Is There a Difference Between MLMs and Pyramid Schemes
Multi-Level Marketing, or MLM, is a type of direct sales in which people earn commissions for selling products and also for recruiting new members into the sales team. Pyramid schemes, on the other hand, are illegal operations that typically involve promising participants unrealistic financial rewards for recruiting new members. Unlike MLM, there is no real product or service involved in a pyramid scheme – only the promise of easy money. Also read: Lifewave review
Multi-level marketing plans have been around for many decades, and there are a number of well-known companies that use this type of structure, including Mary Kay, Herbalife, and Amway. Pyramid schemes, on the other hand, have only existed for a few years and usually collapse quickly due to their illegal nature and lack of sustainability.
Still, even though MLM companies have products, they still put an emphasis on recruiting new members. In most cases, the people who join an MLM company do so in order to make money, not because they are passionate about the products. This means that many MLM companies have a high turnover rate, as people leave when they realize they are not making any money.
Pyramid schemes, on the other hand, rely solely on recruitment to make money. This is why they are illegal – because they are essentially asking people to invest in a scheme that has no chance of success. Pyramid schemes will always collapse eventually, leaving participants out of pocket and with nothing to show for their investment.
Overall, MLM companies are legal versions of pyramid schemes. Both types of businesses focus on recruitment to make money, and both typically have high turnover rates. However, MLM companies do have products that they sell, whereas pyramid schemes do not. This is the key difference between the two.