MLM Vs Pyramid Scheme – What’s the Difference?


If talking about MLM then it is an outstanding business proposition to some people. It provides the chance to become concerned in a system for allocating products to customers.

Not like the person that wants to start a business from the beginning, the MLM marketing member has the complete support of a direct selling firm which supplies the products and most of the time provides experienced level training as well.

Do you know the working model of MLM?

As a contractor or consultant or distributor (different firms call by different names) you earn your cash by selling the things to other participants of multilevel marketing. In case they are not already a member of any MLM company, you can join them.

Besides earning some good money off your own sales, you even earn a proportion of the income formed by the distributors that you have brought into your downline. Normally there are different types of bonuses for selling specific amounts of product or registering a sure number of new members; you can earn trips and cars and cash. It really seems good, doesn’t it? And being the fraction of an efficient MLM business can look very similar to being a permanent member of a large absolute family.

What About The Pyramid Schemes?

Sorry to say, not every opportunity of multilevel marketing is a genuine opportunity for business. Some pyramid schemes, frauds planned to part the unsuspecting from their money are camouflaged.

Similar to multilevel marketing, if talking about pyramid schemes then they completely depend on hiring people to become distributors of a service or product.

A Unique purpose of Pyramid Scheme

The great dissimilarity between MLM marketing and a pyramid scheme are in the way the business works. The complete purpose of a pyramid scheme is to obtain your money and then utilize you to hire other suckers (you can stay that distributors). The complete intention of MLM is to move services or product. The assumption behind MLM is that the bigger the distributor’s network, the more number of product the business would be able to sell.

You can use these possible questions as an acidic test if you are in the least uncertainty as to whether the chance you are considering is a pyramid scheme or multi-level marketing:

Checklist for Identifying a Pyramid Scheme

Are you planning to “invest” a good amount to become a MLM or pyramid scheme distributor? This request of investment can be masked as an inventory charge. Genuine MLM businesses don’t want big start-up costs.

In case you do need to pay for inventory, would the company purchase back unsold catalog? Genuine MLM companies would offer and stick to supply buy-backs for minimum 80% of what you compensated.

Is there any type of mention of or concentration paid to a market for the service or product? MLM marketing completely depends on setting up a market for the products of the company. In case the company does not seem to have any interest in customer’s demand for its products, do not join.

Is there more importance on recruitment than on selling the service or product? Keep in mind, the dissimilarity between pyramid schemes or multilevel marketing is in the focus. If talking about pyramid scheme then it focuses on fast incomes from joining people up and taking their money. In case recruitment comes to be the heart of the plan, run.

Another two important questions would assist you to decide what the company’s focus is:

Is the arrangement planned thus you earn more money by hiring new members except throughout sales that you make? It is the sign of a pyramid scheme.

Are you providing with commissions for hiring new members? One more trademark of the pyramid scheme. It is the number of people that are eager to register which matters in a pyramid scheme, not the services or products being provided.

How to Keep Yourself Safe

Always, when you are doing research about a potential business opportunity, you will need to collect all the important information you can regarding the products and operations of MLM Company.

You should get hard copies of the business’s sales literature, business scheme or suitable marketing plan.

Discuss with some other people that have knowledge of the MLM Company and the things to decide whether the products are really being sold and in case they are of top quality.

Confirm with the Better Business Bureau to check if there have been any criticisms regarding the company. It is very important for checking business credibility.

And carefully listen when you are at that meeting of MLM recruitment. Overstated claims for the remarkable amounts of money you are going to earn must set ringing your alarm bells.

Being division of a successful MLM company can be both fun and profitable, but sorry to say, some supposed MLM opportunities are really just cons planned to flatten both your dream and your wallet of running a successful business.