Most people often mistakenly lump Multi Level Marketing (MLM), Network Marketing, Affiliate Marketing, Ponzi Schemes and Pyramid Schemes together as one big group of scams.

In reality, network marketing, MLM, and affiliate marketing are different and usually legitimate business opportunities.

Whereas Ponzi Schemes and Pyramid Schemes are illegal scams designed to make the person or people at the top rich and rip off everyone else.

In the MLM industry, a person still has to be careful in choosing an opportunity to join.

Not all businesses are designed the same and not all contracts and policy and procedure are created equally.

It is vitally important that a person understand what makes a company a strong business opportunity for the distributors. 

At Mentoring For Free, we use the Five Pillars and the $10,000 Question to measure an MLM company’s strength.

Whatever yardstick you use to evaluate your company or a company you are considering joining, you must understand what would make it a scam.

How To Identify A Scam

An Attorney General would ask these two questions:

1. Would a logical thinking person pay this much money for the product or service if there was not a business opportunity involved?
2. Does the income stop when the recruiting stops?

If the answer to the first question is “No” and/or the answer to the second question is “Yes”, then it is a scam.

The word SCAM
brings up Ponzi schemes and Pyramid Schemes.
They are similar and different.

A Ponzi Scheme usually targets more affluent people referred to as “investors”.

A Pyramid Scheme targets more of the blue collar section of society.

They are both illegal and designed to rip people off while making the guy(s) at the top rich.

Rod Cook of MLM Watch Dog wrote an excellent article about Ponzi Schemes and Pyramid Schemes.

Take the time to read it here: Pyramids and Ponzi Media Reporters.  At the end of the article is some interesting history about Carlos Ponzi.

As Rod says, “A good MLM provides goods or services that a consumer would buy if an income opportunity were not included!”

Believe In Your Success, I Do!
Karen
mentor.karen.j.miller@gmail.com

This is the second of a three part series in making money fast scams.  The first post was on Chain Letters.

When money is tight and we have bills to catch up on or there are nicer things we would like to buy, we often search for easy and quick ways to make some extra cash.

The internet, and sometimes people we know, offer a multitude of opportunities for making money with “no experience necessary”.

Some of those opportunities are legitimate, while some are scams intended to part you with your money.

Pyramid Schemes and Ponzi Schemes
Seductive Offers of a High Rate of Return in a Short Time Span

The term “Pyramid Scheme” has a long standing reputation of being a scam.

The problem is that most people don’t know how to tell if an opportunity is a pyramid scheme or a genuine business opportunity, so many people get sucked in.

Pyramid Schemes and Ponzi Schemes are both similar and both illegal.

Both make extravagant claims for huge earnings in a short timeframe.
They both rely heavily on recruiting new affiliates.

A Pyramid Scheme has a product to sell, but relies on the members within the organization to buy the products. This is often a huge monthly quota my mentor, Hugh, calls “filling your garage.”

There are also no retail sales to the general public.

A Ponzi Scheme only recruits new members. There are no products or services offered. There are no commissions paid for recruiting new members.

The promotor just collects the sign up fee and pays it to the upline.

“Both pyramid and Ponzi schemes are illegal because they inevitably must fall apart.
No program can recruit new members forever.
Every pyramid or Ponzi scheme collapses because it cannot expand beyond the size of the earth’s population.
When the scheme collapses, most investors find themselves at the bottom, unable to recoup their losses.”
(http://www.ftc.gov/speeches/other/dvimf16.shtm)

Legitimate Network Marketing, or Multilevel Marketing, businesses should not be confused with Pyramid or Ponzi Schemes.

A genuine MLM business offers a product or service and generates retail sales to the general public.

Believe in Your Success, I Do!
Karen
mentor.karen.j.miller@gmail.com