IT'S NOT A PYRAMID THING
The difference between a pyramid scheme and genuine Network Marketing opportunities.
The big misconception.
If you're like most people then you have probably heard about pyramid schemes, chain letters and the many email scams that have been robbing people of their hard earned cash over the years. These scams are often created to last long enough for the creators to grab their cash before the inevitable crash. This means that pyramid schemes do slip through the cracks as they usually don't operate long enough for government bodies to take action before investors are hurt.
Unfortunately many people mistake genuine network marketing and mlm opportunities as pyramid schemes. One of the biggest reasons for this misunderstanding is through the multi-level-commission structure that looks like a pyramid. Although most manufactured products throughout the world have a pyramid structure, it is network marketing that many people mistake as pyramid selling.
So let's start at the most basic level. Lets look at what pyramid schemes actually are, and why they are illegal. Then we'll examine what MLM opportunities are, and why they're not illegal.
So what is a pyramid selling scheme?
pyramid selling is where people are induced to pay money to join, and recruit others who also pay money to join the scheme. The incentive is that once you have recruited a certain number of people you will receive a payment greater than your initial investment. The main feature of pyramid selling schemes is that progressing through the scheme and earning money depends on recruiting other people into the operation, rather than selling a genuine product or service. Ultimately, pyramid schemes are doomed to quickly collapse as without a product or service, you don't have a business.
The only way for people to make money is for a much larger number to lose theirs.
As the creators and operators of pyramid schemes know that their schemes will eventually collapse they often don't have a product or service to offer which could generate repeat business. This is the biggest clue that gives away pyramid scams. If there isn't a product or service that people will come back for then it is destined to collapse.
What is Network Marketing?
The entire process of Network Marketing is to leverage the efforts of many independent business builders to turn over more products. It's the ultimate form of distribution. While thousands of smaller retail businesses fight for the space on supermarket shelves, network marketing companies turn over large volumes of product through independent business builders who are also known as distributors or consultants. Network marketing companies save millions in traditional business costs associated with advertising, retail space and employees. These savings are passed onto distributors in the form of commissions for the sales that their team generate.
Try this for yourself!
When you examine most business models and chart them out for yourself, you will soon find that they too have a structure that is identical to pyramid structure. This doesn't necessarily mean that they are a pyramid scheme that you should stay clear of. In fact most of them are quite legitimate and successful. Get a piece of paper and break down any business or company you can think of. Start at the top and work your way down the corporate structure. ( CEO » management » worker ) You will soon find that you have a pyramid structure. This natural working order is necessary for all organizations to operate successfully.
Conventional Business
It's easy to see that the break down of all business models gives you a pyramid structure. The difference between the above structure and network marketing is that only the people at the top make the big profits in a conventional business. All the others below will have no or very minimal increase in pay.
The Networking Difference
The success of a network marketing company depends on all of the people getting great results for themselves and therefore turning over more product for the company. It really is a win win situation and the reason that network marketing has been a phenomenal success for the past 20 years.
Direct sales businesses are booming for everyday people. Even Richard Branson has developed a hugely successful network marketing company in response to this massive opportunity. The great thing about this industry is that the growth and opportunities are not limited to billionaires as anyone who has a can do attitude and desire for success can reap the rewards from this great industry.
The big misconception.
If you're like most people then you have probably heard about pyramid schemes, chain letters and the many email scams that have been robbing people of their hard earned cash over the years. These scams are often created to last long enough for the creators to grab their cash before the inevitable crash. This means that pyramid schemes do slip through the cracks as they usually don't operate long enough for government bodies to take action before investors are hurt.
Unfortunately many people mistake genuine network marketing and mlm opportunities as pyramid schemes. One of the biggest reasons for this misunderstanding is through the multi-level-commission structure that looks like a pyramid. Although most manufactured products throughout the world have a pyramid structure, it is network marketing that many people mistake as pyramid selling.
So let's start at the most basic level. Lets look at what pyramid schemes actually are, and why they are illegal. Then we'll examine what MLM opportunities are, and why they're not illegal.
So what is a pyramid selling scheme?
pyramid selling is where people are induced to pay money to join, and recruit others who also pay money to join the scheme. The incentive is that once you have recruited a certain number of people you will receive a payment greater than your initial investment. The main feature of pyramid selling schemes is that progressing through the scheme and earning money depends on recruiting other people into the operation, rather than selling a genuine product or service. Ultimately, pyramid schemes are doomed to quickly collapse as without a product or service, you don't have a business.
The only way for people to make money is for a much larger number to lose theirs.
As the creators and operators of pyramid schemes know that their schemes will eventually collapse they often don't have a product or service to offer which could generate repeat business. This is the biggest clue that gives away pyramid scams. If there isn't a product or service that people will come back for then it is destined to collapse.
What is Network Marketing?
The entire process of Network Marketing is to leverage the efforts of many independent business builders to turn over more products. It's the ultimate form of distribution. While thousands of smaller retail businesses fight for the space on supermarket shelves, network marketing companies turn over large volumes of product through independent business builders who are also known as distributors or consultants. Network marketing companies save millions in traditional business costs associated with advertising, retail space and employees. These savings are passed onto distributors in the form of commissions for the sales that their team generate.
Try this for yourself!
When you examine most business models and chart them out for yourself, you will soon find that they too have a structure that is identical to pyramid structure. This doesn't necessarily mean that they are a pyramid scheme that you should stay clear of. In fact most of them are quite legitimate and successful. Get a piece of paper and break down any business or company you can think of. Start at the top and work your way down the corporate structure. ( CEO » management » worker ) You will soon find that you have a pyramid structure. This natural working order is necessary for all organizations to operate successfully.
Conventional Business
It's easy to see that the break down of all business models gives you a pyramid structure. The difference between the above structure and network marketing is that only the people at the top make the big profits in a conventional business. All the others below will have no or very minimal increase in pay.
The Networking Difference
The success of a network marketing company depends on all of the people getting great results for themselves and therefore turning over more product for the company. It really is a win win situation and the reason that network marketing has been a phenomenal success for the past 20 years.
Direct sales businesses are booming for everyday people. Even Richard Branson has developed a hugely successful network marketing company in response to this massive opportunity. The great thing about this industry is that the growth and opportunities are not limited to billionaires as anyone who has a can do attitude and desire for success can reap the rewards from this great industry.
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