“ Multi Level or Pyramid?”
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To clearly identify the differences between Multi-Level Marketing and illegal Pyramid Schemes, consider the following facts:
Multi-Level Marketing
Is a legally recognised form of marketing. Companies must fulfil strictly enforced requirements. Emphasis is on retail sales and consumption of product, enforced through minimum retail sales or turnover requirements to receive bonuses.
No financial benefit is derived from simply getting people to join up. Offers a full money back guarantee on all products sold to consumers.
No one profits until the product or service is sold to a satisfied customer.
Pays refunds for stock returned by distributors who
wish to terminate their agency.
Discourage distributors from holding a large stock
inventory. Therefore no capital at risk.
ALL distributors pay the same wholesale price for
goods.
ALL distributors have an equal opportunity to reach the top levels in the marketing plan. There are no limits to how many people can achieve these levels. The Company accepts full legal liability for its products or services. The distributor is free of liability. Little or no upfront investment. Usually less than $100 for registration, subscription to Company magazine/newsletter, forms, literature, training aids, and optionally perhaps some demonstration stock.
Ongoing training and assistance is given by the Company and upline sponsors (those who introduced you to the business).
Payment of bonuses on turnover generated by your downline (distributors introduced by people you personally introduced) is limited to between 3 and 7 generations after these have achieved turnover figures showing they can operate independently.
Truly a fair system of renumeration as a sponsor’s involvement in support and training is significantly reduced once distributors 3 to 7 levels down are established. Encourages self improvement through helping others.
Pyramid IS ILLEGAL! While schemes of the past are long gone there are cases in recent times where companies have not been allowed to continue operating.
Emphasis in on sponsoring new ‘distributors’, not on selling products. A heady is bounty is paid for just getting people to join. Income is derived from these fees new distributors pay for rights to an area, a franchise or simply for position in the company hierarchy.
No guarantees, no money back.
Customers are not sought. Profit comes from recruiting.
No return of stock or refund of joining or franchise fees.
Encourage new distributors to buy in BIG! Capital at risk. Often life savings or retirement funds have been lost or heavy debts incurred.
Distributors pay proportionally higher prices for goods or franchise the further downline they are. This is primarily responsible for people getting stuck with overpriced merchandise.
Only ONE person can ever be at the top. The further downline you join the business, the harder it is to succeed.
The Company (if it is still in existence and can be found) accepts no legal responsibility for products. Large upfront investment to buy rights, position, area or bulk stock can range from hundreds to many thousands of dollars.
No backup or training. You are on your own! There is no limit to how many levels down a pyramid sales plan can work, so long as people can be conned into buying in, the chain continues. (Yes, chain letters were a form of pyramid selling, which although illegal is still promoted in some areas).
Success comes from shifting the risk to other people – a selfish business! Encourages an ‘every man for himself’ attitude. Built in failure.
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Article contributed by Helene Malmsio
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