The Difference Between Network Marketing and a Pyramid Scheme
________________________________________________________________________________________________________
Wikipedia's definition between a PYRAMID SCHEME and NETWORK MARKETING is as follows:
PYRAMID SCHEME: A pyramid scheme is a non-sustainable business model that involves the exchange of money primarily for enrolling other people into the scheme, without any product or service being delivered. Pyramid schemes are a form of fraud.
MULTI-LEVEL MARKETING: (also called network marketing, direct selling and referral marketing is a term that describes a marketing structure used by some companies as part of their overall marketing strategy. The structure is designed to create a marketing and sales force by compensating promoters of company products not only for sales they personally generate, but also for the sales of other promoters they introduce to the company, creating a downline of distributors and a hierarchy of multiple levels of compensation in the form of a pyramid. The products and company are usually marketed directly to consumers and potential business partners by means of relationship referrals and word of mouth marketing.
When approaching someone with the opportunity of joining a multi-level network business, regrettably you often hear the following comment when you present your business to others: “But isn't this one of those pyramid schemes?!” This is a common misconception and is largely due to a lack of knowledge and false perception.
It is true that South Africa has unfortunately been exposed to a number of pyramid schemes where many people lost money. However, there is vast difference between a pyramid scheme and a legitimate network marketing business. The law characterizes a legal MLM business by a couple attributes, of which three of the most important points are:
The business must have a product or render a service
If the company, you signed up with, provides a product or service, it adheres to that portion of the law. However, the product or service must be fairly priced. A good way to test this is to take the business part away and see if you are left with a fairly priced sustainable product or service.
The network marketing company must be limited in its levels
This is in order to prevent the first member to earn the most and makes it an equal opportunity business, which gives equal opportunity for every member to become a top earner.
The network may not be sustained out of the registration fees of members
People think everything with a pyramid structure is illegal. However, what they do not realize, is that any successful business, government body, church, family or related organization has a pyramid structure. If you listen to people comments about pyramid schemes, any successful big business should be 100% illegal!
Network marketing is nothing else than the distribution of commission or the distribution of wealth. We do not pay one person big commissions, we pay several people with the same commission.
PYRAMID SCHEME: A pyramid scheme is a non-sustainable business model that involves the exchange of money primarily for enrolling other people into the scheme, without any product or service being delivered. Pyramid schemes are a form of fraud.
MULTI-LEVEL MARKETING: (also called network marketing, direct selling and referral marketing is a term that describes a marketing structure used by some companies as part of their overall marketing strategy. The structure is designed to create a marketing and sales force by compensating promoters of company products not only for sales they personally generate, but also for the sales of other promoters they introduce to the company, creating a downline of distributors and a hierarchy of multiple levels of compensation in the form of a pyramid. The products and company are usually marketed directly to consumers and potential business partners by means of relationship referrals and word of mouth marketing.
When approaching someone with the opportunity of joining a multi-level network business, regrettably you often hear the following comment when you present your business to others: “But isn't this one of those pyramid schemes?!” This is a common misconception and is largely due to a lack of knowledge and false perception.
It is true that South Africa has unfortunately been exposed to a number of pyramid schemes where many people lost money. However, there is vast difference between a pyramid scheme and a legitimate network marketing business. The law characterizes a legal MLM business by a couple attributes, of which three of the most important points are:
The business must have a product or render a service
If the company, you signed up with, provides a product or service, it adheres to that portion of the law. However, the product or service must be fairly priced. A good way to test this is to take the business part away and see if you are left with a fairly priced sustainable product or service.
The network marketing company must be limited in its levels
This is in order to prevent the first member to earn the most and makes it an equal opportunity business, which gives equal opportunity for every member to become a top earner.
The network may not be sustained out of the registration fees of members
People think everything with a pyramid structure is illegal. However, what they do not realize, is that any successful business, government body, church, family or related organization has a pyramid structure. If you listen to people comments about pyramid schemes, any successful big business should be 100% illegal!
Network marketing is nothing else than the distribution of commission or the distribution of wealth. We do not pay one person big commissions, we pay several people with the same commission.
Copyright
©
2011 Passive Income Business All Rights Reserved.
