So….Network Marketing Isn’t a Pyramid Scheme?!
Have you ever wondered, been asked, or maybe even told that network marketing is nothing but a pyramid scheme? The thought has never occurred to me, but I have heard the question asked many times. The answer to that question is, No. A genuine , successful network marketing company or MLM is NOT a pyramid scheme. It is an all too common misconception among skeptics of the network marketing industry.
To fully answer this question, we need to define both a network marketing company and a pyramid scheme. Basically, a network marketing company is a business that uses representatives, through the power of networking, to sell or “market” their product or service for them. Both the representatives and the company itself benefit from the sale of the products. The representatives can and do use many different means to network the product ranging from online marketing such as through blogging or social networking just to name a few, and offline marketing which is getting out, meeting and talking to people about the product or service.
A pyramid scheme is an illegal dealing where money is passed around from person to person in an upward direction. In a pyramid scheme, only the person at the top will make most if not all the money. In these transactions, there is no product or service given to the person who is paying the money. In other words, money is only made by recruiting more people to recruit more people. This is why a pyramid scheme is considered illegal. Money gets passed around until the pyramid can no longer sustain itself and eventually the pyramid crashes.
Critics or skeptics of network marketing say that a network marketing company is a pyramid because the person at the top makes all the money. This is not true in a successful, legitimate company. With network marketing, each person has the ability to make money and be successful. Like many businesses, the more time and effort you put in or the harder you work, you can be just as successful as the person ahead of you or who has been in the company longer. The more productive the rep, the more money he or she can make regardless of when he or she joined.
Unlike a pyramid scheme, a network marketing company, or MLM, gives value back to its customers in the form of products or services the customer purchased. Money flows up while value, or products flow back down. In a pyramid scheme, money only flows up, and nothing of value comes back down. MLM’s have real customers that buy and reorder products whether they are part of the company’s comp plan or not.
If you go along with the logic that only the person at the top makes all the money, then look at the organization chart of your place of employment. You, along with other coworkers work under your boss and management, who works for the owner of the company. The owner of the company makes most of the money. That shape is a pyramid. Does that make your place of employment a pyramid scheme? No, it doesn’t. You can also look at the church or a professional football team. Those organization charts are shaped like a pyramid too, but are not pyramid schemes either. Just because they appear to have the shape of a pyramid doesn’t mean that it is a scheme.
It all comes down to doing your homework! Before you join any kind of company or venture, you need to do your homework first. Network marketing may not be right for you, or maybe the company you decide to check out isn’t either. There will always be people out there who are skeptical of a risk you may want to take and they might try to talk you out of doing something. Do the right thing and investigate the company for yourself. Make sure that you get your information from credible sources. There are a many legitimate, great companies out there that can bring you success!
To discover how you can create phenomenal success in your business, earn multiple streams of income and increase your downline, check out this short video from Jonathan Budd successful internet marketer.
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