Why do people think MLM is a pyramid?
It never ceases to amaze me that so many network marketers are in total shock when a prospect says, “Ha, network marketing is a pyramid scheme!” Network marketers throw their hands up in disgust and do their best to explain why network marketing isn’t a pyramid scheme. The best that they can do is to say that all businesses are set up in a pyramid shape.
Yes, most business structures look like pyramids. My question to this would be, “If you had a scam business, wouldn’t you set it up to look like a real business?”
I remember years ago, my father was asked to participate in a pyramid scheme. I forget what they called it, but the way it worked was that you got recruited into the pyramid. You had to purchase a spot at the bottom of the pyramid. Then all the people in the pyramid would try to get their friends and family members to purchase a spot, for $100.00. As the people at the bottom bought into the pyramid, the people who got in early would move up. When they finally reached the top level, they would get the money from all of the people who were below them. Or some such nonsense. The problem with pyramid schemes is that at some point no one wants to purchase a spot in it and the whole thing collapses. The people who bought in, but never go to the top level lost their money. Anyway, my father decided not to participate. Good for him!
Now, I have to ask you this. Does any of that sound remotely like network marketing? It kind of does. A network marketer might say, “No! Of course that doesn’t sound like network marketing.” To someone who has never been in the business, I would think it sounds a lot like network marketing.
If you have been following the FTC’s case against Vemma, in my opinion, you’ve had front row seats to a pyramid scheme. Some high priced attorneys managed to convince a court that they aren’t a pyramid scheme. If you look at their business practices, you see a company that did a lot of recruiting and not much in the way of selling anything to anyone outside the business. To me, that’s a pyramid!
Anyone who happens to be intellectually honest, has to see that a network marketing business has similarities to a pyramid scheme.
You buy into the deal. You go out and try to recruit others in a hope that you get to the position in the pyramid, I mean pay plan, to make money. If you are extremely lucky, you make money and all of those who you recruited, more than likely, lose money.
Network marketing’s saving grace is that the courts have ruled that they are not, for the most part, pyramid schemes. That doesn’t stop the FTC from going after a lot of them! Is your company next?
If you are worried that you might be involved in a pyramid scheme or a company that the FTC might consider a pyramid scheme, then you should be asking the company whether the members can earn a decent living from just selling the products. If your company stresses the recruiting side of things without asking the members to sell their products, to people who are not distributors, then you could be involved in a pyramid scheme.
The next time someone asks you if your company is a pyramid scheme, don’t act so surprised.
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