So the question is, are these companies really pyramid schemes?
To start off, I want to get the meaning of pyramid scheme out of the way. So here is the pyramid scheme definition.
It is a non-sustainable business model that involves the exchange of money for enrolling people into a scheme where there is no real product or service. I just want to repeat that. There is NO REAL product or service. So what happens is, 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. And the reason is that distributors concentrate on the money that they can earn by recruiting new people and completely ignore the marketing and selling of any products or services. Because there are none!
So just to clarify, a pyramid scheme is illegal.
This is very different to Network Marketing where a company decides to sell their products direct to the consumer through word of mouth. They use this method instead of paying for advertising costs. So instead of paying the advertising companies, they pay their distributors commissions for doing the work. So in reality, the main goal is …read more...