I think I need to clear this up once and for all so that I don't have to keep repeating myself.
And I think that those of you in the business can definitely relate to this. As soon as people hear that I am in Network Marketing, the first thing they say is "You mean one of those illegal pyramid schemes?!". And I laugh because there is a huge difference between the two and most people don't know what it is. Firstly I would like to clarify that Network Marketing is legal, and a Pyramid Scheme is illegal.
So what's the difference?
Well, a Pyramid Scheme is a non-sustainable business model that involves the exchange of money for enrolling people into a scheme where there is no real product or service. I just want to repeat that. There is NO REAL product or service. So what happens is, eventually the number of new recruits fails to sustain the payment structure and the scheme collapses with most people losing the money they paid in. And the reason is that distributors concentrate on the money that they can earn by recruiting new people and completely ignore the marketing and selling of any products or services. Because there are none!
Network Marketing on the other hand is a business model where a company decides to sell their products direct to the consumer through word of mouth. They use this method instead of paying for advertising costs. So instead of paying the advertising companies, they pay their distributors commissions for doing the work. So in reality, the main goal is to distribute the products.
There are two ways to make money in this industry. By selling the products or by recruiting new distributors. People can do either one or both. But because of the way the business is set up, most distributors naturally consume the products that they distribute as well.
The reason why a lot of people confuse Network Marketing with Pyramid Schemes, is because the shape of the business model for Network Marketing is in the shape of a pyramid.
Unfortunately this confusion is something that will continue to give this industry a bad reputation. But I'm willing to stick it out because it is this pyramid shape that allows so many of us to live the lifestyle that we choose. And it pays the bills!
About the Author So what's the difference?
Well, a Pyramid Scheme is a non-sustainable business model that involves the exchange of money for enrolling people into a scheme where there is no real product or service. I just want to repeat that. There is NO REAL product or service. So what happens is, eventually the number of new recruits fails to sustain the payment structure and the scheme collapses with most people losing the money they paid in. And the reason is that distributors concentrate on the money that they can earn by recruiting new people and completely ignore the marketing and selling of any products or services. Because there are none!
Network Marketing on the other hand is a business model where a company decides to sell their products direct to the consumer through word of mouth. They use this method instead of paying for advertising costs. So instead of paying the advertising companies, they pay their distributors commissions for doing the work. So in reality, the main goal is to distribute the products.
There are two ways to make money in this industry. By selling the products or by recruiting new distributors. People can do either one or both. But because of the way the business is set up, most distributors naturally consume the products that they distribute as well.
The reason why a lot of people confuse Network Marketing with Pyramid Schemes, is because the shape of the business model for Network Marketing is in the shape of a pyramid.
Unfortunately this confusion is something that will continue to give this industry a bad reputation. But I'm willing to stick it out because it is this pyramid shape that allows so many of us to live the lifestyle that we choose. And it pays the bills!
Aaron Chen is an Online Marketing Specialist and Coach in the Network Marketing industry who is sick and tired of seeing MLMers struggle. His goal is to help as many as humanly possible to taste success!
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