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Network Marketing, MLM, Isn't it just another 'Pyramid Scheme'?
Definitely not. Though Network Marketing and pyramid schemes do
share some similarities, there's a very important difference that makes
the latter illegal. You see, in pyramid schemes, income is generated
solely on the process of recruiting others into the pyramid.
Sometimes a
product or service of questionable value is involved (that is never
retailed to the general public by the way), but generally what you're
buying is the right to recruit others into the scheme. This is illegal.
Also, in pyramid schemes, those who get in first and who are at the top
win, while everybody else loses. In a legitimate Network Marketing
company, on the other hand, distributors are paid only on product
movement; not on recruiting. Both at wholesale and retail. There's also
compensation based on the training and managing of your marketing team.
And unlike illegal pyramids, in Network Marketing, no matter where
you're positioned or when you join, you can advance to the very highest
income levels and even make more money than those above you in the
network.
I was just having a conversation with someone the other day
who was sceptical and said he was sceptical because this reminded him of a
pyramid scam/scheme. I asked him, "what is a pyramid scam" and he replied,
"where you get people to come into business under you and get them to
recruit others under them".
This person works for a water filtration company and does telemarketing for
that company. John had spoken previously about the business owner.
I said to John, "Let me ask you something John. How many business owners are
there in your company?" John replied, "One". And I said, "And how many
managers are there in your company" with which John replied "A few". I then
asked John how many supervisors there are in his company and he replied
"Several". I finally asked John, "And how many telemarketers are there in
your company?" John replied, "Many". I then asked John, "Since you are at
the telemarketing level, who in your company earns more money than you do?"
John said, "The owner, Managers and Supervisors." "Okay then", I said. "Who
trained the Managers and who trained the Supervisors and who trained the
Telemarketers?" John started understanding where I was going with these
questions. I then asked John, "Now, who do you think earns the most profits
from those the Managers and Supervisors trained?" John replied, "The owner!"
"Correct!" I said. Now, when you look at that corporate structure, how is it
formed and who makes the most money? "Ah ha!" replied John.
I then proceeded to explain to John although our business is much like a
traditional business where I will find people, like I am the owner, and I
will train them to be Managers who will find people they can train to be
Managers, who will find people who they can train to be managers. Some of
those people just want to be supervisors and some of them will only want to
be telemarketers and that's okay because not everyone is cut out to be the
owner. But when one of those people decide they want to be an owner just
like me, and they train as hard and as focused and as long as I have
trained, they too can earn as much as and even more than me. If they decide
to train more, focus harder and find more people who want to become owners,
more people than I have, they can always do that, it's their business, they
can work it as hard or as soft as they want. That's what keeps us
independent. There is no limit as to what one can do except the limit they
put on themselves. If I "hire" you today and decide I'm just going to sit
around and do nothing, but you decide you're going to go all out and make
something of this, I can assure you you WILL be earning more than me in a
very short time period. And don't you believe you deserve that?
I then asked John, "Who do you think works the hardest on your job? The
Telemarketers, the Supervisors, the Managers or the Owner?" John replied,
"The Telemarketers!". I then asked John, "And who do you think does the most
work, the hardest work, gets the most leads that produces the most income
for the business?" "The telemarketers", John replied. I then proceeded to
voice my opinion of Network Marketing being the fairest business plan in the
world today.
"So, what IS a pyramid scheme John?" I asked.
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Pyramid Selling
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Multi-Level Marketing
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1. Principal
income from recruiting. Income from retailing is incidental or
spurious. |
1. All income
earned from retailing of products. No income simply for
recruiting. |
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2. Distributor
locked into position in Pyramid. Can’t pass sponsor. |
2. Not locked
into organisational structure. Can pass sponsor and upline
distributors based on personal achievement. |
3. People at top
make the real money — until the Pyramid collapses.
“Ground floor” opportunity really means “downhill” opportunity…
everyone who joins has less opportunity than the person who
recruited them. |
3. Anyone can
earn top money — based on personal achievement, not position in
organisation. Business opportunity improves with time and
exposure. Based on sharing an opportunity for genuine financial
independence through co-operation. |
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4. Income from
products based on discounting on a sliding scale.* In reality,
means that prices get higher and higher until impossible to
sell. |
4. All income
derived from product sales through commissions and bonuses
according to personal effort. In the best MLM plans, all
distributors buy at the same price. Performance bonuses reward
higher achievement. |
5. Product not
important. May or may not work well. In reality, acts as ‘bait’
for recruiting ‘hook’. Usually no guarantee, non-returnable, no
refunds.
May not even be a real product. |
5. Products are
all important because repeat sales is key to success. Products
guaranteed to perform, satisfy or money refunded. distributor
stock can be returned for refund in most companies. |
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6. Real
financial risk, especially for those at lower levels, as non-
returnable products become harder to sell downline or at retail. |
6. No financial
risk. No money paid for recruiting, products are returnable for
refund. |
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7. Main appeal
is to selfishness, greed, envy and laziness. |
7. Appeal is to
nobler attributes — sharing, helping are among better aspects of
MLM companies. Top achievers typically help others and rewards
follow naturally. |
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