What is a Pyramid Scheme?
A Pyramid Scheme is an illegitimate Multi Level Marketing or MLM business model that involves joining a club or program for money upfront in exchange for the ability to sell the product or service but as well to recruit new members. Because the products or services are either very low quality or far too expensive and unattainable the main focus becomes recruitment. If you cannot convince people to fall for the same sales pitch (scam) you just fell for, you won't generate any income. The deception that's involved between the operators and their victims in order to extract money is what makes the Pyramid Scheme illegal.
The whole concept of the Pyramid Scheme relies heavily on the potential victim's wishful thinking, high hopes and desire to get rich quick! Human greed speaks volumes on the sidelines while the operator manipulates the victim into believing the simplicity of the system. They show you as the 'investor' and how you will soon have your very own empire of distributors that will eventually do most of the work for you. The operators tend to show the new recruits how they are positioned at the top of the pyramid so they see the potential for immense wealth right at their fingertips. In reality, the new recruit is somewhere near the very bottom of the pyramid and the speculated numbers of available sign-ups are embarrassingly inflated and exaggerated. Pyramid Scheme runs their full course when someone tells the authorities or there aren't anymore new victims to sign up.
Why are Pyramid Schemes compared to Multi Level Marketing and Network Marketing?
Pyramid Schemes are compared to both MLM and Network Marketing due to some of the major components being similar which is why doing your homework is necessary to enable you to spot the differences. With legitimate MLM and Network Marketing there is no deception involved. Documents are legitimate and traceable with notable information. Recruitment is secondary, if it exists at all. The products and/or services are highly desirable where customers make multiple, repeat purchases at fair market value.
MLM or Multi Level Marketing is a business structure designed to create a marketing sales force. The typical Multi Level Marketing program works through recruitment. You are compensated for your sales along with additional compensation for new distributors and the sales they generate. This action creates a downline or network of distributors, on multiple levels, in the form of a pyramid.
Network Marketing is a method of marketing that utilizes independent representatives to reach potential customers that companies may otherwise not reach with traditional offline or online marketing methods or strategy. The term Network Marketing is not in reference to the structure of the company more how the marketing takes place via social networks and individuals. Companies utilize multiple marketing strategies in various degrees as part of their overall business plan, from tv & billboards to internet based ads and social networking.
Avoid being a Victim of the Pyramid Scheme
Learn to Watch for...
- opportunities that offer products and services of little or no value to the purchaser. They will be disguised as easy to sell yet are overpriced, poorly made and of low quality which makes them very difficult to sell. Hence, the focus falls back on recruitment.
- a payment plan designed to payout high commissions for recruiting and the opposite for selling product or service.
- operators who encourage you to push and pressure your family, friends, co-workers and current business associates using all forms of communication ie; E-mail, snail mail, face to face interactions, seminars, in home meetings, phone calls and online sign-ups.
- constant reassurance from the operator that their program is legal and not a fraudulent Pyramid Scheme.
- an operator describing the opportunity as an investment club, gift network, team, program or group along with promised or guaranteed earnings or winnings.
- a lack of written information; business documents, literature, statements, marketing plan, etc.
- a large up front cost to join and/or to purchase large quantities of goods. On the contrary, there may be no goods or services at all.
- a 'miracle' product or a 'be all end all' service.
- high pressure tactics from the operator by imposing a false sense of urgency to commit or loose out on the opportunity forever.
- operators using manipulative tactics such as their position of trust, authority, level of education, personal contacts, name dropping etc.
Remember to conduct your research before any money ever exchanges hands. Obtain a second opinion from a qualified professional and contact your local Better Business Bureau. Follow your instinct, if it sounds too good to be true it most likely is!
For current information regarding various schemes please visit Frauds & Schemes FBI within the US or Scams & Frauds RCMP within Canada.
No comments:
Post a Comment