Pyramid schemes are a type of fraud that involves a person paying money to the first person in the chain, and then they must recruit people below them. The last person gets nothing. In contrast, multi-level marketing has no churning or recruiting required from the participant’s end.
It is based on selling products to customers. There is an opportunity for participants to make money by becoming leaders within their organization and earning commissions off of sales generated by those under them, but this is not always how it works since there are many different types of MLMs out there with various compensation plans available.
Pyramid schemes are illegal and present a very high risk for all involved.
Pyramid schemes are an illegal form of investment in most countries and therefore we would like to warn you not to get involved with them! Although some pyramid websites may be legal, the majority will not and this is something that people should always look out for when getting involved.
There are many examples of pyramid schemes, two of the most popular being OneCoin and MMM. OneCoin has been banned in a number of countries for its fraudulent activities including India. In fact, India’s Criminal Investigation Department (CID) arrested 18 people accused of defrauding investors by running a Ponzi scheme disguised as a Bitcoin investment company named ‘OneCoin’. MMM is another example of a scam Ponzi scheme. However, the most popular within the cryptocurrency community are BitConnect and USI-Tech.
Multi-level marketing is not my thing.
I just seem to always come across it, whether it is selling supplements or trying to sell you on the newest way of preventing cancer. And most of the time, if they can’t outright sell you something, they try and push your buttons by asking what you will do if an illness affects one of your loved ones?
It’s a good question, and it gets me every time. However, this article isn’t about my own sensitive side. I want to look at the bigger picture of the costs that go into a multi-level marketing business, and whether or not you can really make money with one of these things.
Pyramid schemes have no product to sell.
Instead, they attract new recruits to sell products and recruit more distributors, who then do the same. The pyramid continues until it collapses under its own weight as those at the bottom of the pyramid fail to make any money.
Pyramid schemes are scams that involve selling a product or service that doesn’t exist, or simply an empty promise on your investment. Some pyramid schemes may also be Ponzi schemes, in which the organizer will use money received from new members to pay off old members.
Pyramid schemes are illegal in most countries around the world and can result in legal action against the people who started them, as well as those who join them. They are typically hard to prove in a court of law.
In most cases, pyramid schemes don’t actually involve selling a legitimate product or service. Instead, they focus on recruiting new members and getting them to recruit more members. The idea is to get as many members as possible to make money from sign-up fees, recruitment fees, and ‘sales’ of non-existent products.
- * A new member pays an initial fee to join the scheme, for example, $100. The only product they may receive is the right to sell products or services themselves.
- * The organizer promises that members can make money by referring others to the scheme, buying advertising and sales leads, recruiting new members, and so on. They claim that members can make thousands of dollars.
- * The organizer claims that products or services can be sold to consumers for personal use, as business opportunities, or as part of the pyramid scheme itself. Participants typically don’t end up receiving any products or services at all.
Multi-level marketing has products to sell, and those products have a market.
The market is as large as the number of people who want or need those products, so to increase sales, MLM organizations encourage their members to recruit others who will also sell their products.
They provide training and promotional materials for this purpose and many companies offer incentives—like discounts on the product or free trial offers—to encourage new recruits to try their first product.
MLM companies like to claim that the average MLMer makes between $500 and $2000 per month, but if you listen carefully, they will always point out (in very fine print) that this is an average figure which includes people who work part-time or otherwise only a little. And this is before their expenses, expenses which according to the FTC “typically [add] up to nearly the price of buying the goods themselves.”
MLM success is not a function of how many people you recruit or even how many products you sell; it’s only a question of how much money you pocket that depends on whether you’re willing to put in the hours.
Multi-level marketing is not a scam.
This is one of the first things you need to know before getting involved. Multi-level marketing (MLM) is not a scam, but some companies engaging in multi-level marketing are scams. This article will attempt to dispel several myths that surround this business model and discuss why people fail at MLM. It will also tell you some of the reasons people succeed at MLM.
Myth 1: MLM is a scam because it´s illegal to sell products to your customers.
It’s not a scam, but it sure feels like a scam! That’s what many people think when they first hear about multi-level marketing and direct selling companies. Here are a few facts: a multi-level marketing company allows you to buy products at wholesale prices and re-sell them at a retail price. This is allowed in many countries, including the US. You can be an independent sales representative for that company without being an employee of the company. Now this point alone should stop your urge to call your state attorney general’s office.
However, it is important to note that if you decide to join a company and pay anything for the chance to sell their products, then that does feel like you just got scammed. You paid money for something—and when you try to get your money back or even ask a question, attention is diverted from product knowledge and directed toward you and your wallet.
Myth 2: MLM is a scam because most people lose money.
Actually, it’s not true that most people lose money in direct selling companies. It’s just the opposite. Most of the participants do earn an income, but usually at levels much lower than what they initially expected or were led to believe. I was one of them! A year after selling books, tapes, and seminars (MLM products) for a company that has since gone out of business, I was still broke.
Myth 3: MLMs use cult-like techniques to recruit people.
I’ve done extensive research on the subject and talked with many participants—and I’ve even had a few of them tell me that I was too skeptical. Many people selling the products are very sincere and passionate about what they do; sometimes, however, things can go wrong with the company or business model.
Myth 4: MLM is a scam because it´s like gambling—you never know who’s going to win.
I’m not sure if the analogy of gambling with MLM is accurate, but I can say without a doubt that you have less chance to win at roulette than with an MLM business. This is because “the house” always wins—and there are many levels of “the house.” But keep reading to find out why this doesn’t always apply to network marketing.
Myth 5: MLM is a scam because distributors are not well-trained.
If you don’t think it’s worth spending the time, effort, and money to make your distributorship successful, I think that says more about you than about direct selling companies. Sure, there are companies that don’t train their distributors well. But there are many that hire only the most experienced and successful people to teach their distributors, so it’s not all bad.
Myth 6: MLM is a scam because you have to recruit in order to make money.
When you join a traditional business, such as an insurance agency or mutual fund company, the company trains you in the product so you can sell it to customers. Then they expect you to do exactly that. If you don’t meet your quota every month, not only do you miss your commissions for those unsold policies or funds—you also lose your job!
Myth 7: MLM is a scam because distributors are not professional.
It’s true that many distributors don’t have a very polished public speaking style or cosmetically pleasing appearance, but it doesn’t mean they can’t sell the products. Look at it this way: if you joined a company and were trained by their tenured executives on how to sell a product, would you be confident of your ability to do it?