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7 Differences Between Pyramid Schemes and MLM

Jun 14, 2008
If you stay in network marketing (or MLM) long enough you will eventually hear someone say some version of, "Oh, that's one of those pyramid schemes." Or, perhaps you're saying that to yourself right now regarding network marketing.

However, network marketing business programs are not the same thing as pyramid schemes. In fact, you want to avoid pyramid schemes all together.

How? What's the difference?

There are at least seven differences between network marketing programs and pyramid schemes:

1) Pyramid schemes are illegal. Network marketing business programs are legitimate and provide a viable, lucrative way for a person to earn an income - as long as that person has the skills and abilities required to build a network marketing business. This is actually why network marketing gets a bad rap. There are a lot of people out there trying to build network-marketing businesses without first developing the language, prospecting and recruiting skills necessary to build a stable, successful business.

2) MLM business programs do not require large start up costs. In contrast pyramid schemes often do. So, if a requirement of any program that you're considering is to invest a lot of money to get started, be wary.

3) Nowadays MLM companies do not require their distributors to carry inventory. Most MLM companies provide their distributors with a web site from which people can order and have product shipped directly to them from the company. If you're being asked to buy and store a lot of inventory you may be dealing with a pyramid scheme.

4) MLM companies have a market for their products. If there does not seem to be consumer demand for the company's products, it may be a pyramid scheme. Avoid the program.

5) Network marketing companies have a strong focus on their products and getting those products in the hands of consumers. Pyramid schemes will focus on fast profits by getting other people signed-up, with no regard to whether these people use the product or service.

6) Pyramid schemes will be designed such that a person makes more money-recruiting people into the business versus by the volume of product sold. MLM programs are volume driven.

7) Network marketing companies do not provide compensation for recruiting new people. If a commission is offered for recruiting people into the business, you could be looking at a pyramid scheme.

Take a few minutes to run any program that you're considering through the above 7 points. There are many legitimate MLM programs available today. So, there is no reason to settle for any type of pyramid scheme. Once you've decided upon which program you're going to join, consider getting the training you need to develop your language, prospecting and recruiting skills.
About the Author
Kimberly Anne is a Master Coach with MLMU and has helped thousands of network marketers build successful businesses. She provides free, no-holds barred, let everything hang out, tell it like it is, 30-minute business coaching reviews that can mean the difference between success and failure for network marketers. To get your free live coaching call visit www. freecoachingcalllive.com .
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