Multi-Level Marketing & Pyramid Schemes

Last night I was approached at my part-time job by a young man who is barely out of his teens. “What would you say if I told you to come hear about a job, and you’d get paid $100 just to come listen?” he asked. I said I would have to know more about it. “No, no, you get PAID $100 just to show up. Would you come?” I said I’d need to know more about it – where it was… He cut me off, “Anywhere you want – your house,” he interjected. I continued and said I would need to know how long the meeting would last. “Not long, 30 minutes, an hour,” he eagerly informed me. I said for $100 I would show up for an hour if it was a convenient location, but if I wasn’t interested, at the end of the hour, I would walk. He was clearly frustrated with me, but he went on. “Well, what if you wanted to take a cruise, anyplace you wanted, for a week, and it only cost $100? You like cruises, don’t you? Would you go on cruise for just $100?” I replied I would still have to have more information before I would hop on a cruise ship with anyone. He countered with, “Suppose I told you that if you brought 6 friends to the company you would get $100 each. I said, “Ah, then we’re talking about Multi-Level-Marketing or a Pyramid Scheme.”
At that he became openly hostile, “No, it’s not a pyramid scheme, You aren’t putting any money into it.” I said, “Yes, it it. If you are signing up people and getting paid to sign them up and then paid on what they produce, and the people who signed you are getting paid to recruit you as well as what you produce, that’s how pyramid marketing works.” I began to walk back to my department as I was clearly NOT interested, but he followed me to my area saying, “It’s not a pyramid scheme. There’s no form to it. I am just signing friends up.”
WIKIPEDIA ON MULTI-LEVEL MARKETINGWikipedia has an interesting article on Multi-Level Marketing. This passage is of particular interest:”In the most legitimate MLM companies, commissions are earned only on sales of the company’s products or services. No money may be earned from recruiting alone (“sign-up fees”), though money earned from the sales of members recruited is one attraction of MLM arrangements. If participants are paid primarily from money received from new recruits, or if they are required to buy more product than they are likely to sell, then the company may be a pyramid or Ponzi scheme, which is illegal in most countries.”However, one doesn’t have to turn to Wikipedia to sense a problem with some multi-level marketing companies and various pyramid schemes. There are some obvious warning signals that apply to multi-level marketing, pyramid, and other schemes when they aren’t on the up and up.RED FLAGS1. If they won’t or can’t tell you immediately right up front what the job and/or product is2. If they try to lure you to a meeting with promises of money if you attend or hypothetical cruises3. If there is the implication that you are none too bright if you ask questions or don’t jump at the chance to attend a meeting to learn more4. If they say they will pay you for each friend you sign up5. If they use ambiguous descriptions or vague, hard-to-understand phrases to explain what they are or what the business isNot all multi-level marketing is a scam by any means, but a reputable multi-level marketing (MLM) company will tell you right up front they are an MLM company, and they can also tell you exactly what it is they sell. And even a legitimate MLM company risks implosion after the initial players earn their big dollars, and the next level earns their medium-sized dollars, and the lower levels earn their small dollars.
The longer an MLM business has been around, and the more saturated an area is with representatives, the less likelihood there is of earning substantial money. The only way to make big money in a multi-level marketing company is to get in on the ground floor of a debt-free business with a great product, a recognizable and respected brand, and a great business plan. And a business like that has no need to be vague or mysterious.
The bottom line is: “If it sounds too good to be true, it probably IS too good to be true.” These old words of wisdom have been around for as long as there have been schemes. So next time someone approaches you with a job they can’t tell you much about, and then promises to pay you to hear about it and razzle-dazzles you with cruises or other prizes… RUN!
From our archives 7/31/8
9/10/10 Read about the company that made me eat my words at Christian Activities Publisher Kathryn E. Darden Announces Partnership with Rodan + Fields.


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