How does network marketing or multi level marketting differ from pyramid schemes?

Question

I refer to companies like GNLD ,amway etc

Answer 1

The biggest difference is that in most MLM companies you can actually sell products and make money (although not worthwhile). However, the focus in nearly all MLM companies is on recruiting which is exactly the same as a pyramid scheme and is based on unsustainable growth.

The other big difference is that in pyramid schemes, everyone knows its a scheme and hopes to be in early enough to make some money. In MLM, you actually have naive people who don't even know its a pyramid, and are duped into propaganda such as "its the same pyramid as conventional business" (the obvious difference being that conventional businesses don't need to keep hiring merely to pay their existing employees). MLM focuses so much on hype to keep the naive in and buying their own products.

Answer 2

well, multi-level marketing and "network marketing" are basically the same thing. You have several levels of the "organization" and people have people above them, and if they get other people into the business, then there are people below them.

The main difference between a "pyramid" and a "regular" network marketing scheme is in how they do business.

Take a "regular" network marketing company like Pampered Chef. They don't advertise, they don't "market" to the general public - they use consultants (essentially independent contractos) to market their products for them. With Pampered Chef, as a consultant, you go out and find people (usually friends, family, co-workers) who will let you do a "show" in their home - to which they invite their friends, where you (the consultant) showcase the Pampered Chef products, while cooking something for the guests to snack on. At the end of the show, the guests hopefully order stuff, the person who hosted the show (had it in their home) gets "points" which they can use to get 1/2 price products, or possibly free products, depending how much in sales their show made.

At these shows, you also look for people who are willing to host their own show - and possibly also get free products.

The emphasis, with a true network marketing company, is on the sales. They have a real product or products, which people want to buy.

A pyramid scheme is basically a scheme where in the people on the bottom pay money, and that money goes up the pyramid, and eventually makes its way to the top. The only way you can make money in a pyramid scheme is to get people in below you. They only way they can make money is to get people in below them, etc.

Amway has been repeatedly called a pyramid organization. Not so much because of the Amway organization itself - but because some of the big "distributors" through Amway - guys that have lots and lots of people in their "organization" below them - make a lot, if not most, of their money through sales and motivation products that they produce and sell to their "downlines" (people below them). Arguably, these products are there to motivate and help the people in their organization to become more successful and make more money. The downside is, there are almost 100% profit, and arent' always based upon sound business ideas.

Hope this helps!

Answer 3

In illegal pyramid schemes, people earn money by recruiting other people in to the scheme. In network marketing, or MLM, people earn money by sale of legitimate products to legitimate consumers. People often confuse them because in the second, recruitment is used as a marketing strategy to increase the volume of sales, through new recruits being customers themselves and purchasing products for their own consumption and onselling the products to customers. In companies like Amway, if you recruit a million people, you make no money at all - you need people to actually buy and use the products. In a pyramid the goal isn't sales volume - it's actual recruiting.

Legally, the "sine qua non" of a pyramid scheme, ie "without which it is not", is receiving payment for actual recruitment. Many illegal pyramid schemes disguise themselves as MLM or Network Marketing, but if you can earn money simply by recruiting people, rather than for actual legitimate sales of actual products to actual consumers - then watch out! Some schemes attempt to circumvent this by requiring new recruits to purchase products, thus claiming earnings come from product sales. In reality, unless the person joining legitimately wants the products, this is just a disguised pyramid scheme. The courts consider that if you do have products included with "signup", as many legitimate companies do, then any products must come with a money back guarantee.

The simple difference is - is recruiting the way you make money, or is recruiting just a form of marketing to increase sales volume?

Answer 4

Very little difference. The only reason Quixtar cannot be considered a full blown pyramid scheme is because they "officially" promote retail sales. It is even considered a "sale" when you buy from yourself. However in meetings and home plans you are seldom if ever encouraged to sell retail, but rather sign up everyone you know, have known and ever will know. Take a look at this web site, it might help.
http://www.amquix.info/quixtar_pyramid_rebuttal.html

Answer 5

There is a massive difference... Pyramid Schemes are illegal, whereas MLM or Network Marketing is 100% ethical and legal. There are 1000s of successfull MLM companies worldwide, some of which are floated on the stock market. I dont think that would be allowed if they were unethical or dodgy. If you want to know more about MLM or network Marketing, drop me a mail or you can visit this site that is FREE to register and allows you to view profile of 1000s of business contacts worldwide, all profiling their MLM or Network Marketing business... good luck in your research

Answer 6

The "theory" of MLM... pyrmaid schemes eventually and always collaps under their own weight as there can not be enough people to support.

Amway, CNLD, Primerica beleive that their growth is unlimited and a person is always "on the ground floor" of the business with unlimited potential.

As you can tell, there is little difference

Answer 7

Pyramid schemes involve borrowing from participants by organizers with a binding promise to repay. MLM makes no such promise.

Answer 8

network marketing or multi level marketing are terms that people involved in pyramid scheme use to sucker other people into a pyramid scheme.

There is no difference.

Answer 9

Only in the way you spell them.

This is only my opinion, but either way the rich get ritcher and the poor stay poor.

Answer 10

The two are functionally the same.