Is Multi Level Marketing a Pyramid scheme?

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In this post I will answer the question - is multi level marketing a pyramid scheme?

What is multi level marketing?

Look at the picture >>>>>>>>>

That is the structure of Multi Level Marketing or MLM.

Let's say that a company has a product they want to sell. There are different ways they can market this product. They can use TV- channel, they can send out fliers or use Newspapers to advertise their product.

But quite a few uses Multi Level Marketing to get the product out to people. As you see in the picture, it starts with one person who buy the product. He in turn recruit three other persons who in turn get three other persons to buy the product and so on. For every person who buy the product there is cut going to the up-lines.

So let's say that the cut goes 5 tiers deep. It means that the man in the top of this 5 tier will have a cut from 363 persons. Normally the cut will be lesser the deeper you go on this 5 tier, but on the other hand the cut will come from more people.

This is basically what Multi Level Marketing is all about

Is this a pyramid Scheme?

Many people consider MLMs as pyramid schemes but as long as there is a product involved it is not considered as such.

Is MLM a good way to earn money?

Seemingly, as we saw at the illustration it looks quite good, to get a cut from 363 persons. But the reality isn't that simple.

First of all you need to convince 3 persons to use this product, but you also need to convince these persons to convince 3

other persons each and so on. The reality is that this will possibly not happen. It is estimated that 73 to 99% who involve themselves in Multi Level Marketing fail.

One reason is that it is very difficult recruit persons. Let's say that you are supposed to recruit 3 persons. It doesn't sound so difficult, but it isn't just 3 persons or any persons. If it should be of any benefit it should be persons who have leadership qualities and they in turn should look for persons with similar qualities in order for all the 5 tiers to be filled. This never happens. Why?

Because normally those who get involved in Multi Level Marketing are quite ordinary people like housewives or persons who just want to get an additional income.

That means that they start to chase family members, friends and others who most likely are not interested in building a network. That is why 73 to 99% of all who try to do MLM fails and they just lose money.

So is Multi Level Marketing a pyramid scheme?

As long as there is product involved it is not a pyramid scheme.

But frankly it is not a good way to earn money.

  • MLM for making money 2/10
  • MLM recommendation NO
  • Is a pyramid scheme? NO

All the best

Goran

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Recent Comments

7

Affiliate Marketing: No down lines or adding another person to see some income. You work when you want and how much you want without any pressure. No monetary investments needed to get started. All is needed is time and the right traffic for exposure on the promoted product(s). You don't need to leave your home.

MLM: Most of them need monetary investments. You need to get down lines to see any income or to recoup your investments. You work hard to make the one above you richer and also to sell products based on quotas. There is always some kind of pressure from the ones above you. You could put a lot of physical time in away from home and you might still not see any rewards. If you quit, you might not be able to get your money back. You would most likely stay with the product or package you've invested on collecting dusts in your basement. There's more. I'll stop here. Lol! Thanks for an interactive post friend. All the best!

You are so RIGHT!
Goran

MLM, Ponzi, Pyramid, stay away from them all I reckon, affiliate marketing works for me.

You are so right.

Goran, my take on this is also that the people you recruit must also buy the products that are being sold, and so on and so forth! That rarely happens! I would be one of those that almost believes it is a pyramid scheme, or as close to it as it can be without being one!

This is just MY opinion, of course. Thought -provoking post, my friend!

Jeff

I agree with you, but it is still legal. Morally thumb down.

I could not have said it better, Goran!

Jeff

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