Pyramid Schemes - Part 1

When we deal with potential network marketers we can all agree that the most commonly questions asked would be: is this a pyramid scheme? Naturally we answer no but we fail to explain why not. So let’s see whether we can shed some light on this phenomenon that is the pet hate of so many honest network marketers. Pyramid selling differs from that of network marketing and is actually a highly illegal practice! Unfortunately it is still responsible for much confusion in the marketplace and responsible for a great amount of negative press for the network marketing industry. The following will hopefully shed some light on the issue and help you to understand the difference between network marketing and pyramid schemes.

Pyramid schemes have popped up a few decades ago mainly in the USA. The reason they were called pyramid scheme is because the person at the top benefits the most by placing new people below. The system is tiered and the higher up one is, the more money they would make. Many people got sucked into those chain letter pyramid schemes were one would be asked to send $5 to the first 3 people on a list and then their name will be placed on the list, only to move up a notch. Once their name was at the top they would receive thousands of $ in a very short time. Blah, blah and blah again. This is simple a lot of baloney and a pyramid scheme of the worst case scenario. The sad truth is that many people are motivated by greed and the promise of quick riches. So they fall prey to these pyramid schemes only to see themselves with a court case on their neck when the company goes bust eventually.

Yes, any pyramid scheme company will be found out and will go bust eventually. Thank god most people are becoming educated more and more. So these pyramid companies will find it harder all the time to suck unsuspecting prey into their fangs. But how can we distinguish a pyramid scheme from an honest network marketing company?
• Pyramid companies offer no product. There whole purpose is to recruit others with vague promises of instant riches. They get people to join up by paying money.
• Pyramid companies target the vulnerable. They promise them easy money and exploit people’s insecurities in order to get them to join.
• Pyramid scheme money is earned by recruiting others into the system. Those will then go and recruit themselves until a pyramid is being formed.
• Pyramid scheme companies collapse quickly and only those at the very top will benefit in the short term, making them very rich and leaving everybody else with nothing.
• Pyramid selling is outlawed by many countries these days and if you suspect being a victim of such a scheme, please contact the authorities.

In the next article we will look at the opposite of pyramid selling –network marketing