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Unread 8th Mar 2012, 05:44 AM   #1
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Debunking The MLM Pyramid Scheme Myth
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There is one word that proves to be a block or hindrance to many folks when considering joining an "opportunity," including this awesome PIPS opportunity. The word? mlm. As soon as this word is heard many folk turn cold. There is no easy answer for people who view mlm as something illegal or just another "pyramid scheme." However, I'd like to offer a few thoughts on the subject that might help some to overcome any objections they might have.

If you have any thoughts to add please do so because I'd really love hear them.

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In todays world of online business and marketing mlm gets a big thumbs up from people like Donald Trump, Robert Kiyosaki, and other well known business people from around the world. If these people are giving mlm a big thumbs up then why is it that many ordinary folk turn cold the moment they hear the word "mlm?" Good question, and one which needs to be honestly addressed.

The problem with most folks is that if you were to draw an mlm's business structure it resembles a pyramid. Now this pyramid structure is not a problem in itself, however, because some unscrupulous people have used the basic mlm business structure to promote their scams mlm has inherited all the negative connotations that are associated with the word "pyramid."


Lets think about a pyramid for a moment. At the top is one person, then on the next level down there might be three to five people, then on the next level down there might be nine to fifteen people, and so on. Now the further you go down on each level the lager the numbers get. This is true both in mlm and traditional corporate business. Yes I did say tradition corporate business.


You see, traditional corporate business also has a pyramid shape to its structure. Lets consider this for a moment. At the top is only one CEO, then on the next level down are your managers (usually two to three), then on the next level down is middle management (can be up to ten or more), then on the next level are the front line supervisors (possibly 20 or more), then last but not least are the company floor workers, which could number in the thousands.


As you can clearly see, corporate business has a pyramid shape to it's employee structure. So then as I mentioned above, the pyramid structure in and of itself is of no concern as far as legitimate business goes.


So what actually is the problem? My whole purpose for writing this article is to debunk the myth that mlm is nothing more than an illegal pyramid scheme.


The problem began when unscrupulous people started creating "business opportunities" that involved recruiting other people for monetary compensation using the pyramid structure to make "false" monetary claims.
Typically the person being recruited is told that whenever they recruit new people into the "opportunity" they will be paid a commission from the new persons entry fee. The more people, they are told, that they can recruit the more money they will make.


Now there are two problems with this. Firstly this kind of activity is illegal, secondly there is no actual product to be seen, only recruitment fees. Eventually this illegal system can not sustain itself and it collapses.


Legitimate mlm businesses, however, have a core product that is sold to both retail customers and members themselves. Although mlm uses a pyramid for its organizational and commission structure, the core activity is distributing product.


Now mlm products also include membership sites. For example, I'm a member of 7Minute Work Out.com which costs me $9.95 per month. For my membership fees I get dozens of videos teaching me how to exercise correctly, as well as up to date nutritional information. Whenever I sponsor a new member into this "membership" site, I get paid a monthly commission. The only fees being paid here those required to obtain the product. This is how every legitimate mlm business is run.


I'm also a member of another mlm company where I have over 2500 people in my down-line. Now this company is free to join and remains free as long as you want to be a free member. However, I'm making some good money from this company because there are over 4300 products both physical and digital which I sell everyday. Actually I don't do any selling because all members are also customers and buy what they want when they want.


As you can see, although mlm is based around a pyramid for its organizational and commission structure there is nothing wrong with using this kind of business structure so long as there is a legitimate product that is being sold.


So the next time you hear the word "pyramid," I encourage you to think of mlm and the word "pyramid" in a new light. There is absolutely no reason to fear going into business with an mlm company so long as you've done your research and you've determined that their product or products are real.

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Unread 8th Mar 2012, 12:28 PM   #2
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Re: Debunking The MLM Pyramid Scheme Myth
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The concept that many people have of Multi-Level Marketing (MLM) is that it is only the people "at the top" who make the money, while the people down below do not. A legitimate opportunity offers a realistic opportunity for every representative at all levels to earn any amount of income they choose to aim for.

A legitimate MLM opportunity has a real product or service that real people (end consumers) are willing to pay for and actually use. A "pyramid scheme" either has no product, or it is a thinly disguised product that doesn't have any true value and members of the scheme only promote it as a way to convince people to join the scheme.

A legitimate MLM opportunity focuses on training the representatives to market the product to the end consumer and provides training and resources to teach the rep how to do this effectively.

With a legitimate MLM opportunity, representatives may be encouraged to invite others to participate in the income opportunity, but they are trained to market the product to the end consumer and not to place an undue emphasis on the income potential of the opportunity.

Just my thoughts!

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Unread 8th Mar 2012, 05:09 PM   #3
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Re: Debunking The MLM Pyramid Scheme Myth
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GT,

Thanks for filling in some of the holes.

Jeffery 100% :-)

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Unread 8th Mar 2012, 06:18 PM   #4
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Re: Debunking The MLM Pyramid Scheme Myth
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I would like to add as a matter of precaution that any mention of the terms "MLM and Affiliate" on our websites should be avoided. Also, any websites that link to our sites that mention the terms should be avoided!

Do some research about the FTC and ClickBank investigation. The end result is CB removed products related to MLM and is still doing so as they find them.

Also, as we speak, PayPal is freezing accounts that promote any type of site that promotes intangible products about 'how to make money'. See the Warrior Forum Main Discussion for the threads.

Between the FTC and Payment Processors (AlertPay just changed their policy) MLM will survive as long as we play by their rules.

It is no longer a matter of Due Diligence, yet a matter of..
Due Diligence and Due Intelligence to avoid Due Negligence.

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Unread 8th Mar 2012, 09:25 PM   #5
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Re: Debunking The MLM Pyramid Scheme Myth
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very good read. nice post

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Unread 8th Mar 2012, 11:27 PM   #6
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Re: Debunking The MLM Pyramid Scheme Myth
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I have a website that mentions both MLM and network marketing and have no intention of removing those words. The business itself is legal in every way. It's the way people market it and promote it having no tangible products. It's been illegal for quite some time and is called a Pyramid scheme when money changes hands and no product is being purchased in return.

I'm not sure what click bank has been up to but I'm sure with some of the junk they have available questionable products had snuck through.

As long as the product is legitimate and business is conducted both legally and ethically there will be nothing to worry about.

MLM was once laden with Hype, get rich quick, get in now or loose nonsense. Between the lies top marketers made and taught and the fact no one wants to call a bunch of people they don't know or annoy their friends and family to death people were simply not interested in the whole business idea. With the Internet and the use of honest sales tactics and sales funnels the old ways of MLM are giving in to a new ethical way of marketing. MLM systems now do most of the qualifying for you by using a funnel system that removes the Freeby business seekers and tire kickers. The result is qualified leads who actually want to talk about your business.

The new MLM model is a breath of fresh air and much more enjoyable than it once was. Easy, no, just a lot more user friendly.

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Unread 8th Mar 2012, 11:33 PM   #7
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Re: Debunking The MLM Pyramid Scheme Myth
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I have heard that with the vast majority of MLM companies, there is very little market for the product (which is why the MLM structure was chosen to begin with) and most consumption happens internally.

I'm not saying that's my view, but I would love to see a response to this.

Personally, I don't like MLM because I don't like having my income depend on the performance people under me. I'd rather hire people and tell them what to do, not coach them or motivate them. In a regular business, your people do their job or they're fired. Much easier in my opinion.

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Unread 9th Mar 2012, 12:40 AM   #8
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Re: Debunking The MLM Pyramid Scheme Myth
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Originally Posted by Kung Fu Backlinks View Post

I have heard that with the vast majority of MLM companies, there is very little market for the product (which is why the MLM structure was chosen to begin with) and most consumption happens internally.

I'm not saying that's my view, but I would love to see a response to this.
I am not actively involved in MLM or Network Marketing right now, but I was involved with what I believed to be a great company through the mid 90s. Their product line was popular in the marketplace, their quality standards were high, and their prices competitive.

I earned income, for about five years, that was above the "average" in that company. Compared to the real income earners, it wasn't much, but it averaged about five figures per year, compared to most reps who were lucky to earn a few hundred dollars a year. My income success was solely because of a few capable marketers in my downline.

To address your question, I believe that most legitimate MLM companies have a product or product line that appeals to the general consuming public.

I will admit that there are some fly-by-night wannabe MLMs that barely have a legitimate product to offer, but in those cases, I would not call them "legitimate" MLM companies. And those are the ones that give the decent ones a bad name.

Legitimate companies have real products. However ... where the problem arises is either in the pricing, where it has to be higher to accommodate the multi-level commissions; or in the marketing focus of the independent representative.

In my experience, most reps who join a company do not care about the product - they are interested primarily in the income potential. And because that is their interest and their perspective, that is how they promote the company; as an income opportunity.

The problem with this is that they do not learn how to sell the product to an end consumer and they definitely do not train their downline members to retail the product, either.

It then becomes a network of people trying to push the opportunity on other people and they buy product only to achieve certain status levels in the pay plan. Then they encourage the people they sponsor to do the same. That is how so many people end up with so much product they don't want and can't sell (because they haven't been trained to sell product).

So, what I am trying to say is, with most MLM companies, I do believe there IS a market for the product, but the problem is the reps are not trained or properly encouraged to retail that product to the end consumer. Some reps do retail it well, a few try to do it, but most do not.

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Unread 9th Mar 2012, 12:44 AM   #9
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Re: Debunking The MLM Pyramid Scheme Myth
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wow GT.. very well put.. after looking through so many different MLM opportunities, i have to say i couldn't have put it better than you just have.

your exactly right A LOT of MLM companies just market the business itself to make money instead of the product which i see as an end result just leading to failure.

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Unread 9th Mar 2012, 01:56 AM   #10
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Re: Debunking The MLM Pyramid Scheme Myth
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If the end result of marketing the business is failure then most PIPs members are doomed to fail.

MLM has changed. Maybe be the law made them do so. The companies no longer promote only the business end. The top companies, the ones who create good products and firmly believe in them sell the product first and foremost. Consumers and those who are Entreprenutial minded no longer look at the business first. You will find that most Reps today, top Sponsors included look at product quality and company integrity very strongly before making a decision to sign on. Consumers who are looking for another income, a second income so to speak, are in no way interested in the hype of days gone bye. Many of the sales tactics still found in affiliat marketing, scarcity bring the worst of the bunch, do not cut it with today's small business/income minded person. Most are sick and tired if all the sales hype they've had to hear most of their lives and they won't tolerate it any longer. If the product doesn't have quality you can forget building a business. companies know this and their focus has changed. Most people can examine their own view of MLM and understand quickly what they personally will not tolerate.

I don't promote Herbalife and probably never will but they for one have gone into retail. Savvy Reps open small retail shops selling some sort of Tea and a Shake as a alternative meal for lunch. They then recruit customers who want to save on their own purchases. Other companies are doing the same. Reps for many health suppliment companies are also selling products retail to friends and others. They do it because they believe in it and it brings a nice second income. I have personally talked with people who will sell the products "if they are good enough" and have no want for a MLM business.

The focus is changing and those who are making the money have changed with it. I'm already making plans for a small shop selling the products up front while building the business on the back side. I would only want a one man and wife business. No one in their right mind wants employees. As one business owne said, he now has weekly employee of the week promotions. If an employee can keep from texting and stay off the cellphone for one week they win a prize lol

If your going to be in MLM or any type of online sales you better dump the hype. It' quickly finding its way out the door.

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Unread 9th Mar 2012, 05:21 PM   #11
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Re: Debunking The MLM Pyramid Scheme Myth
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@ Stephan,

Well done!

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Unread 12th Mar 2012, 03:58 AM   #12
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Re: Debunking The MLM Pyramid Scheme Myth
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Thanks guys, your thoughts have certainly made this thread really informative for those who struggle with the concepts of legit mlm business. How true it is that the top mlm companies are making or have already made the shift from just selling the "biz opp" to focusing on the "product."

PIPS is a really good example of this. I'm glad and actually feel privileged to have met all you guys who are involved.

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Unread 7th Apr 2012, 09:52 PM   #13
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Re: Debunking The MLM Pyramid Scheme Myth
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It's funny to me when someone talks about MLM being a pyramid scheme...but I certainly understand their concerns. The problem is so many shady companies have disguised themselves and offered "products" to "consumers" that are vastly overpriced.

I have been approached by several people promoting shady opportunities in the past, where the product was $10,000 worth of "information" for $997. Even if the info is worth that price (which with these programs is seldom the case), it's hard to put a tangible value on it & sell it to the general public.

Now I'm involved in a network marketing savings club program that actually helps people save a substantial amount of money on products/services that 99% of people use anyways, and there just happens to be an income opportunity attached...the product itself is a no-brainer.

The litmus test for MLM opportunities is this; would you buy the product and think you got a great deal with no income opportunity attached (be honest with yourself). This will help you avoid signing up with an illegitimate network marketing business.

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Unread 8th Apr 2012, 01:30 PM   #14
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Re: Debunking The MLM Pyramid Scheme Myth
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This is so true - most every scam I have heard of has a high cost to join. I guess they figure if they are going to jail someday it may as well be for the big money.

By the same token however, these are businesses and businesses do need to make money and they do provide various services to members which cost them money. For example with affiliate programs - they have customer service - you may say 'well duh' - but I don't mean just to their members, I mean as well to YOUR prospects and customers.

Most provide some sort of resources like training, graphics and other tools you can use to promote the business, and accounting; even the site itself and the affiliate sales pages - all require them to pay for hosting, domain, technical support, etc.

... and don't forget their intellectual property - they are allowing you to make money from their product/service/system -

I think it is a fair exchange that you will promote them (they will get free advertising from you) for a fair commission.

So if their membership fees are REASONABLE and affordable to you, and the compensation plan is fair - don't begrudge them.

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Unread 9th Apr 2012, 06:18 PM   #15
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Re: Debunking The MLM Pyramid Scheme Myth
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Originally Posted by sitetalkscam View Post

On the other side the MLM business has no overhead in form of rent for high visibility location or sales people salary. Their overhead is much lower than traditional business which means they must be very happy for more people are ready to work for them for just commission.
Not really. In the MLM Service Industry the 'location' is a group of dedicated servers and most cost $600 monthly per server. Most of the high profile MLM Companies require three servers minimal:

1) Dedicated email server.
2) Dedicated server for hosting.
3) Dedicated server for multiple DNS (optional).

Now consider the cost of a dedicated Server Manager. My own fee is $600 monthly per server for the 'basic service' and up to $1200 monthly for the 'premium service'.

There are many start-ups that try to run a single business on a single server and it can work... until they overload the server and eventually lose everything. Happens all of the time with scammers at the helm.

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Unread 10th Apr 2012, 04:13 AM   #16
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Re: Debunking The MLM Pyramid Scheme Myth
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MLM is a very good way to start up a lot of programs are free
and you can get referral commission for inrtoducing members.
Thats how l started many years ago, a good way to learn


Last edited on 10th Apr 2012 at 04:13 AM. Reason: spelling
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