What is multilevel marketing?
Multilevel marketing is defined by Investopedia as “a tactic used by certain direct sales organisations to encourage their existing distributors to recruit new distributors by paying the existing distributors a share of the sales of their recruits.” A distributor’s downline refers to the recruits. All distributors make money by selling products directly to customers. If you are in multilevel marketing (not to be confused with affiliate marketing), have a look at this company that specialises in network marketing software.
What is a pyramid scheme?
Pyramid schemes, on the other hand, are deceptive scams camouflaged as a multilevel marketing method. The difference between a pyramid scheme and a legal MLM programme is that in a pyramid scheme, no real product is marketed. Participants try to gain money exclusively by bringing in new people to the programme. The promise of sky-high profits in a short period for doing nothing more than turning over your money and convincing others to do the same is the hallmark of these schemes.
Pyramid schemes, unlike MLM, have only one goal
The main distinction between MLM and a pyramid scam is how the business is run. A pyramid scheme’s sole objective is to take your money and then utilise you to recruit more distributors. MLM’s sole objective is to move products. MLM works on the premise that the wider the network of distributors, the more merchandise the company can sell. If you’re unsure whether an opportunity is multilevel marketing or a pyramid scheme, use these questions as a test:
The following two questions will assist you in determining the company’s focus: