Difference between Pyramid Schemes and Multi-level Marketing (MLMs)
Basis |
Pyramid Schemes |
Multi-level Marketing (MLMs) |
---|---|---|
Primary Revenue Source |
Recruitment of new individuals without a focus on valid products or services. | Revenue from each product sales and recruitment. |
Legitimate Products/Services |
Often lacks true products or services. | Legitimate services or products are offered. |
Emphasis on Recruitment |
Recruitment is the primary cognizance for earning. | Recruitment is a part of the business version but balanced with product sales. |
Sustainability |
Unsustainable; collapses while recruitment slows down. | Can be sustainable if merchandise has a proper call for and is sold to stop clients. |
Legal Status |
Illegal in lots of jurisdictions. | Legitimate MLMs comply with rules, however a few may additionally go the road into pyramid scheme territory. |
Compensation Structure |
Rewards frequently come completely from recruitment efforts. | Compensation includes commissions from product sales and bonuses for recruitment. |
Participant Earnings |
Only the ones on the top gain, leading to giant losses for the majority. | Participants can earn from product sales, and recruitment may also contribute to additional income. |
Focus on Training |
Limited attention on product education. | Emphasizes schooling on both product expertise and recruitment strategies. |
Long-Term Viability |
Unsustainable and destined to disintegrate. | Can be sustainable if there’s an authentic market call for for the goods or offerings. |
Legitimate MLMs Examples |
Avon, Amway, Tupperware. | Avon, Amway, Herbalife (even though controversies have arisen), Mary Kay. |
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