Can anyone tell me what the definition of a "Pyramid Scheme" is?

Question

I'm in MLM - I've ask people for a definition when they ask me if what I'm in is a Pyramid/Pyramid Scheme - Isn't any business where the person at the top, a Pyramid? Such as Wal-Mart, Insurance, Brokers etc.?

Answer 1

Roger,
A great explanation of a "Pyramid Scheme" can be found at:
http://en.wikipedia.org/wiki/Pyramid%5Fscheme

I to like MLM. If you are leading with the fact that you can make a lot of money and you are not, you will receive a lot of negative comments. If you do not enjoy the product or service that you provide and know what your target market is it is hard to succeed. I have heard the analogy of a typical business being a pyramid too. You are right in one aspect and it does compare to MLM. You have to start at the bottom and work your way up. The higher you go the more money that you make. Also similar to a typical business, someone bellow you can pass you up. Many times people portray that if you get in now, you will move up automatically. Don't get caught up in saying those things. It will damage your business and you won't have anyone stay in your down-line. I hope this has helped.

BEST WISHES & HAPPY NEW YEAR!

Answer 2

Think of a Pyramid the top block is a person that's making money from everyone under him and everyone under him will never make it to his spot in the pyramid no matter what they do.




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Answer 3

Long story short for the people that fell asleep reading the first responds.

The person at the top that starts the Pyramid gets the most money. The Scheme will fall apart when word gets out it's a scheme and they run out of new recruits.

Often the man on the top makes out and the rest get screwed out of money.

MLM's Multi Level Marketing "companies" correct? They are I guess a legal way to create a scheme. Though it's not like a Pyramid Scheme I would still stay away from them.

Oh as for Wal-Mart and ect they are not Schemes some one actually gets what they pay for and are NOT scamming people. They have legit business plans and are not a scheme or MLM.

Answer 4

A Pyramid is one thing but a "Pyramid Scheme" is quite another but then you knew that.

Answer 5

A pyramid scheme is a non-sustainable business model that involves the exchange of money primarily for enrolling other people into the scheme, usually without any product or service being delivered. It has been known to come under many guises.

Identifying features
The distinguishing feature of these schemes is the fact that the product being sold has little to no intrinsic value of its own or is sold at a price out of line with its fair market value. Examples include "products" such as brochures, cassette tapes or systems which merely explain to the purchaser how to enroll new members, or the purchasing of name and address lists of future prospects. The costs for these "products" can range up into the hundreds or thousands of dollars. A common Internet version involves the sale of documents entitled "How to make $1 million on the Internet" and the like. The result is that only a person enrolled in the scheme would buy it and the only way to make money is to recruit more and more people below that person also paying more than they should. This extra amount paid for the product is then used to fund the pyramid scheme. In effect, the scheme ends up paying for new recruits through their overpriced purchases rather than an initial "signup" fee.

The key identifiers of a pyramid scheme include the following:

A highly excited sales pitch.
Little to no information offered about the company unless an investor purchases the products and becomes a participant.
Vaguely phrased promises of limitless income potential.
No product, or a product being sold at a price ridiculously in excess of its real market value. As with the company, the product is vaguely described.
An income stream that chiefly depends on the commissions earned by enrolling new members or the purchase by members of products for their own use rather than sales to customers who are not participants in the scheme.
A tendency for only the early investors/joiners to make any real income.
Assurances that it is perfectly legal to participate.
The key distinction between these schemes and legitimate MLM businesses is that in the latter cases a meaningful income can be earned solely from the sales of the associated product or service to customers who are not themselves enrolled in the scheme. While some of these MLM businesses also offer commissions from recruiting new members, this is not essential to successful operation of the business by any individual member. Nor does the absence of payment for recruiting mean that an MLM is not a cover for a pyramid scheme. The distinguishing characteristic is whether the money in the scheme comes primarily from the participants themselves (pyramid scheme) or from sales of products or services to customers who aren't participants in the scheme (legitimate MLM).