To the seasoned Network/Multi-Level Marketer this has almost become a non-question. The fielding of which has become nearly as involuntary as sneezing. The answer is almost universally “no” or “what do you mean?” The resulting explanation generally pacifies, at least temporarily those skeptics that might be examining your business. However, it seldom really addresses the core understanding of what a “Pyramid” really is.
Pyramids, according to Federal law are illegal. A true “Pyramid” is dependent on a constant influx of participants at the base in order to move others to the top. Multi-Level or Network Marketing dispels this requirement due to the fact that if a real product or service is being sold, the business will continue regardless of the influx of new participants. Additionally, “Pyramids” will require a fee, sometimes nominal and sometimes substantial, which will be paid partially to the company and partially to the recruiting agent. Most states have outlawed this practice and deemed it uniquely an act of “pyramiding”. A legitimate Network/Multi-Level Marketing company my have a startup fee, but it is usually only enough to handle administrative services and initial supplies and marketing materials.
The only real difference between Network or Multi-Level Marketing and traditional business models is the number of hands that a product or service has to pass through before it reaches the consumer. The true mark of any business, is to ask the question, “Would people own this product or service if they were not involved in the business of marketing it”? Many Network/MLM’rs become marketing distributors for no other reason than to receive a discount for their product or service.
It’s true that the earnings for being self employed are unpredictable, but the advantage of being self-employed in a Network/Multi-Level marketing business is that you can out earn your “sponsor” or the person that hired and trained you. What would happen in a traditional J-O-B if you started outperforming the person that trained you or even worse your supervisor? In Network/Multi-Level Marketing there are no buffers, either on the top or the bottom. Success and failure are an act of your own efforts.
To most Network/Multi-Level Marketers, anyone that works a traditional J-O-B is involved in a “Pyramid”. You go to work for a company at an entry level. There are lots of you at that level. In order to oversee things there are a few supervisors. These supervisors are usually amenable to department heads, who in turn usually answer to any one of a number of upper management administrators. Upper management usually has a CEO or owner that is ultimately at the top of the…oh wait…isn’t this one of those “Pyramid things?”
Gary Russell
GoSmallBiz.com
www.GaryLRussell.com
www.DefendMyLife.com
503-519-3592
Hi Gary,
Good description of the difference between Pyramid Schemes and Multi-Level Marketing. I would hope that any business minded person would take a moment to read your article, educating themselves in this topic.
I know two people who went bankrupt through network/multi-level marketing. They had to pay and pay for all the brain-wash conferences, brochures, tapes, catalogs, inventory. One guy was constantly making threats that his kids were dependent on this income, and if his retired mother wanted to see them, she’d buy his expensive junk. He poisoned all relationships with trying to grift off the backs of friends & relatives.
The other guy ethics-poisoned his real job by recycling his indoctrinations, switching the MM-corporate-name out for “Time Management” and parroting them at work. I’d time his speeches, 20 minutes a day in class. When my sisters took his class and started complaining, I turned my time statistics over to my mom. He lost his long-term tenure. He’d so violated the “social contract” in our town, bait-and-switching people with invites out for a pleasant dinner and then switching in high-pressure sales, and trying to take advantage of friendship for personal gain. Nobody would go near him. He went bankrupt with several warehouses full of product.
I even went to a M-M conference, it alternated around 3 conflicting marketing techniques:
1. Appeal to “help” friends,
2. Appeal to do wildly better than friends, and humiliate them,
3. Appeal to personal greed,