well MLM companies have been a frequent subject of criticism as well as the target of lawsuits. Criticism has focused on their similarity to illegal pyramid schemes (hence the “scheme” reference), price-fixing of products, high initial start-up costs, emphasis on recruitment of lower-tiered salespeople over actual sales, encouraging if not requiring salespeople to purchase and use the company’s products, potential exploitation of personal relationships which are used as new sales and recruiting targets, complex and sometimes exaggerated compensation schemes, and cult-like techniques which some groups use to enhance their members’ enthusiasm and devotion. Eesh!

credit: Jody Greene

E: I would rather buy from the corporate world and people I don’t know than to support friends and family. So here is were I stand with this. If I can help a friend or family member stay home and achieve their goals, I am going to do it. I understand that all of those who work at Meijer and Target and Walgreens need those jobs as well. I am not complaining about that at all. However if I am going to spend money on something, if I agree with the materials they use, if I am in need and if I am really a person who loves others – I am going to purchase from my friends and family! I do not agree with a lot of the companies that I do purchase things from when I go grocery shopping and yet, it doesn’t stop me from buying their products. So if I do not agree with network marketing but I can help a loved one out, why should the word MLM stop me from helping them? It should not!

I cannot stress enough just how much it means to someone to have support from friends however big or small. Now I’m not saying anyone expects anything, really they don’t but a mention of “how’s it all going?” or a like or share of a business post will really mean the absolute world, it really is hard out there when you are starting out – we have all been there!

credit: deveniabesant.com

 

F: Network marketing companies are just an optical illusion and don’t really help anyone. I have admitted I have been involved in many MLM companies. Most of them I didn’t make a thing with. However the company I am with now, I have not had a month go by without getting a commission. I do think there are probably some MLM companies out there that are more of an optical illusion than a reality. No company is supposed to make claims for income but you can make money from some of them.

The reason I decided to write about all of this is because there are a lot of companies out there that you can join. I support as many friends as I can when it comes to this. Why do I do that? Because I truly care about them! I want them to be successful. I want them to know I actually care about them and their life and their choices.

Yes, as with anything there are bad choices out there. But the truth is, pyramid schemes are NOT the same as MLM companies. The truth is, most people when they write about them, still write as though those words are interchangeable. They should not be.

When writing this, I came upon a lot of articles written warning about how bad they are. How you lose money, how you lose friends and family, how you are wasting your time and it goes on.

Do you want to know what I really think?  If you are telling people NOT to buy from these companies, if you are telling people they are going to lose their friends and family, if you are telling them how awful these things are – this is what attitude seeps into our minds.

You are right, we will lose money if you are telling everyone not to buy from these types of companies. You are right, if you are influencing friends and family by telling them not to put up with this, we probably will lose them.

These companies can change lives and do change lives. Can you imagine how many more lives could be changed if we changed how we view these opportunities? I can imagine!