The quick answer… it depends. (My old boss used to HATE that answer!)
It’s basically one of those terms that mean different things to different people.
If you are using the term pyramid marketing in the same way you would multi level marketing, you may want to be careful how you’re explaining your business. You could be losing business before you even start because of their assumption that you’re talking about a pyramid marketing scam.
The phrase “pyramid marketing” brings with it several questions that you may need to clarify for your prospects.
- Is it just another term for MLM or multi level marketing?
- Aren’t pyramid’s all scams?
The confusion between MLM and pyramid marketing scams are basically due to the shape of the organization. In both cases there is one person at the top and then as new people are added, they go under that person.
As an example, let’s assume 5 people can go under that person. When more than 5 people get involved, they go under the 2nd level of people. The second level of people can each have 5 which means there can be 25 people at level 3. As each new level is added, the number of people in that level grows 5 times larger. Thus… resulting in a pyramid shape.
Whether it’s a multi level marketing company or pyramid marketing (see below), the result is the same. An organization that is shaped like a pyramid.
To help you with new leads here is a basic description of MLM marketing and pyramid marketing.
MLM Marketing
In MLM network marketing there is always some type of product being sold. The range of products is huge and there are over 1,000 different network marketing companies out there. The one thing that’s different is that the specific products are only available through the MLM company. You cannot find it retail, or anywhere else because it’s only available to members of the network.
Therefore, if you want to buy it you will have to join under an established member of the network, and become a member yourself. This is how the people involved make their money – the recruiting member receives a commission from the products purchased by the new member.
Now that you’re a member, there are certain rules you must adhere to. The main one is usually about committing yourself to purchasing a certain amount of that same product every month. Your job is to show the products to new people and hope they like them well enough to want to join the company in order to purchase them.
Pyramid Marketing Scam
On the other hand, a pyramid marketing scam is just that – a scam. And, one in which the only people who end up making money are the ones who started it up in the first place. An example of this type of “get rich quick” business is the “envelope” letter, which you may have received as an email, or in the regular mail, at some point in the past.
In this “letter” someone who usually goes by a first name only, informs you confidentially, that he has already made thousands of dollars by following the directions of a simple protocol. And the best news is, you can too, if you just do what he did! The basics are that you get a list of people, send them $10 or so to the top name on the list. You take their name off, add your name to the bottom and send it to as many people as you can find.
The theory is that by the time your name gets to the top of the list you will have thousands of people sending you money – $10 at a time. This is the very definition of a pyramid marketing scam.
Conclusion
So, there you have one of the main differences between MLM network marketing and a pyramid (or pyramid marketing). MLM network marketing is basically about selling legitimate products and earning monthly commissions from people under you in the organization. Pyramid marketing schemes are basically about convincing people to give you money. One is a legitimate way to build your own business. The other is fundamentally a fraud.
When your prospect brings up the term “pyramid marketing” or “pyramid”, make sure to clarify the terms with them so that you can explain why their confusion is justified. Explain to them why your MLM company is a legitimate business building opportunity for them.
Have you been confronted by prospects who think your MLM business is a scam because of their confusion with pyramid scams?
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Gail Ramberg has been building TheNetworkMarketingBlog to teach you: how to build an MLM business, how to separate the legitimate info on the internet from the bad stuff and why to avoid pyramid marketing scams. She’ll also teach you to separate a real business opportunity from a scam.
