The difference between an illegal pyramid scheme and a legitimate multi-level marketing organization is that the pyramid scheme focuses on recruiting new members/salespeople/consultants/distributors. In a legal MLM system, commissions are earned for the sale of products or services to end users. You cannot earn money by signing up with potential distributors or consultants. However, commissions may be earned from the sales of recruited distributors or consultants. The concept of fair prices is crucial when evaluating all these aspects. This means that multi-level marketing organizations and participants must be able to clearly state that their direct or indirect sales to participants are reasonable. In practice, however, this transparency is often lacking.
Despite this distinction, multi-level marketing has been criticized. Recruitment often takes the form of meetings where participants are given little information beforehand (“I have something interesting for you, I want you to meet someone”). The impression is often created that you can get rich quick and that once you’ve done enough, there’s nothing left to do. Many participants feel frustrated, but others insist that you have to keep working for it and that it is not for everyone. In this case, it is often about entrepreneurial skills that are in demand. After all, having your own company also entails more obligations, for example you will sometimes have to work at weekends or at night. This is often overlooked. In many cases, structural benefits are only built up after 6-12 months of effort and earning more than € 3,500 per month or higher is only possible for a few.
Some newbie distributors make money, but it doesn’t mention that most distributors don’t make money at the end of the year and have incurred more expenses. In fact, the distributors do the sales work but hardly earn anything. As a result, many stop. They are being replaced by new distributors. over time, most of the remaining representatives were replaced by new representatives.
In this way, the agents or distributors are exploited because the opportunity for quick profit is not offered. This happens a lot in the network marketing world. There are special sites like Falseprofits.com and MLMsurvivor.com that agitate against this. They provide a lot of factual information but also hint that they are not a fan of the industry. The question then is to what extent there is objectivity.
There are many companies that are tackling this and giving new distributors the opportunity to make a profit right away. However, this does mean that work needs to be done.
Genuine MLM companies aim to move products through a network of distributors. On the contrary, the pyramid schemes (057) just want your money and to use you to get other distributors, who are just more people to con and use.
MLM businesses sell tangible products, while the pyramid schemes provide products in the form of services. They could be investments where they promise great returns after a period of time. They may also have products that are overpriced and available at your local store or things that are present today but disappear tomorrow. The pyramid schemes (PS1) are always after your money, especially in large sums. They don’t want bank transactions while at it to avoid paper trail. The MLM business will show you the product and accept bank transactions if you are to buy in bulk. MLM ensures money flows from one level to the next together with the products. The pyramid schemes just have money on the move from one level to the other, with no products to exchange. MLM pays you for recruiting people and selling products. Pyramid schemes mostly have no products and so will only pay you for recruiting people.
The training offered in the MLM business meetings insist on the benefits of using the products so that the customers can find reason to buy. As soon as they benefit, they can join you too in distributing. The pyramid schemes over indulge in claims about the money that you can make. They have no justifiable claims about the products instead of that the pyramid schemes target that you are desperate and looking for money, so they will tell you what you want to hear. The MLM focus on product distribution, and motivate you to be a good sales person.