Is Network Marketing the Same As Pyramid Selling Schemes?

If you’re considering beginning a home based business, you’ve probably been made aware of network marketing opportunities and have questions about whether one of these is right for you.

Some people wonder whether network marketing businesses are actually pyramid selling schemes. While network marketing is known by several other names (multilevel marketing, direct marketing, relationship marketing, MLM), it is very much different from pyramid selling.

Often, people have heard negative stories about pyramid selling but don’t know exactly what it is or what it involves, and so it is difficult for them to know whether an opportunity is a genuine network marketing opportunity or a pyramid selling scam.

One reason that people sometimes believe network marketing businesses to be pyramid schemes is that the way network marketers build their teams creates a pyramid shaped organisation – and so people incorrectly think that it must be a pyramid scheme, which they have heard negative stories about. This is incorrect as actually every single business and organisation has a pyramid structure – starting with the CEO or ‘big boss’ at the very top of the pyramid and the lowest ranked workers at the bottom level of the pyramid.

Pyramid selling schemes offer products which you will have to buy in order to join the scheme. You will usually have to order a large amount of this stock – often enough to fill your garage or spare room! – and there will be very little focus on the products or their quality; the focus will be very much on the money you can make. You will purchase the products for a set price and will have to sell them on at a higher price to create your profit. You will usually do this by telling people about the money they can make rather than any benefits of buying the product. Pyramid selling products are rarely used, but instead are sold numerous times with their price inflating each time. Naturally, this can only continue for so long, and so somebody ends up with a garage full of (usually) low quality products that cost them far too much and which nobody is prepared to pay an even higher price for.

Network marketing opportunities, by contrast, often offer higher quality products than high street companies. The products are not stocked in shops, but are sold by independent associates not employed by the company. Associates pay a small fee (usually less than £1,000) to become associates, and often are required to purchase a certain quota of products each month. While they can choose to resell these products, they are encouraged to use them personally as it is seen as being ethical that they will want to use the products they are sharing with others.

While associates will be able to purchase products at a discount from retail price, both associate price and retail price are set and are not inflated for each new customer or associate. The network marketing company pays associates commissions and bonuses not only on the products they personally sell, but on the achievements of associates they share the business opportunity with – focusing on an associate’s ability to help others. Network marketing is a great example of business where one person’s success depends on the number of people they help.

Network marketing is a booming industry that has been endorsed by business leaders including Donald Trump and Robert Kiyosaki, to world leaders including Bill Clinton and Tony Blair. With it’s low start up costs, network marketing is a realistic way for people to begin their own business with the support they need, and offers the opportunity to achieve unlimited earnings.

Comments are closed.