The 4 features of a pyramid scheme are:
- The investment is just an investment for the right to participate in the scheme.You may get something for your money … some kind of product, service, or gift. But the "thing" is inconsequential to the investment … meaning you don’t want the thing, you only want to invest with the hopes of earning back your money plus a profit.
- Everyone in the scheme is motivated to recruit others into the scheme.That is the ONLY way you get your money back and earn a profit. It is this feature that creates a compounded growth of the participants (i.e. You-5-25-125-625-3,125-15,625 etc.).
- When you have compounded enough people under you in the pyramid you cash in.For example, if each person invested $1,000 as soon as you get 5 people who each get 5 people ($30,000 in revenue) you might earn $10,000. Then you reinvest and start over.
- Success is guaranteed. Everyone involved knows that the only way they get paid is if everyone recruits and keeps recruiting. So, they are encouraged by promising them if they recruit they will get paid. Their success is "guaranteed."
What is Network Marketing or Multilevel Marketing?
Lying about an opportunity ought to be a crime whether it is told by the opportunity or told by those not part of it.It's powerful, influential peoplewho work for / represent highly visible and credible organizations that LIE about Network Marketing. Government agencies lie about the model, the media lies about it, consumer advocate groups lie about it. They lie about the business model to judges, juries, and the public. Why? Are they evil or have malintent? No, they just believe they understand the model when they don’t. They have conflated the legal and powerful features of a Network Marketing company with the illegal features of a pyramid scheme. And they know they are doing it thus painting and indicting the lives and occupations of millions of honest, legitimate entrepreneurs with those of their cousins, the criminals.
Here are their 7 Lies:
- Network Marketers pay an investment on which commissions are paid.This is illegal. We may buy products we love, samples we hand out but we do not invest money just so others may earn money. If buying products you intend to use, sell, or sample, it is not. Pyramid scheme.
- Network Marketers get paid to recruit. Again, this is illegal. This is a lie of omission. Network Marketers never get paid to recruit. We get paid on sales. The more people we recruit the more sales we get paid on. They know this and lie about it anyway.
- Network Marketing companies require monthly purchases that are akin to "inventory loading."Inventory loading can be deemed to be abusive and illegal. Network Marketing companies often require those earning commissions, and only those earning commissions, to be an active customer. Usually in the range of $100-$150 a month in consumable products … products people are using every month. The FTC has argued that buying $150 a month in energy drinks is illegal inventory loading. That would make every Starbucks customer a felon. I am on auto-ship for $150 a month in golf balls (yes I lose a lot of golf balls). I am not in a pyramid scheme. The liars know the difference. They don’t care. They lie anyway.
- If Network Marketing worked, everyone in the world would be recruited.Network Marketing has been working since 1946. There are over 100 million people in the world that participate … 95% of which are just customers. Amway has been recruiting salespeople for over 60 years. You and I are not an Amway distributor, and we are not ever going to be. Amway does $8 billion a year in sales of award-winning, stellar products. They are not a pyramid scheme, yet the lie continues.
- If you're focused on recruiting then you don’t care about product sales and you're a pyramid scheme.Recruiting is HOW we create more product sales, a quantum leap in product sales. This is is the biggest lie. Recruiting is not illegal. Focusing on recruiting is not illegal. It is a means to more customers. They know this but they hate it. They want everyone to earn a little bit of linear income like an employee. They don’t want people to leverage their efforts like a boss. They want us to be small. And they lie to that end.
- You must have more customers than distributors or you are a pyramid scheme. There is no law, regulation, or anything other than their opinion that says a Network Marketing company has to have a certain ratio of customers to distributors. Since every distributor IS a customer, any ratio does not apply. Every person in every individual Network Marketing company is or was a customer regardless of their role or title. It is a lie that not meeting an imaginary ration makes you a pyramid scheme.
- Encouraging people that they can succeed makes you a pyramid scheme. Showing examples of success, a road map to success, or income potentials is not illegal. It's not illegal as long as you show people the truth, odds, numbers of people that do and do not succeed so they have a fair picture. An Income Disclosure Statement can accomplish this fairness. Lying to a prospect about the possibilities is fraud. Lying about what is fraud is also fraud.