Is multilevel marketing and pyramid schemes same?


Is multilevel marketing and pyramid schemes same?

The straightforward answer to this question is ‘No'. Both are different terms and have different values. And here, in this article, we will understand the differences.

Before getting involved in the discussion, it is necessary to get the proper idea about multi-level marketing.

Multi-marketing is a referral program and is also known as network marketing due to its direct selling procedure among its members or via its members. Multilevel marketing is a business scheme that follows an un-salaried hierarchical sales team and products ate sold directly to the consumers in conjunction with recruiting additional sales representatives of the company. Nowadays, multi-level marketing is also operated online through various effective Multi Level Marketing Software.

In this business model, existing members of an MLM company used to buy, sell, promote, and even consume the products and build a community of potential consumers. They put irrational efforts into expanding their sales team by introducing new members from time to time. The members also get rewards and promotions and there prevails a hierarchy of roles and levels. The independent distributors are actually the micro-influencers, the sales representatives, or the brand ambassadors. In fact, all the members stand as small individual business owners without having any higher educational qualification or degree. These MLM companies use Matrix MLM software and other useful software to get accurate data on individuals who need such jobs and often attract young mothers, students, housewives, and employees seeking alternate work options.

Difference between Multilevel Marketing and Pyramid Scheme:

The basic difference between MLM marketing and a Pyramid scheme is that MLM marketing comes under legal marketing strategies whereas a pyramid scheme does not.

Some of the point-able major differences are quoted hereunder:

              MLM strategies focus on recruiting members as part of the business strategy that encourages sales too. On the contrary, the pyramid scheme only focuses on joining new members of the sales team. There may be no product at all, but the circulation of money is recurring.

              If the sales representative is not able to sell any sort of product, there is a buy-back guarantee, whereas a pyramid scheme does not come with such privileges.

              A pyramid scheme mostly emphasizes continuous investments from newly added members and encourages them to add more members to this business scheme and the upper-level parties will more monetary benefits. There is no specific product to buy or sell. However, MLMs offer real products and services.

              The expansion of the team working on MLM strategies is based upon the necessity of selling their products as much as possible. On the other hand, a pyramid scheme comes with the purpose of taking advantage of the investment done by newbies in their teams.

              Pyramid scheme will ask for making huge investments even before signing any kind of contract. LM strategies are applicable even with a mere investment done to buy the relevant products as a sales representative.

              Basically,  MLM strategies are aimed at a particular number of recruits to be added for the sales of a considerable amount of products, while the pyramid scheme has no interest in the end-user at all.

              A sales representative gets awarded in the form of a commission for their sales or the sales of their recruits under them. In the pyramid scheme, only the representative gets a commission for adding more and more members.

Ways to understand whether an MLM company is really a pyramid scheme or not:

According to different MLM Software Company, here are some signs to understand the ethnicity of an MLM company:

              If the magnitude of income depends on the number of people and not the number of products sold to consumers,  then be aware it is a pyramid scheme.

              If the investment is high and representatives have to purchase a huge amount of inventory, then probably, you are getting trapped in the pyramid scheme. 

              In order to stay in a particular position,  if you are asked to purchase products at a greater deal as a representative, think a bit, it can be a pyramid scheme.

It is highly necessary to do proper research and analysis before getting associated with any MLM or Network Marketing company a bit. And, yes! They provide productive outcomes and a long-term passive income too, if connected with the right entity.