Multi Level Marketing: How to spot a pyramid scheme

 When you're told that your dreams can be achieved faster than you think and you're told that wealth is not far as you think that financial freedom is yours.

 Now everybody who is reading this blog has this question on your mind, who is going to tell me these above ones?????what is it??

It would come in the form of your best friend or the person who you admire or your family friend or the person you know very well. They tell you like 6-7 figure earners, be your own boss as soon as possible and they invite you to seminars or some events. You go to that seminar and suddenly a positive vibe enters your mind and a speaker enters the stage and they also tell you that 9 - 5 is for the losers. You work from home you pay your own expenses and earn commission on what you sell 

What is it??

It is called as MLM - Multi Level Marketing or network marketing. It is a strategy for the sale of products or services where the revenue of MLM company is derived from a non salaried workforce selling the company's products or services while the earnings are derived from a pyramid shaping structure. An MLM may be illegal.

History of MLM 

Presently 50 million people are engaged in this MLM all over the world. But, where comes does it origin????

There is no origin for MLM it is believed that this concept originated from 'Nutralite' formerly known as California Vitamin Company. In the 1940s the company used this strategy to increase its sales.

Pyramid scheme 

A pyramid scheme is a business model where a few top level members recruit newer members. Those members pay a entry amount to the members who had recruited them. As new members recruit other new members the entry amount is going to the pocket of the members who had recruited them and the top level members will make 💰 with a percentage of the amount.

Why it is named as a pyramid scheme?

It follows a pyramid structure with the single point on the top and they become wider towards the bottom. 

Let's assume what we learnt from the above paragraphs 

A founder of the company sits alone at the top, we can represent him as tier 1, then he recruits 10 members under him, we can represent them as tier 2, where each newly joined member must issue a cash payment (entry fees) for the privilege of joining and they should sell the company's product. Each tier 2 members should recruit other 10 new members so the total is 100. The amount  is credited to the tier 2 members and a percentage of it will go to the pocket of the tier 1 member.

Many pyramid schemes will rely on fees from recruiting other new members. Majority of them do not involve in the sale of products.

How the pyramid breaks 

We can notice that the lower levels remain bigger than the upper levels. If the lower levels shrinks the entire pyramid will break down. If the people are unable to recruit new members then the structure would fail and the rotation of money would not happen. Then the upper line members would walk out with a load of cash and the downline members who are newly joined into the program will remain zero.

Difference between MLM and pyramid scheme

 

Multi-level Marketing	Pyramid Scheme
MLM is to promote maximum number of distributors for the product and to maximize the sales force.	Pyramid schemes doesn’t promote products but they would recruit members.
The distributors will earn a commission out of how much products they have been distributed.	The members make money only by recruiting other new members into this program.
They will recruit new members to this marketing service and compensation for the sales their recruiters make.	The scheme will promise to provide a Sky-high return in short period of time whereas they are unsustainable.
Network marketing is legalized in India.	Pyramid schemes is illegal in many countries including India as it is not legalized.

 

How to spot a pyramid scheme?

• Do an internet research 
• Read many articles about the company
• Search the company with words like scam, fraudulent, complaint etc.
• Find how long the company have been in this business.
• How they are interacting with their customers.
• Whether the company has been sued for deceptive business practices.
• Ask your sponsors some good  questions like what is the compensation structure?? How much money can you make out of it??

Companies which follows the network marketing scheme 

• vestige
• Oriflame
• Herbalife
• Amway
• RCM
• Safe shop

Final thoughts

When you enter into a MLM company they will give you self help books to read. By reading these books you enter into the toxic positivity and it leads you to entitlement. That's why it's very hard to come out of this program.