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Is Network Marketing a Pyramid Scheme?

posted by Gendall

What's the difference between network marketing and a pyramid scheme?

Let me guess, somebody has just approached you and asked you to join their network marketing business and your instant thought was - is this one of those pyramid scams?

You made the right decision to do some research and be concerned, because pyramid schemes are illegal and can put you in to a lot of trouble. The good news is that network marketing or multi-level
marketing is a legitimate and legal business model. On this discussion page you will identify the differences between network marketing and pyramid schemes.

To start with we will review the similarities and then work to distinguish the two.

Generally, the initial concern for people when introduced to a network marketing opportunity is when they see the compensation plan which resembles a pyramid in shape. Instantly they fear the worst as they draw a resemblance to illegal pyramid schemes. The truth is that this pyramid structure is the same as every other sustainable business model across the world. This is best highlighted in the diagram below (figure 1.)

Pyramid business structure

Is it the shape of the business model that dictates whether a business model is illegal?

No, of course not. If this were true every profitable company, government, church and school would be illegal and shut down. It is not so much the shape of the pyramid that people should be concerned about, more the way in which the pyramid is created that distinguishes whether
or not it is legal. Let’s review.

Pyramid Scheme (illegal scam)
A pyramid scheme can be defined as a fraudulent money-making scheme that is based on a non-sustainable business model that involves the exchange of money primarily for enrolling other people into the scheme.
Eventually the number of new recruits fails to sustain the payment structure and the scheme collapses with most people losing the money they paid in. In a more practical sense, probably the easiest way to identify pyramid schemes is firstly there is no legitimate product or

Network Marketing (legitimate, legal business model)
The concept behind network marketing is a distribution model that allows a company to sell their products or services directly to the consumer. Choosing to use a word of mouth approach (networking) instead of advertising through traditional streams (eg media). Therefore instead
of paying the media for advertising, network marketing companies are structured to reward distributors through commission in return for selling their products and finding new customers.

In Network marketing not everybody wants to be a sales person and therefore chooses to recruit more agents into their team as a means to build their referral base. Not only does this create a group of loyal customers, it also allows you to leverage the efforts of others to create a residual stream of income.

“I would rather earn 1% of 100 people’s efforts than 100% of my own efforts”
- John Paul Getty (American Billionaire)

Therefore the recruiting element of a network marketing business is merely a way of distributing more products and helping to build a leveraged income.

Why do agents in network marketing normally receive a commission when a new recruit joins their organization?

Most network marketing companies now offer a very low start up option where you do not have to purchase any product to get started.

In summary, when trying to understand network marketing, Agents are paid a commission - not for recruiting new members, but for the money being spend on a product or service, that is sold through their organization. Therefore recruiting new members into a network marketing company is purely a way of expanding the agents network and customer base.

Another big distinction between pyramid schemes and network marketing is the fairness of good math’s. To prevent network marketing companies from falling over like pyramid schemes (where people at the top make all the money and people at the bottom lose everything), there
are restrictions placed in the network marketing company’s compensation plan that limit the number of people who can earn a commission off any given sale. Basically there are only so many ways you can split money, therefore, network marketing commissions only travel so far. This not only makes the business model sustainable but also makes it fair in the sense that it doesn’t matter if you got in first or last, you have the same opportunity as everyone else.

Please bear in mind that every network marketing company’s compensation plan is structured differently.

So in summary, despite the fact that network marketing and pyramid schemes shares similarities (i.e. the pyramid shaped business model shown in figure 1, and that in both you can recruit new members) network marketing is a legitimate business opportunity and one where you can
earn a substantial legal income. You don’t have to take our word for it, network marketing is now being endorsed by a number of leading businessmen worldwide.

“If I lost everything and had to start again, I would find myself a great network marketing company and get to work!”
- Donald Trump (David Letterman Show)

Just some info for you about Network marketing with GFL South Africa
What you get in return for your start up investment, other then just the potential to earn good money is:

You get a members login page to view complete details of your business team / downline / compensation etc… and with GFL you will receive - *a Visa Cash Back Card, *a Trauma Assistance & Life Cover Policy, *Business Optimizer Software, *a chance to help charity and yes like said above the potential to earn a 6 to 7 figure income.

This was taken from my forum
please feel free to add your opinions to the forum

Views: 159


Replies to This Discussion

Hayır,kesinlikle farklı ve inceleyin.

Not a scam if they are telling you to and training you to sale products for a profit. WARNING -you do have to use the product or become a product of the product is what they call it. But whatever group you are in or considering, I wouldn't stock up all of my savings in products because they might not sell quickly and never sell as quick as sponsors tell you. So be careful.


But MLM or network marketing is a great concept and really something that everyone should be a part of in one way or another.


HINT: Try the health care industry (and to sell health care products), you know with all the obese people in the country.

And network marketing should always be done in conjuction with other ways of making money in the same industry as a supplement for cash. Network marketing doesnt pay too well at first.


EXAMPLE: I joined a network marketing company in the w***** l*** field, then I went a got a part time job at a gym (to make income and to learn the industry and what people want and are attracted too and believing in today in that market. Then I wrote my own book on w***** l*** (its always easier to sell when you are the expert speaking to people)

And now I teach classes on w***** l***.

Check it out for yourself and see what I mean about dedication to a industry at:


So the important part is MLM is real but it takes lots of work and you will have to at some point dedicate your life to whatever industry you choose if you are going to make it.


But it is legit, just pick the right industry that you wont mind staying in for the rest of your days. And pick a older stand alone, been around company. Unless you and a few friends are putting your heads together to start one of your own. My reason is that most new network marketing companies fail early on and members never make anything. Even though this is not as exciting pick a long term company.


And you cant get rich over night unless you are working everyday (best friends) with someone who has done what you want and are still doing it everyday and they really want to see you get there also.


Nothing is perfect, stick with it and no pain, no gain.


P.S. I have a book that will be finished this week on making $100,000 this year in network marketing.


Hope that helps you out a lot, call me if you need anything while in MLM or network marketing.

Kevin Derrick Gentry

(678) 832-3512


There is power in duplication

How to Explain The Difference Between M.L.M. and An Illegal Pyramid By Tim Sales

Take a look at my "Coffee Business" and then you decide if MLM is a Pyramid Scam or not.

This how I put it together, hope you can follow my logic..

Its up to you to decide !! Are you actually helping others and yourself?

Lindsey Duncan - Transcending the Borders to Optimum Health

Pure Alkaline Ionized Drinking Water For You & Your Family

Why I added "The Whole Food Farmacy" to my businesses.

Testimonial from another network marketer ( Frances Richardson) that was a friend over a year before she tried the products ( Gano Excel). Now she is an affiliate. Ask her why? Its more about "Health" than "Wealth" folks!!

What good is "Wealth" if your health isn't up to par, you can't enjoy it!

Documentation beats conversation


Open pdf document:'

Most people have heard of Network Marketing

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as per my knowledge, Network marketing is a  distribution model which  allows a company to sell  products directly to the consumer by online or offline ways and pyramid scheme is a non-sustainable business that involves the exchange of money

After 1st contact with a potential customer/affiliate: 


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