The Difference between MLM and Pyramiding
Note: Some information provided here came from a book I bought entitled, “Build, Grow and Sustain Your Network Marketing Distributor Business” authored by Mr. Josiah Go.
A lot of people mistakenly associate Multilevel Marketing (MLM) with Pyramiding. Because of this misconception, MLM gets an unnecessary negative reputation due to the negative history and publicity attributed to Pyramiding.
But what exactly is Network Marketing? According to Mr. Josiah Go, Network marketing is a type of direct selling where distributors are compensated in both selling the products and the business opportunity. This encourages them to build and maintain their own network of distributors, each with their own retail customers. In order to build, grow, and maintain your own network of distributors the key is to provide them the knowledge and support they need in order to grow their own network. This is the reason why MLM is also known as “People-Helping-People Business.”
The distributors are independent contractors and they are not direct employees of the company. They act as both the company’s customer base as well as the marketing and sales arm of the company’s product (or services) and business opportunity. They are compensated in two ways:
1. When they sell products.
2. When their recruits sell products.
It’s important to take note that merely recruiting new distributors into the network gives no compensation. It is the sale of the product or service that will result in compensation and not the recruitment itself. The term multi-level describes the various levels of recruits that are qualified for compensation even if they are not directly involved in the sale of a product or service.
On the other hand, Pyramiding is simply a scam. Its income is solely dependent on recruitment of people and never on the sale of a product. Some pyramiding companies offer products that have no real world value to hide their scam. If investigated deeply, it will be discovered that the true intent of their compensation plan remains the same – a recruitment scam.
For more information, please visit the link below.
How to differentiate a legitimate direct selling company from pyramiding using the 8-point Test