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There are a number of key differences
between Pyramid Selling and MLM (or network marketing). This chart compares them
point by point. But remember… the real differences lie not in the technicalities
like structure and methodology, but in the motives of those involved in each.
You’ll still find people in MLM who have the same selfish, greedy, lazy mentality
as the old Pyramid Selling operators, just as you’ll find them in any system
where there's a great deal of money to be made.
Pyramid
Selling
Multi-Level
Marketing
1. Principal income from recruiting.
Income from retailing is incidental or spurious.
1. All income earned from retailing
of products. No income simply for recruiting.
2. Distributor locked into position
in Pyramid. Can’t pass sponsor.
2. Not locked into organisational
structure. Can pass sponsor and upline distributors based on personal achievement.
3. People at top make the real money
— until the Pyramid collapses. “Ground floor” opportunity really means “downhill” opportunity... everyone who joins
has less opportunity than the person who recruited them.
3. Anyone can earn top money — based
on personal achievement, not position in organisation. Business opportunity improves
with time and exposure. Based on sharing an opportunity for genuine financial independence
through co-operation.
4. Income from products based on
discounting on a sliding scale. In reality, means that prices get higher and higher
until impossible to sell.
4. All income derived from product
sales through commissions and bonuses according to personal effort. In the best MLM
plans, all distributors buy at the same price. Performance bonuses reward higher
achievement.
5. Product not important. May or
may not work well. In reality, acts as ‘bait’ for recruiting ‘hook’. Usually no guarantee,
non-returnable, no refunds. May not even be a real product.
5. Products are all important because
repeat sales is key to success. Products guaranteed to perform, satisfy or money
refunded. distributor stock can be returned for refund in most companies.
6. Real financial risk, especially
for those at lower levels, as non- returnable products become harder to sell downline
or at retail.
6. No financial risk. No money paid
for recruiting, products are returnable for refund.
7. Main appeal is to fear of loss,
selfishness, greed, ignorance, laziness and gullibility.
7. Appeal is to nobler attributes
— sharing, helping are among better aspects of MLM companies. Top achievers typically
help others and rewards follow naturally.
*In our experience and observation,
some compensation plans tend to attract more people inclined to exploit the system
and cause difficulties. Such plans are often open to manipulation and can generate
resentment, envy and friction.
Some are typified by regular disintegration of downline groups through internal pressures
caused by these attributes. The most stable, reliable marketing plans use a commission
structure with reasonable performance bonuses which encourage positive behaviour.
In real terms, some compensation plans appeal to, and encourage, the undesirable
attributes that typified the Pyramid schemes. These plans reward your ability
to buy, not your ability to sell... a fatal flaw in any business system.
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