Illegal Pyramid Schemes!

Permalink Reply by Poorya Montaseri on January 21, 2009 at 3:04am

Almost all organizations, irrespective of whether they belong to direct-selling, conventional business or government departments, are pyramidal or hierarchal in structure.

In terms of structure, therefore, there is some similarity between pyramid schemes and all other organizations.
The important distinction between pyramid schemes and other organization, however, is in the operational area. That is to say, does its operations follow a chain letter principle? In terms of income, do members of the organization derive income from the mere act of recruiting? Are there actual sales to end consumers in the company's operations? To join the business, do participants have to pay a high entry fee? And if one wishes to opt out of the business, is there a provision for him to recover his money?

Legitimate Direct Selling Companies
1. The start-up fee for all ethical multi-level selling companies is generally low, primarily to cover training materials, sales aids or demonstration kits. Pyramid schemes often disguise high entry fees as part of the price charged for required purchases of training, product inventory etc.

Pyramid Schemes
Pyramid schemes make virtually all their profits from recruiting.

Legitimate Direct Selling Companies
2. Such companies sell a wide range of quality products to the general public. The bulk of the sales are on repeat sales form satisfied customers. This is only possible because these companies spend millions on research and development to develop quality products.

Pyramid Schemes
Pyramid schemes are frequently disguised to appear as legitimate direct selling companies. Such schemes are not interested in marketing these products which are of dubious value. Instead, money is made in typical pyramid fashion, from recruiting, with new distributors being pushed to purchase high cost/large inventory when they sign up.

Legitimate Direct Selling Companies
3. Many companies have a 100 percent money-back guarantee. Dissatisfied users (and there are relatively few) could exchange the products back for money or for an equivalent amount in other products.

Pyramid Schemes
Pyramid schemes will not buy back unsold inventory. Such schemes will collapse very quickly if there is this condition for re-purchase of goods.

Legitimate Direct Selling Companies
4. These companies are interested in long-term business. In every country that they operate, this criterion is important because the companies have an obligation to their distributors who are small businessmen in their own rights.

Pyramid Schemes
Pyramid schemes are get-rich quick schemes. The nature of the pyramids, in which large numbers of people at the bottom of the pyramid pay money to a few people at the top, clearly explains why the scheme cannot sustain itself for long.

Legitimate Direct Selling Companies
5. Recognition of achievement is based on efforts. This means that a distributor's income is commensurate with the efforts he/she puts into the business.

Pyramid Schemes
Position could be purchased.

Legitimate Direct Selling Companies
6. Established companies depend on selling to customers quality products which offer value for money in order to establish a market.

Pyramid Schemes
Pyramid schemes are not concerned with repeat sales to users of the products. Profits are made on volume sales to new recruits who buy the products not because they are useful or attractively priced, but because they must buy them to participate in the scheme. As a result, new participants are stuck with products that are way below the market value in relation to the high entry fees paid by them. Should the pyramid scheme collapse, there is no way for the participants to recover their "investments".

Legitimate Direct Selling Companies
7. These companies build up networks of independent distributors to sell products.

Pyramid Schemes
Promoters of a pyramid scheme are engaging in fraud, knowingly deceiving participants in the schemes.

Legitimate Direct Selling Companies
8. They have strict Rules of Conduct which, among other things, forbids its distributors to load up on inventory.

Pyramid Schemes
Participants in a pyramid scheme have no choice but indulge in inventory loading/high fees to participate.

Legitimate Direct Selling Companies
9. Distributors sell products and or services.

Pyramid Schemes
Participation is essentially based on recruiting, not necessarily on the sale of products or services.

Legitimate Direct Selling Companies
10. Direct selling is a popular method of retailing which is recognised as a lawful and legitimate business in many countries including the U.S.

Pyramid Schemes
Pyramid schemes have been outlawed throughout the United States and many countries many countries around the world.

For more info visit Direct Selling Festival.com

▶ Reply

Permalink Reply by Wafa A. Bdair on January 25, 2009 at 9:54am

Thank you Poorya for such valuable information. You made it very clear and simple. But I also want to add something.. in Legitimate Direct Selling we approach people to help them and we seek to know their wants and needs and how can we extend a helping hand and accordingly we offer them the solutions. We share with them the information and show them love and care. Lots of emotions and feelings are engulfing both parties. Their comfort is our aim. Through helping them we extend the same help to ourselves. We are all in a win-win situation.

In Pyramid Schemes, since the aim is only to get wealthy quickly, I beleive the feelings for others are not involved. In my opinion only "selfishness" is ruling.

▶ Reply

Permalink Reply by Wafa A. Bdair on January 25, 2009 at 10:40am

Also I would like to include that in Legitimate Direct Selling we build long life relationships and make friends all over the world built on trust.

▶ Reply

Permalink Reply by utila on October 4, 2010 at 7:43pm

HMmm...

▶ Reply

Permalink Reply by Siony Caparros on August 14, 2010 at 12:24am

For me a single explanation is that any MLM is legitimate if there is a product sold against your money, Even if the term used is recruiting as long as when you join by paying an amount you get your products worth your money, in other words you do the business or not you don't lose anything because you have your products or services. MLM becomes pyramiding scam if and when they don't provide the products or services worth your money.

▶ Reply

Permalink Reply by utila on October 4, 2010 at 7:45pm

Nice info!! people should know well the difference between network marketing n money game scheme..

▶ Reply

Permalink Reply by Poorya Montaseri on October 28, 2010 at 3:37pm

Millions of people have found success in direct selling for companies using a multi-level compensation plan. Unfortunately, not all opportunities are legitimate and it’s easy to get caught up in the enthusiasm and big promises of a pyramid scheme posing as a trustworthy company. So how do you tell the difference? Answer the following questions:
Is the start-up cost reasonable? A legitimate company will generally offer a startup kit that includes product samples, catalogs, order forms and other essentials that you need to get started selling. The median cost of a kit is $99, but can range from free to several hundred dollars depending on the type of product being sold. A pyramid scheme on the other hand will often require a large upfront investment of several thousand dollars for which you get little more than the right to recruit others.
Does your compensation come from selling products and services or from recruiting others? The money-making potential in a legitimate multi-level marketing company will rely primarily on selling products – be it from your own sales or the sales made by your recruits. In a pyramid scheme money is made by the recruiter from the fees paid by new recruits, regardless of whether they sell anything. Additionally, be sure products and services are being sold to the ultimate consumer of those products instead of passing large quantities of product from seller to seller.
Will the company buy back sales kits and unsold inventory? Most direct selling companies do not require large inventory purchases, but if one does, be sure to check out the buyback policy. All Direct Selling Association member companies are required to repurchase, at no less than 90 percent of the purchase price, any marketable inventory and sales aids purchased in the past 12 months if you decide to quit the business. You should not risk financial loss by trying direct selling. Pyramid schemes often try to disguise their deception by offering a sham product, so beware of a company that requires a large inventory purchase with no return policy.
The bottom line is that a legitimate company will portray an honest picture of the opportunity, including the possible risks, rewards, and challenges. A pyramid schemer, however, will enthusiastically sell you on the promise of making tons of money with little effort. Successful direct sellers treat the experience like running a small business. There are no short cuts to success. Keep a level head and evaluate all opportunities objectively. If you feel pressured to make a decision with which you are not comfortable, or if the opportunity sounds too good to be true, just walk away.
Before signing up with direct selling company, check the company out with your BBB at www.bbb.org or on the Direct Selling Association’s website atwww.dsa.org.