legitimate Network MarketingIt’s a legitimate Network Marketing! “This one, you don’t have to sell” “no monthly PV required” “just bring 2 people who bring in their 2 – that’s all, and you will be smiling to the bank.” You hear such claims from people who try to talk you into their MLM opportunity. But the BIG question now is… How do you differentiate between legitimate network marketing and a pyramid scheme? Many uninformed people believe they are the same thing, and even some people in the industry still do not know how to spot the difference.

In essence, there are two basic differences between legitimate network marketing and pyramid scheme:

1. Legitimate network marketing opportunities provide value, and pyramid schemes do not. In order for any program to be legal, there has to be a product or service connected to it. However, in many cases, pyramid schemes are disguised by throwing together a bunch of products (usually e-books and outdated or free software) which offer little or no value to the participants at all. On the other hand, legitimate network marketing and MLM companies offer products that contain enough value for people to buy them without caring to engage the opportunity. In fact, many legitimate network marketing companies require new recruits to maintain a certain monthly volume of sales for a set period before they are even allowed to start recruiting others. Pyramid schemes, on the other hand, rely only on recruiting revenues to keep everything afloat. While there might be enough money in the calculation to allow for everybody to get paid, the flow of money will stop the moment recruitment stops. It is not driven by sales, but by new recruits who immediately set out to recruit others. If you are ever unsure, simply ask yourself this question: if there was no opportunity attached to this product or service, would people buy it? Or is the product just a thinly disguised attempt to legalise an obviously fraudulent business model? If the product or service will not sell on its own, it is a pyramid scheme. Always remember: If the product or service is not worth its money, those referrals who do not make sales will leave sooner than if they derive value from their purchase. 2. Does the payplan make sense? In a legitimate network marketing program, you will be able to see how the money is distributed, and that it all adds up. Everything is above board, and everything makes sense. In many pyramid schemes, however, you need to pay close attention to the details of the compensation plan. It has become quite common among pyramid schemes to offer substantially increasing commissions on recruits further down the downline. Officially, this is structured to encourage participants to support their teams and ensure the success of their downlines as deep down as possible. However, if you look at the actual amount of money coming in, you will (often) note that the numbers just don’t add up. They seem to be offering more money on some levels than what they will receive from recruits. In other words, they are – literally – robbing Peter to pay Paul. They may try to play it off by saying that most participants will never refer enough people to make it a problem, and they may also say that by the time a member gets to that stage, the downlines of his or her downline will already be big enough to absorb the cost. The fact of the matter is that, legally, you cannot spend money you do not have. If it is not a sustainable business model, it is illegal. Lastly, think logically. In any legitimate company (legitimate network marketing and MLM included), this is how it works: 1. A portion of the retail price goes towards buying and delivering products, or towards developing services and delivering them. 2. A portion of the product price goes to marketing costs (you). 3. The rest goes to the company, to be applied as salaries, office expenses, and profit. If they are spending more money than they can get, it is a pyramid scheme, and it will eventually come crashing down. Don’t get caught – do your due diligence to find a legitimate network marketing opportunity. If not, you will be building a house which is bound to collapse sooner or later.  

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