MLM or Pyramid scheme - What is the difference?
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I am putting this article not to defend any MLMers or MLM company, but for the benefit of those who do not get the chance to know or read about it.
I do not blame those who are skeptical. Skepticism is not a bad thing. After all, we all want to protect ourselves. But skepticism without investigation is stupidity. Everyday, there are so many new things and changes around us and we stop finding out just because of skepticism. That is so unfair to ourselves, isn't it?
However, I do believe that there are some of you (non MLMers & anti MLM) who want to find out, but not sure where to start. Hence, I am pasting this article for your reading. Hope this will clear some doubts and misunderstandings, which very much exists in this forum. -
By Paul M
Many people question the ethics of MLM. They claim that the people on the top get all the benefit from the people working below them, while the people below don't get much if anything at all. Nothing could be further from the truth!
Think about where you work. Isn't it true that the boss is raking in the big bucks out of the money YOU are making for the company? And if there is cutbacks who is the first to go? Definitely not the boss and probably not his bonus.
With an honest MLM, you can easily make more than the boss if you put the effort into it. He gets a little bit from your sales, but you get the lion's share.
But isn't this just a big 'pyramid scheme'? Yes and no. Anyone who works a conventional job is in a pyramid scheme. Every company, army, and government in the world is built on the pyramid concept. However, with multilevel marketing, you aren't held back by the people above you like you are in a conventional job.
With an MLM, you can build your business as large and as profitable as you want it to be.
So, what is a Pyramid scheme?
These illegal scams involve a large number of people at the bottom of the pyramid, all of them paying money to a few people at the top. Each new participant pays for the chance to advance to the top and profit from cash paid by others who join down the line. Pyramids resemble a legal MLM in structure, but there is an important difference. Pyramid schemes seek to make money from you, while multi-level marketing seeks to make money with you. The Direct Selling Education Foundation suggests that, before you sign up with a company, you ask yourself these three questions:
1) How much am I required to pay to become a distributor? An MLM company will generally charge a small start-up fee. Pyramid schemes make most of their money from signing up new distributors, so their start-up charges are often very high. These start-up fees may be called many things and you may be told they are required or are recommended purchases for training, computer services and product inventory.
2) Will the company buy back unsold inventory? Honest companies will usually buy back any products that you fail to sell. Bogus companies will stick you with the inventory.
3) Are the company's products sold to customers? Pyramid schemes
gain nothing by actually selling a product, and often don't sell anything at all. They focus only on gaining new investors. Be wary if you must start by buying a large amount of product. Also, take a good look at the product itself. Multi-level marketing depends on quality products that are well-priced; pyramid schemes do not. Pyramid schemes are much like chain letters; they require mathematical gymnastics that cannot possibly work. Pyramids always collapse in the end, and only a very few (usually the con artists themselves) make any money on them at all.
As with any other investment, before you commit ask questions about the company, its products, start-up fees, buy-back policies and its earnings. Take your time and investigate any information you're given. Talk to other investors and research the company. Don't act hastily! -
Paul Marsland is an independent distributor for a Multi-level marketing company with 25 years of experience and trading in 59 countries worldwide. Along with his wife Annette they run a successful MLM business, full time from home, around their young family.
For more information please go to: http://livin-the-good-life.biz/?refid=ezineaticle-567883263
Article Source: http://EzineArticles.com/ -
many reasons why i dont step in much nowadays to comment, and i presented the same reasons on the anti mlm forum..is that there is lack of awareness or knowledge on how direct selling, network marketing, mlm, pyramids really work...and many fruitless discussion in this forum, and by both sides
for example on technicalities, Asayo and DW are two commonly used examples by anti-mlmers to bash MLM..but the truth is that these two cannot be simply considered having MLM structure. They do not posses many features of MLM, for example, having total residual and long term network, Their distributors are actually employees, for goodness sake, former employees have mentioned before that they receive reimbursement on expenses. Two years ago, three out of thirteen DSAS members are strictly considered MLM coys.
which leads to second question, what is the structure and marketing plan of these coys? again, i never seen this discussed much..
there are hosts of other questions, like how do u see whether a company act in pyramidlike, and i must do commend many forumers who actually are able to point out how it look like - very, and i mean very little emphasis on products, many crappy motivation seminars, aggressive recruitment methods...
the downside is that, many simply ride on the waves of emotions and blatant url linking - discussing how they feel their friend seems to be cheating them, how hypocritical people can be blah blah...and one guy cleverly post one article on why mlm coys arent bigger than other coys, i have to point out he is making many unfair comparisons, which even businessmen would not do..gotta refer to the topic, it was long time ago...
the worst sin of them all is try to mix mash business ethics and subsume it totally under common views on moral and ethics - this is committed by both sides, mlmers who discuss sunday gatherings as church like (discussing spirituality with profiteering is a big no no to me), and non mlmers who perceive anything which looks like inferor products as scams, and business shouldnt profit much from people...i gotta laugh at this..why shouldnt the coy make as much profits as they like as long as they can command market share or achieve target sales with that competitive price?
other misconceptions is that DSAS and CASE are two powerful org which can solve ur case..a big no. They are as powerful as babies trying to snatch ur candy. Not any organisation which are DSAS members can be straightaway counted as a legal or an ethical company. Lux and Enrich (formerly DW and AMH) are two good examples. It was reported last year Lux has 35 (or 75?) police reports made against it.
I think both sides seriously need to sit down and research some more b4 shooting off remarks, and i dont mean just linking urls from webbies. -
Hi Fellas,
I supposed you can't blame us for doubting.
Basically, MLM's concept is great and for some product, it is a fantastic way to move awareness and acceptability.
But...
- All claims that their product or payout is the best.
- All claims that if you do not want to know, you are losing out or you are "frog in the well" Reverse psychology?
- All claims that you are sickly or needs more supplements
- All claims that you will lose your commission if you don't hit your target
- ... more
Get it? All the claims... its like endorsing on a religion that says:
Hear Ye Hear Ye! If all of ye none believers deny our gods, the greatest gods in the universe, then shall ye be forever damned! So cometh forth and be redeemed!"
Most became fanatics and have themselves turned into frogs, refusing to see it in another view. Sure, we can see your view but was never listened when I speak. I have listened to a fair few and heck even joined. But the members turned me off. -
Not that I am doubting your claim. But if you could support with more information, maybe the rest of us could help voice out your concern to the respective management, or even authority if the respective company refuse to cooperate. Because if your claim is found to be true and is bothering you, then it will also bother many other ppl out there. Hence, it is important that we address the above issues that you mentioned in the right manner, by taking action if we need to.Originally posted by AbstractArt:Hi Fellas,
I supposed you can't blame us for doubting.
Basically, MLM's concept is great and for some product, it is a fantastic way to move awareness and acceptability.
But...
- All claims that their product or payout is the best.
Well, who will not? I mean... if I am using SK2 product, I will praise it. Why? Cuz I think it's the best product, that's why I am using it. If I use it and still doubt it, I must be crazy, right?
- All claims that if you do not want to know, you are losing out or you are "frog in the well" Reverse psychology?
Ehhh... Not that I know of. I have ppl doing all kinds of MLM for skin care, health supp, IDD lines etc. So far none has said such thing even if I show no interest in knowing more.
You experienced that? With which company?
- All claims that you are sickly or needs more supplements
This is new to me, though I know ppl (close friends) from Amway, Herbalife, Nuskin. But none has told me that I'm sickly. Which company told you that you are sick?
- All claims that you will lose your commission if you don't hit your target
Again, which company is that?
- ... more
Get it? All the claims... its like endorsing on a religion that says:
Hear Ye Hear Ye! If all of ye none believers deny our gods, the greatest gods in the universe, then shall ye be forever damned! So cometh forth and be redeemed!"
Most became fanatics and have themselves turned into frogs, refusing to see it in another view. Sure, we can see your view but was never listened when I speak. I have listened to a fair few and heck even joined. But the members turned me off.
But if it is heard from somebody's friend's relative's colleague's friend etc etc... and not first hand experience, then I can safely say there is no issue lah. Cuz the somebody's friend's relative's colleague's friend might not even exist in the first place. Nevertheless, I will take your word for it for the time being. -
hahhaa... agreed. sometimes, we really have to bring ourselves down to their standards and talk their language... HAIZ..Originally posted by laurence82:many reasons why i dont step in much nowadays to comment, and i presented the same reasons on the anti mlm forum..is that there is lack of awareness or knowledge on how direct selling, network marketing, mlm, pyramids really work...and many fruitless discussion in this forum, and by both sides
for example on technicalities, Asayo and DW are two commonly used examples by anti-mlmers to bash MLM..but the truth is that these two cannot be simply considered having MLM structure. They do not posses many features of MLM, for example, having total residual and long term network, Their distributors are actually employees, for goodness sake, former employees have mentioned before that they receive reimbursement on expenses. Two years ago, three out of thirteen DSAS members are strictly considered MLM coys.
which leads to second question, what is the structure and marketing plan of these coys? again, i never seen this discussed much..
there are hosts of other questions, like how do u see whether a company act in pyramidlike, and i must do commend many forumers who actually are able to point out how it look like - very, and i mean very little emphasis on products, many crappy motivation seminars, aggressive recruitment methods...
the downside is that, many simply ride on the waves of emotions and blatant url linking - discussing how they feel their friend seems to be cheating them, how hypocritical people can be blah blah...and one guy cleverly post one article on why mlm coys arent bigger than other coys, i have to point out he is making many unfair comparisons, which even businessmen would not do..gotta refer to the topic, it was long time ago...
the worst sin of them all is try to mix mash business ethics and subsume it totally under common views on moral and ethics - this is committed by both sides, mlmers who discuss sunday gatherings as church like (discussing spirituality with profiteering is a big no no to me), and non mlmers who perceive anything which looks like inferor products as scams, and business shouldnt profit much from people...i gotta laugh at this..why shouldnt the coy make as much profits as they like as long as they can command market share or achieve target sales with that competitive price?
other misconceptions is that DSAS and CASE are two powerful org which can solve ur case..a big no. They are as powerful as babies trying to snatch ur candy. Not any organisation which are DSAS members can be straightaway counted as a legal or an ethical company. Lux and Enrich (formerly DW and AMH) are two good examples. It was reported last year Lux has 35 (or 75?) police reports made against it.
I think both sides seriously need to sit down and research some more b4 shooting off remarks, and i dont mean just linking urls from webbies. -
well, i am not for any side...in fact, there are abt one or two person whom i love to talk abt mlm to, coz they knew by experience what really good abt it, and what legal loopholes are there, and what actions to take in case of scams..Originally posted by I love BMW:hahhaa... agreed. sometimes, we really have to bring ourselves down to their standards and talk their language... HAIZ..
a lot of mlmers in this forum, i am afraid, are too philosophical when discussing business opportunity, and i am afraid, non mlmers are the more extreme and rigid ones in their thinking, and riding on the emotional waves instead...
its not wise to ban it altogether, coz US, Japan, Taiwan, Malaysia have alredi been way ahead in this industry, with effective regulations and even non government agencies participation in catching scams..
network marketing, and dont be shocked, is reported to be studied as degree courses in US universities..
but one bad thing is that scams are rampant in sg, being new to mlm and slightly not been much introduced to direct selling...the authorities are too slack actually, despite the many cases reported....
well, this is the reality as best as i can present to peeps here... -
Most of the MLM companies mentioned in this forum are quite good and reputable. (Only the fly by night kind of companies that we really have to be careful cuz every month there are so many MLM companies that close down). The payout plan is also quite reasonable -- each company has a plan that suits different ppl. But somehow there will be some black sheep in every company. Today, I just heard my friend telling me her bad experience with one very reputable MLM company which I almost joined two years ago. I explained to her that the company is a very good and established one. It's her friends doing the business that spoil the market.
So the best thing is to deal with the black sheep by making complaints to the companies directly. You see... if we allow the black sheep to continue doing what they are not supposed to do (eg. make all kinds of promises to excite new prospects, very hard sell etc), very soon our govt might receive such complaints and ban the MLM altogether. This is not going to benefit anybody (consumers will have less choice , MLMers will lose the business & it's definitely not going to do our economy any good).
I know one company that sends out warning letters and even suspends the distributorship when a distributor breaks certain rules in the business. I am sure many other companies do the same. -
Hmm.... after so many days, I have not heard anything. I was trying to help those who have grievances against MLM -- either the ppl, the company or both. So now I can safely assures everyone that there is actually no issue against any MLMers or their companies.Originally posted by Honeybunz:Not that I am doubting your claim. But if you could support with more information, maybe the rest of us could help voice out your concern to the respective management, or even authority if the respective company refuse to cooperate. Because if your claim is found to be true and is bothering you, then it will also bother many other ppl out there. Hence, it is important that we address the above issues that you mentioned in the right manner, by taking action if we need to.
But if it is heard from somebody's friend's relative's colleague's friend etc etc... and not first hand experience, then I can safely say there is no issue lah. Cuz the somebody's friend's relative's colleague's friend might not even exist in the first place. Nevertheless, I will take your word for it for the time being.
So now we can move on to more mature talks, like the compensation plans and system of each company and the differences. -
Thanks for highlighting this.Originally posted by JWorld:By Paul M
"
3) Are the company's products sold to customers? Pyramid schemes
gain nothing by actually selling a product, and often don't sell anything at all. They focus only on gaining new investors. Be wary if you must start by buying a large amount of product. Also, take a good look at the product itself. Multi-level marketing depends on quality products that are well-priced; pyramid schemes do not. Pyramid schemes are much like chain letters; they require mathematical gymnastics that cannot possibly work. Pyramids always collapse in the end, and only a very few (usually the con artists themselves) make any money on them at all."
This is really the acid test for a pyramid scheme. Are products sold to real customers? (People who are NOT fellow members of the scheme and who buy the product for their own use.)
If you are selling only or mainly to fellow members of the scheme (ie people who sign upto be distributors) then you are in a pyramid.
Why ?
Because in order to sell you need to RECRUIT a distributor. Sales are tied to the number of distributors. To sell one more item we need to get another member signed up. Since population is fixed, the number of people who can be recruited is fixed and when the population limit is reached all sales stop.
Ah you may say, but the population is large we will never run out of members. But remember
1. that only a small % of the population will join. (many will not have time, money or sufficient interest to join.) Just ask the fellow who wants to know how to become a Herbalife SV just how easy it is to recruit people.
2. The network will be expanding exponentially as each member goes on a recruiting spree and growth will be extremely fast. Saturation may take a few years to reach, but it is eventually reached with the usual consequences.
On the other hand, a good level for "outside" sales ( 70% is used as a test by US courts) will ensure that sales will continue even if recruitment stops.(One will lose 30% of sales but the balance will be sustainable, subject of course to the products continuing to be competitive in the market. -
Thanks for your input. I see that you are assuming that products are only sold to members, which means that the main focus of every company is recruitment. This is not the case in a true MLM company.Originally posted by ratty:Thanks for highlighting this.
This is really the acid test for a pyramid scheme. Are products sold to real customers? (People who are NOT fellow members of the scheme and who buy the product for their own use.)
If you are selling only or mainly to fellow members of the scheme (ie people who sign upto be distributors) then you are in a pyramid.
Why ?
Because in order to sell you need to RECRUIT a distributor. Sales are tied to the number of distributors. To sell one more item we need to get another member signed up. Since population is fixed, the number of people who can be recruited is fixed and when the population limit is reached all sales stop.
Ah you may say, but the population is large we will never run out of members. But remember
1. that only a small % of the population will join. (many will not have time, money or sufficient interest to join.) Just ask the fellow who wants to know how to become a Herbalife SV just how easy it is to recruit people.
2. The network will be expanding exponentially as each member goes on a recruiting spree and growth will be extremely fast. Saturation may take a few years to reach, but it is eventually reached with the usual consequences.
On the other hand, a good level for "outside" sales ( 70% is used as a test by US courts) will ensure that sales will continue even if recruitment stops.(One will lose 30% of sales but the balance will be sustainable, subject of course to the products continuing to be competitive in the market.
A true MLM company will require the distributors to do retails (ie. actual selling of products to consumers who are not members). There is no need for selling to members since they are already signed up as distributors.
Eg. Nuskin requires a min. of 150 VP every month to maintain the level (correct me if I'm wrong. This is as far as I can recall). This min requirement is not to force the distributors to buy products. But rather to ensure they are actively doing the retailing every month, instead of just sitting there enjoying residual income from the downlines. (if this happens, it will be what you call pyramid).
Another Eg. Herbalife requires distributors to submit Sales report of Retailing every month, otherwise their incentives will be forfeited.
Also many companies set very high profit margin for retailing. Eg. Herbalife SV gets 50% Net Profit from retailing their products to non-member consumers, while they only make 0 - 25% from the order made by their immediate downline.
I don't care about the Pyramid, cuz you can only find them in Egypt..haha. But every MLM companies that you can read about or find out, the objective is to bring the product to the users. If this is not the objective, why would these companies spend so much money on the Research and Development of products.
You may wonder why the consumers choose to buy from Retailing when they can buy at a discount when they sign up as members. You may be amazed that many consumers wanted to be serviced by the individual distributors -- eg. delivery of the products to the cust's door step, personal update of any latest products, personal followup by the distributors etc. If the consumers choose to sign up as a member, they will be "on their own". They may not get any help if they encounter problems using certain products.
PS. Is that ric-rats? -
Hi All,
Why not try the link below to see whether it suits you.
http://PayMeWell.FSCStore.com
http://itpayswell.tripod.com/
http://www.gocollect.com/index.asp?kbid=3206 -
Ahh.... so he calls himself successful in MLM, no wonder he writes a pro-MLM article. Frankly, everyone who is "successful" in MLM are pro-MLM.Originally posted by JWorld:Paul Marsland is an independent distributor for a Multi-level marketing company with 25 years of experience and trading in 59 countries worldwide. Along with his wife Annette they run a successful MLM business, full time from home, around their young family.
For more information please go to: http://livin-the-good-life.biz/?refid=ezineaticle-567883263
Article Source: http://EzineArticles.com/ -
And ,why not?Originally posted by lution:Ahh.... so he calls himself successful in MLM, no wonder he writes a pro-MLM article. Frankly, everyone who is "successful" in MLM are pro-MLM.
Duh... -
Haha.. isn't it obvious? Still need to ask why not? Duh...Originally posted by laurence82:And ,why not? Duh... -
Noobz.....Originally posted by lution:Haha.. isn't it obvious? Still need to ask why not? Duh... -
so glad you talking to yourself.Originally posted by laurence82:Noobz..... -
noobz should note they are still noobz, by post counts or join date, whatever.....
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haha... so funny got people think this way.
really makes all sorts of people in the world. -
there is a real reason why some people state that way
go figure out yourself.... -
state in which way, care to explain.
what does it mean by post counts or join date?
kindly help to explain. -
really bo liao leh...Originally posted by lution:state in which way, care to explain.
what does it mean by post counts or join date?
kindly help to explain.
dont make the readers feel you so stupid...
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Is great to see this topic. I'm new to this, but not to Network marketing.
I feel network marketing should not be 'link' to religion. Also, there are many way for people now to find out more about network marketing. So, if you happen to come across any company, do your research.Originally posted by AbstractArt:Hi Fellas,
I supposed you can't blame us for doubting.
Basically, MLM's concept is great and for some product, it is a fantastic way to move awareness and acceptability.
But...
-All claims that their product or payout is the best.
>There is no so-call BEST products or compensation plan. Only the HOTTEST products and compensation. In total, it will still be great to see all the 'black & white'...
- All claims that if you do not want to know, you are losing out or you are "frog in the well" Reverse psychology?
>>Then, I will recommend you to remain not to find out. As a saying, "Lai De Chao, Bu Ru Lai De Qiao".
- All claims that you are sickly or needs more supplements.
>Then ask them, how about Doctor? Does that mean your products is what I only need? If the answer they give you is YES, then 'thank you' them. Look for other Distributor.
- All claims that you will lose your commission if you don't hit your target
>In all company, they are all free target, so, even you fail this month, you can still do it next month. There are no hurry.
Get it? All the claims... its like endorsing on a religion that says:
Hear Ye Hear Ye! If all of ye none believers deny our gods, the greatest gods in the universe, then shall ye be forever damned! So cometh forth and be redeemed!"
Most became fanatics and have themselves turned into frogs, refusing to see it in another view. Sure, we can see your view but was never listened when I speak. I have listened to a fair few and heck even joined. But the members turned me off. -
how can it be stupid to ask to clarify?Originally posted by Alex Wong:really bo liao leh...
dont make the readers feel you so stupid...