Multi Level Marketing vs. Pyramid Selling

Amongst the different methods of direct selling, Multi Level Marketing occupies a prime place simply because of the fact that it is growing substantially and continually all over the world. Every day people are joining the network to become distributors and thousands have become millionaires thanks to the network.

If you are looking to start a business of your own or look for an avenue for earning a second income, MLM gives provides you the right opportunity. The fact that anyone from any walk of life, any age, with or without qualifications can join the MLM network and become a distributor makes it the most convenient business to get into. Besides, the business does not warrant any investments from your end and is risk free.

Before you choose the Company, Product and agree to join the Network and start your business, it is important for you to know how this Network marketing business works. Unlike the misconception that many people have, MLM selling involves hard work with focus and you need to be consistent with your effort in building and expanding your network.

Unless you are clear about the MLM business concept, understand how the sales and income generation happens and have clear understanding, you are likely to get confused. Before you get into business, you will need to understand in detail all about this business.

Many people confuse MLM selling with pyramid selling. It is quite true and likely that the general opinion of the people regarding Network marketing can be poor and you might be confronted with such attitudes when you approach people. Therefore it is important for you to have a clear understanding of the difference between MLM and Pyramid selling including the legality and ethical aspects of both the systems, so that you are in a better position to explain the difference and clear the ambiguity of your prospects.

What is Pyramid Selling ?

Pyramid selling is a scheme that operates similar to Network Marketing in the form of recruiting people to join the network. Pyramid schemes are derived to make money by the promoters through recruitment of people into the network promising those future benefits that will accrue when they recruit more people into the network.

These schemes do not involve any sale of goods or products and charge entry fee from those joining the network thereby earning money in promise of a future income. One of the well known fraudulent schemes that has made rounds all over the world has been the ‘Chain of Letters’ scheme.

It takes a while for the participants to realize that there is no money to be made and that the promoters stand to gain without any real business. Often you will find the Pyramid selling schemes talking about some kind of illusory products or treatments, subscriptions to magazines, catalogues and trainings etc. None of these amounts to any substantial sale of concrete products. They push the distributors to buy and sell on paper without concrete physical transaction of products and goods.

Difference between MLM & Pyramid Selling

A close look at the schemes and understanding of all the details will throw up the difference between Pyramid Selling schemes and MLM Schemes.

MLM Schemes have legitimate process governed by rules and contractual obligations for distributorship as well as regarding inventory holding, training and sales etc.

Pyramid selling on the contrary is based on very loosely constructed, vague rules, promises without any legal or contractual obligations and more importantly without any substantial product range.

Pyramid selling aims at making quick money out of the network whereas MLM businesses focus on building and extending distribution networks primarily aimed at selling their products and thus generating income out of sale of products.

MLM Schemes do not require you to make any investment except a meager cost involved in buying a start up kit or some marcom materials or a small distributor fee for membership and such amounts are quite miniscule.

Pyramid selling networks are focused on making money from charging all kinds of entry fee as well as pushing the distributor to buy, hold inventory on paper without actual physical goods or based on schemes like catalogue or magazine subscription or some sort of discounts etc.

In lieu of a future sale and income, every subscriber to the scheme gets to make investments which accrue as income to the promoters alone. Pyramid selling always comes with ambiguous plans that promote hoarding of inventory as well as lack of clarity regarding income generation.

Pyramid selling on the whole has marred the public image of direct selling as well as Multi Level Marketing schemes. Due to lack of clarity and understanding of the differences between Pyramid selling and Multi Level Marketing, the public has considered both the concepts to be the same and holds negative opinion.

As a Multi Level Marketing Distributor it is good for you to be aware of the pyramid scheme and the above details and this awareness will help you confront the negative opinions of the people you come across in your business and change their perceptions about your business.