The age old question, is multilevel marketing a scam? Too many people fear multi level marketing, network marketing and direct selling companies. Far to often the word pyramid scheme is used to describe these companies and it couldn’t be any further from the truth. This article is going to examine multi level marketing vs pyramid scheme. We will look at what multi level marketing, direct selling and network marketing is. We will then examine what is a pyramid scheme, with the goal to educate and dispel the myth. Lets get rolling!
Network Marketing and Direct Sales – What are they?
Network marketing and direct sales are essentially the same sales concept. They are both a form of selling that eliminates the middleman. Direct sales encompasses traditional doorstop, party plan and network marketing sales methods. Independent distributors recommend and sell directly to the customer and get a commission for selling that product at retail price, without having to advertise or recruit a sales force. In traditional business, the company would pay to advertise their products and have a sales force work through the transaction with the customer, where as network marketing/direct sales company, the independent distributor will sell products on their behalf to people directly in their network. This could be friends, family or people they build a relationship with. Network marketing is heavily driven by relationships. The customer will usually only buy once a relationship has been cultivated with the independent distributor. This relationship will often mean you have a long term customer. Network marketing also rewards their independent distributors by sponsoring people into the business. Now lets look at where multi level marketing fits into the equation.
What Is Multi Level Marketing (MLM)?
Multi level marketing is related to network marketing and direct selling, but multi level marketing refers to the actual business structure. The concept behind multi level marketing is that an independent distributor can build their own sales force or in MLM terms – downline. MLM employs a duplication method where the independent distributor recruits members into their team, and then teaches them how to do the same. Once the recruits start to recruit their own members, they then teach their recruits to do the same, so on and so forth. In the ideal world, all members in the downline are there to support, help and work together, because as the saying goes, more hands make light work. Your sales and recruiting efforts not only go toward your income, but so does your downlines. As they recruit and sell, you get paid a percentage because you have helped them duplicate what you do.
Now to the question – is multi level marketing a scam? Multi level marketing is a legal business model despite all the critics plights to label it as a scam or a more favoured term – “pyramid scheme.” The industry is not well regulated, and there are concerns within the industry, that companies that run pyramid schemes disguise them as MLM’s. It is important to do your due diligence and there are places you can turn to help you determine if the MLM your interested in is legitimate. The Direct Selling Association is a good place to start and the Federal Trade Commission. The Federal Trade Commission is a US based organisation, and the Direct Selling Association is also US based, but has a number of sister organisations throughout the world, UK, Israel, Malaysia, Singapore, Australia and New Zealand.
What Is A Pyramid Scheme?
Pyramid schemes are illegal and usually involve people giving money to join with the promise of making more money by recruiting others that do the same. What eventually happens is that the people at the top make all the money and the people at the bottom lose their investment. Pyramid schemes can take many forms and they can be very cleverly disguised as a multi level marketing company, so care should be taken when looking into a business opportunity to ensure you don’t get fooled into parting with your hard earned money. Check out the video below for further clarification about what is a pyramid scheme.
So is multilevel marketing a scam? Multilevel marketing is a legal business model that is based on independent distributors selling products and creating their own sales force called a downline. The independent distributor will teach their downline how to create their own downline. This process is duplicated and income is generated as a result. Each person has the opportunity to create their own business. On the other hand, pyramid schemes are not a legal business opportunity and usually involves people paying money to participate and get paid when they recruit others. The people at the top get all the money and the people at the bottom lose money. Care should be taken when looking at a business opportunity as pyramid schemes can often be disguised as multi level marketing companies. The direct selling/network marketing industry is not regulated, but there are organisations you can go to for information and advice regarding multi level marketing companies that are legitimate.
A final note. There are many great network marketing and multi level marketing companies out there that can offer home business opportunities. Don’t be disparaged by those that do the wrong thing in the industry. Do your due diligence and don’t be afraid to ask questions to make sure you choose the right opportunity for you.
Thank you for reading, I hope you have found this article useful.