11 May, 2018 - 17:09
Nikhil Ravindran's picture
By Nikhil Ravindran
What's the difference between MLM & Pyramid scheme?

MLM and pyramid schemes - the two most popular terminologies in quick-money marketing world with potential differences. While one tagged under a perfect plan or scheme to introduce a product into marketing and revolutionize it through customers, the other prevailing to be the worst scenario - scam business scheme!

Yes, you heard that right, there is a potential difference between an MLM and a pyramid scheme.

There is actually a significant difference between these two terms and let's have an analysis on it deeply so that you can differentiate between them with certain identifier's (a certain guidance has been displayed in this article to do so).

MLM Balancing

A pyramid scheme is more often a Ponzi scheme that draws the attention of the crowd with many offers and attractive marketing opportunities. The lateral difference between the two is that MLM or Multi level Marketing is more on the part of best marketing course of action and on the other hand pyramid is purely a scam that offers just money based part. Let's study each of them separately,

What is MLM and how it works?

MLM is more often one of the best ways to market a product rather than making plentiful of money. Say, like you're launching a product that has enough competitors and you need to accelerate the product selling in the best way. Usually, the efforts are put forward to enhance the products through distributors and circulate it by selling the product and adding new members to the network.

This MLM marketing scheme is also known as network marketing and it often gives an opportunity to create a good force-sales team. It does help to boost-up your sales, as well as an MLM marketing organization, will be there to monitor on every action done by the corresponding members of the network.

There are many MLM organizations and people who became millionaires with these marketing schemes.

The usual proceedings of an MLM platform usually follow the below cycle,

How MLM Works

The above flow diagram tells you on exactly how this MLM part works and how things work in an easy way.

As I mentioned above, you do manufacture the product then, makes a plan to create a good sales idea. Then, analyzing the current marketing strategy by means of research, observations, case studies, proper dig-ups from various sources etc. This is the best way to create such a strategy and often this leads to a perfect state.

Now, entering into the MLM world to develop vast opportunities and create an excellent opportunity is the ultimate aim. Now that you have decided to get in, it's time to choose an MLM or marketing plan! A marketing plan does carry a complete outlay or structure of how marketing has to be done i.e., how does compensation structure to be molded? The arrangement of network and like more questions are solved here in this part.

There are various plans available in the MLM world like binary plan, uni-level plan, matrix plan etc. choose one among them wisely.

Go to the part where marketing plan is analyzed and move into the employing of force-sales team. This part has to be linked with a proper connection across the globe as well as local network. Set-up a commission rate and all other stuff and that's it with the combined effort your brand name will be there at the top. An MLM Software is usually, implemented to take care of this part (Well, I personally recommend Epixel MLM Software, they are good to deal with and the package comes with great quality).

These all parts comprises to be called as an MLM Scheme.

HMLM Success

Now that you understood about what MLM is, let's move on to the Ponzi scheme part - the "pyramid scheme".

What is a pyramid scheme?

A pyramid scheme, the worst part of marketing scenario with just a motto of creating money. A readily created marketing campaign through advertising or real talk but no real products are being sold. Fake promises by collecting up initial funds in large volume, no return policies mentioned, illegal in nature, an investment with no guidelines etc. can catch the attention of being in an "alert state".

Well, there are many ways to catch-up this scenario, a Q&A list can help you to solve this issue.

  • Is the initial fund or payment in high terms or say about high value?
  • Will you get back at least 80% of your money back if the products are unsold?
  • Does the organization emphasis more on recruitment rather than product selling?
  • Are they not interested in consumer care?
  • Is it just focusing on money chain without any guarantee?
  • Aren't there any regulations to be followed?

If these questions fall under the shades of doubt or not trustful then, yes come to conclusion that it's fake or scam!

Pyramid Scam

It's more a miss-leading path with mischievous nature. Always a trusted brand or an organization even if it is new to the business world but with a board of members and regulations - it's worth a try!

Basically, this is the best differentiating approach to understand the recognition of MLM marketing scheme from that of the pyramid.

Factors to compareMLM schemePyramid scheme
LegalCommission & other compensation schemes for product selling & member sponsoringControlled by an MLM organization
IllegalEmphasis mostly on money terms rather than product sellingNo authority, just fake promises.
Initial investmentLess of cost or no special feesHigh value of money as initial amount

The above table will help you for rough analysis between these two and hope this article caught your attention in understanding the difference between an MLM and a pyramid scheme.

look out for my future articles about various marketing fields that could potentially resolve your queries.

Stay tuned and enjoy reading!

About the Author
Nikhil Ravindran's picture
Nikhil Ravindran
A young and talented writer who engages in the technical world and making readers aware about latest technologies.

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