Have you ever been recruited into network marketing deals that seem like some pyramid or money game? Pyramid schemes are illegal and are based on taking advantage of people, to fuel their desire into joining the marketing program, based on anticipation of high income from the commissions. For someone to actually make money in pyramid schemes, someone else has to lose money. Network marketing is not a get-rich-quick scheme, and anyone promoting it from this dimension is possibly a scammer.
What is Multi-Level Marketing
Multi-level marketing (MLM) is a business model that relies on independent representatives to sell products or services to a company. Instead of the company paying for advertising and promotion, MLM companies rely on representatives to spread the word about their business. In return, these agents receive a commission on their sales. However, this commission plan can be incredibly convoluted. MLM goes by many other names such as network marketing, referral marketing, direct marketing, pyramid selling, matrix marketing among others.
Strategies Commonly Used in MLM Scams.
Scam 1 – Fake or Inflated Products
The majority of today’s MLM programs involve some degree of fraud. Some legitimate companies produce revenue typically by attracting new participants with the hope of reward and selling them products of dubious value at inflated prices. This is as opposed to selling products that customers would purchase at the given price, without regard to the opportunity attached. Once must evaluate the product or service on offer to determine if a significant percentage of customers would continue to purchase them if the “underlying offer” gets scraped.
Scam 2 – Get paid for each recruit
In legitimate MLM companies, commissions are earned only on sales of the business products or services. No money can be made from recruiting alone (sign up fees). One must analyze the compensation plan, to evaluate if participants are paid from actual sales to customers and not money received from new recruits. If the sales representatives are paid primarily from money received from new recruits, then the company is a big scam!
Scam 3 – Deception to Lure Fake Distributors
Some MLM programs use deception to lure unsuspecting people to become distributors. Some promise outrageous incomes as the scheme involve products of dubious values to customers. Distributors will “virtually” earn the set commissions simply by seeing the numbers, but on pay day, the actual figures will not be paid out. After you realize your selling or distribution is worthless, then its time you should quit.
How People Get Lured into MLM Scams
People easily get lured into MLM scam programs due to the promise of high income and ignorance into understanding the hidden agenda of the scam program. Below elaborates some warning signs that a marketing program you are about to join is a scam.
(i) You make money after signing up new members.
If this were a health club, it would be an excellent idea. But if members you also sign earn by signing others, then this should be a red flag.
(ii) You are not selling a good product
If there is any item for sale in an MLM plan, make sure it is an excellent piece of merchandise that people might like. If it is a piece of garbage, people will shun it away once they know the truth.
(iii) You are selling to distributors
Are you not a distributor too? What kind of money can you generate when a bunch of distributors are selling products back and forth to each other? If you are not making the product being sold, then you should be selling it to people who will use it.
(iv) You are promised a high income
This is just not a promise a legitimate business can make to anyone. Anyone can earn through MLM, but for significant income to be made, both time and a tremendous amount of work will be required. If you are promised instant success and high earnings, you should question the legitimacy of the program.
(v) You can succeed if you work part-time
Forget about part-time, if you don’t invest a lot of time and effort in an appropriate marketing program, you can’t earn anything substantial. Being promised to make more money by working part-time is a common lie told to get you interested.
Questions to ask before joining MLM company
As with any venture, it is quite important to understand the company, its business model, SWOT analysis, products and services being offered. Before joining an MLM company, you should at least answer the following questions;
– Does the company have a track record and reputation?
– Which products does the company sell?
– Does the company have independent research to back up product claims?
– Is the product competitively priced? If the product is “Wonder Product”, why is it not available through traditional outlets?
– Do you understand the business model/compensation model that the company uses? What are the minimum sales you should make before getting paid? When is the pay day?