Welcome to the second post on this series “MLM Myths STOPPING You From Succeeding”. If you have missed the last blog, you can check it out here.
Recap About Pyramid Scheme
In my last post, I briefly mentioned that the pyramid structure itself is not an issue. The pyramid organization structure actually is NEEDED everywhere for effective management. It is most unfortunate that many people decided to stay away from MLM because of the negative connotation associated with the term ‘pyramid scheme’ or ‘pyramid scam’.
What is a Pyramid Scheme or Scam?
According to the Australian Competition and Consumer Commission (ACCC), pyramid schemes are illegal and risky ‘get-rich-quick’ scam that can cost people to lose money.
The promoters at the top of the pyramid make their money by having people join the scheme. Then they pocket the fees and other payments made by those who join under them.
In a typical pyramid scam, a member pays to join. The ONLY way for the member (often called distributor, consultant or associate) to recover any money is to have other people joining up, often as business partners that are often referred to as their ‘downlines’. In contrast, a genuine MLM opportunity allows the distributor to pick up COMMISSION based on the sales turnover of products or services that people genuinely love. We will cover this important point in my future blogs.
One of the most famous MLM pyramid scam happened in the 1990s. It involved a MLM company called JewelWay. One needed to invest a substantial amount to buy some jewelry in order to start business. You supposedly would be rich very soon by inviting just a few of your friends to also become distributors. For each sale made, the distributor received a handsome commission and jewelley from the company. For grossly over-priced products, often of little real value at all, the number of people willing to join the scheme would dry up very quickly. In fact, the American Federal Trade Commission (FTC) closed JewelWay down, declaring it as an illegal pyramid scheme. Many people lost their ‘investment’ as the ‘expensive’ jewellery that they had brought was so over-priced that there was virtually no real market for that.
Compare This Legitimate MLM Company!
In contrast, people in legitimate MLM companies earn money by recommending and promoting products of value or providing genuine services to consumers at a reasonable market price.
To illustrate this point, I’d like to mention a company called Fifth Avenue Collection. The company sells quality designer jewellery items that are sold through independent distributors who are often happy customers themselves.
Those with entrepreneurial mindset would like to take advantage of the brilliant MLM business model. They would CHOOSE to start their own individual jewellery DISTRIBUTION ORGANIZATION. They can pick business ‘Showcase Packs’ so that they can start their business, often through home party plans or open home sales. For as little as Aust$220, they are given 17 pieces of jewellery and some basic supplies for starting their home based business which operates much like a franchise business but without the huge start up capital. Nor do they have to pay the on-going franchising fees.
To develop a larger distribution organization for the MLM company, these entrepreneurs keep on doing their business by showcasing the products (to acquire CUSTOMERS) AS WELL AS helping others to become independent business owners (to acquire BUSINESS PARTNERS) like themselves. This is the most attractive feature of a legitimate MLM business model – LEVERAGE. Success is about teamwork, rather than working as a sole business owner.
Key Questions To Ask
Due to the attractive MLM marketing concept, promoters of pyramid scams often disguise their home-based business opportunity as genuine. They often emphases on the power of leverage and use the get-rich-quick bait to seduce others to join.
To tell the difference between a pyramid scam and a genuine MLM business opportunity, ask yourself these two questions:
• Are the rewards you have been promised based on product sales (either by you yourself or others who are in your distribution organization)?
• Are the products of real value, at a reasonable price, that consumers will want to buy even if there was no business opportunity involved?
The Truth Will Set You Free
I trust that I have shared with you enough for you to see that MLM is a legitimate BUSINESS MODEL that has a clear advantage because of the concept of LEVERAGE.
My warning is that – NOT all multilevel marketing plans are legitimate. Some are pyramid scams but many are NOT.
Do your due diligence:
– research the company’s track record: any leaders making real money because they are running a real business?
– do the products or services have market value?
– how is the business being promoted – scamming? pressure selling? Or sharing professionally?
Only the truth will set you free!
Your Say Please
I’d love to hear your views on this much debated topic about MLM.
In particular, how have you got over your ‘scam filter’ and arrived at a legitimate MLM business opportunity?
Even if your success at this stage is considered small, I’d love to hear from you!
Remember, in MLM EVERYONE STARTS small. This is how it should be! Let’s hope that no get-rich-quick scams can pass our critical judgement!