Thursday, September 29, 2022

Scheme or Scam: 7 Ways to Tell a Legit MLM from a Pyramid Scheme

Whip out a compensation plan that resembles a pyramid and you’ll immediately have people referring to your network marketing business as ‘another one of those scams’. In reality, every profitable and sustainable business model in the world utilises a pyramid structure. This simply shows that people should be less concerned with the shape of the pyramid and more with how it is created and sustained.

In this article, we’ll help you understand what sets legitimate network marketing models apart from the many fraudulent money-making schemes out there.

Searching for the Truth

In today’s world of information overload, Google returns 140 million search results for the search term ‘Network Marketing’. Each result offers yet another new perspective on this much misunderstood, much debated, much-maligned industry. About 50% of these millions of search results talk about scams, how network marketing has caused the downfall of various economies, how “victims” have lost millions, and how people promoting direct selling or network marketing should be shunned.

A Problem with Perception

One thing is certain. The network marketing industry is a highly perceptually challenged industry. In most developing economies where the industry has made a mark for itself —such as in India, which is a billion-dollar market— there is a lack of awareness fueled by misinterpretation and misinformation spread by the media and, most importantly, a lack of legislation to govern the industry. This gives rise to misconceptions, doubts and general wariness about it. Also, network marketing is word-of-mouth marketing, which means if there are four million people out there promoting this business; that is four million opportunities for misrepresentation, if not explained the right way! 

The Pareto Principle

pareto principle network marketing
Vilfredo Pareto (1848–1923), Italian sociologist, economist, and philosopher

Unequal wealth distribution is also a major fear that plays on the minds of many prospective network marketers, who are looking to explore the endless opportunities the industry has to offer. In 1906, Italian economist Vilfredo Pareto created a mathematical formula that described the disparity of wealth in his country, with a strong observation that 20 per cent of people owned 80 per cent of the wealth.

The ‘Pareto Principle’, or the 80/20 Rule as it was later called, points out that most things in life, be it effort, reward or output, are never distributed evenly, because there are always some people contributing more than others. And realising that the majority of results come from a minority of inputs can be useful so that we focus on the 20 per cent that makes a difference instead of exhausting our efforts on the 80 per cent that doesn’t count for much. For example, if 20 per cent of employees contribute to 80 per cent of the results, the focus should be on rewarding the employees. Similarly, if 20 per cent of customers contribute to 80 per cent of revenues, the emphasis should be on satisfying the customer.

In order to make the 80/20 Rule work for the network marketing business model, you will need a lot of people putting in a little, but consistent effort, and a lot of people receiving real value consistently. The business must provide a positive experience for both the ‘80 percenters’ as well as the ‘20 percenters’, so that you can develop a reliable, long-term leveraged income.

The Difference

What exactly sets legitimate direct selling companies apart from pyramid schemes and scams?

1 – Direct Selling is NOT a “get-rich-quick scheme”.

Direct selling may be very lucrative, but it is also a tough business. Right from the start, genuine businesses will tell you that the results happen only if you put in the time and effort. Any company that promises you an easy way to riches should be regarded with caution.

2- Legitimate Direct selling companies deliver quality products or services

Unlike pyramid schemes, where you get no legitimate products or services for your initial investment, legitimate companies spend millions on research and development to create exclusive, innovative and high-quality products that are tailored to meet the lifestyle needs of people across the globe.

3- Network Marketers for legitimate Direct Selling companies don’t earn commission through recruitment

Network marketers don’t need to recruit new members to earn a commission. Legitimate direct selling companies are structured to reward people for promoting its products. In a pyramid scheme, there is no financial return unless you have successfully enrolled others into the company.

4 – Direct selling companies have restrictions in their compensation plan

Legitimate direct selling companies apply fair and reasonable compensation plan restrictions in their distributor’s earnings to create equal income opportunities for all. In a pyramid scheme, those who came in first make all the money while new members lag hopelessly behind because they were recruited when the money pool had already been depleted.

5- Legitimate direct selling companies have a solid training system.

Legitimate companies place great emphasis on training their network marketers. They have qualified trainers equipped with the expertise and experience to help their members better understand the business and products. They also inculcate a culture of mentoring to help with the personal growth of individuals.

6- Legitimate direct selling companies provide their distributors with relevant business tools to grow their business.

A legitimate company helps you to keep track of purchases, commission earnings and the status of product deliveries, as well as full customer support. Other forms of support include regular product information releases, promotional offers, marketing materials and social media engagement to help distributors better understand the products and how to sell them.

7- Legitimate Direct selling companies have proper Policies and Procedures and ethical marketing codes.

You can tell a legitimate network marketing opportunity from a pyramid scheme based on the fact that their business policies and procedures are clearly stated in black and white, binding every network marketer to strict regulations and agreements. Any serious breach of the company’s ethical code or Policies and Procedures will result in action being taken against the involved. Most direct selling companies believe in achieving strong long-term growth and stability by creating a culture of ethical marketing.

******

Knowledge is power, as they say. So the next time someone gives you one reason why they think your network marketing business is a scam, perhaps you can give them seven reasons why it isn’t.

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61 COMMENTS

  1. Super article…..This should be an eye opener for lot of people who have a birds eye view and incorrect information about this wonderful industry 🙂

  2. Superb article..I guess this clearly differentiates a fraudulent pyramid scheme to a legitimate direct selling company…people who the moment listens any of his friend or family doing NM should read this article and then make any perceptions or judgements…

  3. Whoaaaa…. Amazingly captured article… A must read for ppl with perceptions about the network marketing industry… It is a pyramid definately much more worth than working for someone else in a corporate field… Here u atleast work for urself… No scheme no sc no get quick rich… Purely hardwork n business…

  4. It’s true i 100% agree with this statement. Direct selling with e-commerce platform ultimate and business is not easy if about traditional biz or anyone biz. But direct selling biz is required commitment, and decisions and after 4 to 5 years latter it’s giving us enough money fir our future without any work.

  5. QNet is best company and seriously Network Marketing is the only way to earn good money and fulfill dreams in today’s era.

  6. Awesome knoledge bro.. some people who don’t want to do hard work will not understand Network Marketing business right choice of companies and right compensation plan is the important key before entering in this business is required

  7. Wow this is wonderful ?? n how beautifully all the facts are covered . Network marketing is d best business to survive in today’s world

  8. I thank God for firstly bringing Qnet into my life. Before that I was a corporate citizen, better employee ( if not best) at almost all places I worked. A MBA graduate who worked hard to come in the corporate ladder. In short I was a MORON.

    I thought I knew how to handle a team until such time that Qnet embraced me and shown the real meaning of TEAM. Here in Qnet I am a part of Brotherhood.

    I though I was good at organising business events until I attended one here. I was duly humbled.

    I thought I was good at a lot of things but soon realised I was just another Moron – a well trained moron who studied hard and working with all my blood and sweat only to realise somebody’s dreams. I did not even had a dream of my own, only corporate goals. I realised I lost the capacity to dream. Qnet thought me how to dream and is helping achieving ALL of them.

    It is a common belief that kids are a scared lot compared to their mighty adults. But I realised that I have been living in constant state of fear. So much so that it has engulfed me and made a timid soul. I feared losing my job, fear of uncertain future, fear of debts, fear of boss, fear of Mondays, the list is endless. I was desperately trying to find some solitude amidst this chaos. But I could not – not until Qnet embraced me. I learned to overcome my fears, learned to stand-up for what I believed in and I am still learning how to script a true success story and I have a million hands helping me. I am becoming a better person. ( Most don’t realise they are not persons but zombies walking around)

    I have not yet spoken about money till now. Although that was the primary reason why I walked up to Qnet, but I soon realized money is secondary. Money will come – sooner or later. I was born poor but I will die rich. When I say rich, I don’t just mean wealthy. I want to be rich with friends from my Brotherhood, rich with true experiences of life, rich with positive emotions and loads and loads and loads of smiles.

    There are a few countries which makes it mandatory for every citizen to serve in the army for a brief period. This they believe will imbibe a lot of qualities which will make their population a good citizens. It is very difficult to implement that in India. Fortunately we have Qnet.

  9. The Best way today to build a plan B in our life is Network Marketing, I did not have any option apart from Jon which is also broke, it’s like a God Gift to me and I accepted it because I need it. Today I am Proudly associated with the most Legitimate and Value based NM company which not changed my life but also millions of life in the world.
    Lack of the above points in any NM company , then it really Unethical and scam.

    I am in the Best Compamy Qnet which fulfills all the above criteria, but they give more than imagination. It is not only Money the value which is in build in the people makes Qnet a all together Best NM company.????

  10. Awesome article!

    Actually Network mMarketing is a way of life ! We have a choice to live a different and better life as compared to just sustain ! It’s individuals cautious call!

    NM is indeed reverse-pyramid where a CEO creates numerous CEOs while building his/her organization / Network.
    [Network = Networth]

    NM is aid to grow some one personally, emotionally and financially ….. And can take to the finishing line of financial freedom .

    Network marketing companies like QNET with amazing and rock solid value system is able to touch and touching the life of millions globally. My heartiest thanks to direct selling industry, Newotk Marketing and QNET as to touch my life as well!

  11. Awesome article, beautifully differeciatd with between LEGITINATE NM AND PYRAMID SCHEMES.
    YES I proudly say NM and QNET is a SCAM
    S – SYSTEMATIC
    C- CUSTOMER
    A- ACQUISITION
    M- METHOD
    If customer acquition with standard operating procedures and strategies is called SCAM then yes we are one.

    For all those who say it a scam , I have a question for you can you define this word YOU YOURSELF USED ” SCAM ” . . . .
    let me ask in Hindi ” SCAM ki chidiya ka naam hai pta bhi hai, ya 4 logo Se sun ke repeat krna chalu kr diya ” ? ? ?

    Okay let me explain you what it is ….
    According to accounting facts ANY transaction happening with NO ACCOUNTABILITY OF MONEY (means no bills, no documemtations, no service tax or vat paid) is know as a SCAM.

    Any person starting business with Qnet have to buy a product with all the money what he is ready to put in happily.
    With in few seconds an ELECTONIC RECIEPT WILL be generated that you can see after making an online purchase. And this same BILL will come to your registered mail I’d as well, which will clearly show the
    1) product purchased.
    2) how transaction is being done.
    3) service tax
    4) value added tax

    With a proper invoce number, new IR ID of person coming into business and who referred him. . . .

    So, Mr and Mrs THE MOST HONEST PEOPLE IN THE WORLD (who say network marketing is a SCAM) , tell me what you do professionally and I will prove it a SCAM LEGALLY AND ETHICALLY.

    > ARE YOU IN A TRADITIONAL BUSINESS???
    check if you file your complete INCOME TAX RETURN. if you are hiding even a single rupee YOU ARE A SCAM

    > HAVE YOU EVER VOILATED A TRAFIC SIGNAL AND PAID RUPEES 100 To get rid of 1000 rupees challan ..
    YOU ARE A SCAM

    > ARE YOU CEO, CFO, CMO, CTO, COO, of a multinational company ???
    What is that you show as your basic pay …. To save income tax and most of your money is coming as allowances.
    YOU ARE A SCAM

    > ARE YOU AN OWNER OF SOME ENGINEERIGN OR MBA COLLEGE ???
    you guys charge lacs of rupees for a DEGREE (doesnt have a value of 2 rupees in market, if needed to be sold @ bad times) .. And after
    4 years of engineering and 2 years of MBA (spending closed to 15-20lacs, most of the students of education loans) get a salary of only 25-35 thousand/month (this is what I am talking on a higher end).

    You know what NM industry have potential to make someone WORLD CLASS BUSINESSMEN along with earning handsome money. In this industry handsome money means A FEW MILLIONS.

    > ARE YOU SOME POLITITIAN ???
    NETA DAL Se kya kahe SCAM ke bare me, apse zyada SCAM shabad Se parichit hoga kon ????… Mahine me 2-4 to ap kr hi lete hai. Umr hogi 50-60 ke aas pass . . .
    To iss bhudape me apko ye 21svi sadi ka dhanda kha Se samaj ayega.

    > ARE YOU A HOUSE WIFE, saying network marketing a SCAM ???
    GOOD NEWS for you .. Actually i am sharing a secret …. IF YOU REALLY work in NM INDUSTRY you can really earn more than your high profile salaried husband. And live life the way you want.

    I belong to a traditional family and know what all my parents had done to sustain in that market . QNET AND NM gave me better option to live my life.

  12. Amazing article.
    well, every business, whether its Microsoft, reliance, tata, GM is a Multi layered pyramid.
    Even schools, colleges, universities, govt, franchises all are pyramid.
    It becomes a pyramid scheme when
    Value stops flowing down and power in form of dollers stops flowing up.
    I am proud to be part of this industry and proud to be part of the best of the industry
    Qnet.
    Qnet is in me and I am in Qnet.

  13. This brings a lot of clarity to Network Marketing business.. it will help you differentiate between illegitimate m2m business and a legitimate network marketing business.

  14. Great information
    So many people just assume and leave the business whereas here its crystal clear clarity in things where there is no better business than this
    Love it
    Live it

  15. Thanks for sharing this article. .
    This is very nice … NM is all about built a beautiful and strong relationship with each other. .. I don’t know others company but QNET is this…. QNET is not only about earn money. It gives the values which is build humanity. So don’t miss the opportunity to be a part of Qnet. I m proudly associated with this value based NM company. ..

  16. Such a superb comparison between traditional business and Network Marketing industry!!!
    Pyramid is the most sustainable structure whether its government schemes, education sector, health care, defense, banking or any other sector. Pyramid is nothing but a hierarchical structure which is being used everywhere.
    I am unable to understand why people are referring Network marketing as an industry based upon pyramid structure though it is everywhere. Why people are making hue and cry about the industry even without knowing the facts.
    Networking marketing is the only future which we will have in terms of distribution of products and services and it is the only way to get the products of its own kind at the reasonable price. Also, network marketing industry is the only industry which gives the platform to a common man to become a business tycoon and we all are evident of this fact.
    My request to all before saying anything about the industry, give some time to yourself in order to find the facts and figures.

    No doubt, this industry is going to explode in forseeable future. Therefore, its your time to decide to watch it from a distance, talk about it or be a part of it and become successful!!! choice is yours!!!

  17. Awesome sharing…people shud know the facts abt this company n abt this industry. True that this industry has been plagued by illegitimate companies does mean every company is wrong. QNET is an awesome company and part of respectable QI group- rated as one of the best companies to work with…
    Awesome product n services n value for money. Id u r hard working then this is the right place to put efforts..
    LOVE FOR ME IS QNET
    TRUST FOR ME IS QNET
    BELIEF FOR ME IS QNET
    QNET IS MY MOTTO
    I TRUST QNET !!

    Know the facts & u too will Trust it n fall in love with this company ??

  18. Qnet is an amazing company with true human values. I always wanted to be associated with company which values humanity. I have found that qnet is one company that will make history and I am proud to be part of this team.

  19. There are lot of strong forces ( including media, sales channel, competition, political lobby) who can face huge losses are trying to malign image of industry and also running campaign against ethical and legal organisation in this business sector, let’s not get them hold of our freedom and block our path to success.

    I m proud to b networker coz it allow me to explore my freedom, my thought process and my core values and help me to transform into best human being apart from successful and rich person.

    Government have to accept this most effective tool of market distribution and need to form strong regularisation.

    My mother and wife feel empowered by being part of this industry and that’s make me feel proud as well.

    Regards,
    Ritesh

  20. I just want it in my blood Direct Selling industry has give me I’ve ever imagined, it must be a great deed that God has gifted me with such an amazing opportunity.

  21. Very knowledgeable information… Everyone must know it… Some people really needs education on direct selling industry

  22. Such an informative article. Thank you for clearing my concepts! QNet family is the best. It runs in my veins now !

  23. Today i proudly say to every one that i m in network mrktg industry..where we r changing the life of people.love u datto shree n japda bishmah..that give me such beautifull life….n ..the artical about the nt.mrkt n direct selling industry ..clear all the bagages …love u qnet

  24. Its a nice article but it does not explain the margins involved in a product and the amount of commission the business gives. The commission given in the pyramid scheme is higher than the margin in the product. thus in long terms the MLM fails. it is good for the initial lot of people who make the money quickly but if the model of the business is incurring losses, it is not advisable in a long run.

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