A pyramid scheme
This is a sketchy and unsustainable business model, where a few top-level members recruit newer members, who pay upfront costs up the chain, to those who enrolled them. As newer members in turn recruit underlings of their own, a portion of the subsequent fees they receive is also kicked up the chain.
Form of a sales and distribution model in which a business makes contracts with representatives to market and sell the product to customer to become Representatives, generally must buy the organization products or services to sell, show to potential customers.
Multi-level marketing has some of the same characteristics as a pyramid scheme and sometimes it would be difficult to distinguish the two from each other.
A pyramid scheme is an illegal sales model
Pyramid scheme is based on the idea that participants stand to make a great deal of money by recruiting additional individuals. The main sales source for these companies is not selling their products to the end user but they sell it for the participant in the pyramid marketing and they will reflect on the sales volume.
How to recognize the pyramid scheme marketing?
If we want to undrestand pyramid scheme marketing, we have to go through these features as follow:
1-how much money you need to invest to be distributer in advance ?
2-will the company buy back unsold inventory?
3-Pyramid companies will offer and stick to inventory buy-backs for at least 80% of what you paid.
4-Is there any mention of or attention paid to a market for the product or service?
5- Multilevel marketing depends on establishing a market for the company’s products.
6-If the company doesn’t seem to have any interest in consumer demand for its products, don’t sign up.
7- Is there more stressing on recruitment than on selling the company product or its service?
Difference between multilevel marketing and a pyramid scheme .
1-The pyramid scheme focuses on fast profits from signing people up and getting their money. If recruitment seems to be the focus of the plan, run.
2- And there is another question to ask who is making money from recruiting new members rather than sales that you make yourself?
The answer is the pyramid scheme operation…
3-Are the commissions offered for recruiting new members?
Another pyramid trademarks. not products offered
N.B. In ecommerce there is a module of affiliate programs that play an important role in ecommerce and this is the mirror of pyramid marketing in ecommerce.
Like any other online business, you should always view a network marketing opportunity with great caution. The more the person extols the virtues of it, the bigger the promises, the more likely it is that either the opportunity is a scam, or even if it is legitimate, you may be sorely disappointed.
E-commerce is the most growing business and it is not only acting as a channel of promoting but it is a separate business model which runs separately; however currently it acts as a trade and wealth currently comes from this model . In fact, pyramid schemes don’t work unless somebody loses.