Is Network Marketing a Pyramid Scheme?

It’s been a while since I’ve heard this question because most people understand the difference between network marketing and a pyramid scheme, but it’s worth touching on. In this article, I am going to talk to you more about the network marketing business model and its legitimacy.

Years ago, this was the number one question people would ask you after they saw a presentation. They were worried they were going to put their money into a pyramid scheme, also known as, Ponzi scheme. What is the difference between these illegal schemes and a network marketing business?

MLM’s Legitimacy

When you look at a pyramid scheme, there is no product or service that is being rendered or providing value to an end customer or client. No one is getting a value as a consumer and money is being pumped into the funnel to serve those at the top.

When you look at network marketing, the people that get involved, do the work of telling their friends, family, people on the internet, whoever, about the product or opportunity, those people get rewarded.
Since some of these people cause a big ripple effect and help the company generate a large amount of revenue, they are rewarded for the product movement from their personal business centers and throughout their teams. This all depends on that specific company’s compensation plan.

As you can see, the main difference is that products or services are being moved to an end consumer that is receiving value. Make sure the program you are involved in is providing value to an end customer and paying out fairly and you will see the difference between a pyramid scheme and a network marketing company.