Is Multi-Level Marketing A Pyramid Scheme? The Truth Behind Multi-Level Marketing​

My name is Dustin Hale. I am a professional Network Marketer. What does that mean? Well, simply put, it means that I am involved in Multi-Level Marketing companies and use Network Marketing to grow my business. With that being said, I feel as if I have the knowledge and experience to be able to answer the question that a ton of individuals have been asking me.

What Is A Pyramid Scheme?

First, we must understand what a pyramid scheme is. A basic explanation is a form of investment in which one individual recruits two other individuals into their business and makes money from that recruitment. Then, those two other individuals both recruit another two people each into the business, so a total of 4. Those two people make money from the four they just recruited. Then, those 4 people recruit two individuals each, now a total of 8. The individuals in the company continue this process over and over again until they run out of recruits. If you write this on paper, you will clearly see the pyramid being created.

After all the recruitment’s take place, it become clear that the top members in the company make the most money while the bottom recruits make very little if any at all. Can you guess what happens next? The pyramid collapses! Some members make money, but most participants lose all the money they invested. Pyramid schemes are obviously awful; luckily they are illegal in the US.

What Is Multi-Level Marketing?

Secondly, let’s understand what Multi-Level Marketing is. Multi-Level Marketing or MLM is a marketing strategy in which participants enroll members into their business into their “down-line”, if you were to write this on paper is absolutely looks like a pyramid. Billboards, radio ads, TV ads, flyers, and many others are all forms of marketing. However, MLM generally works very well and has the statistics to prove it. Simply, it is word-of-mouth marketing. Real people, real experiences, and real-life marketing is the keys that makes it work so well.

To Conclude, No, Multi-Level Marketing Is Not A Pyramid Scheme!

How Is Multi-Level Marketing Not A Pyramid Scheme?

It appears the definitions and explanations of both multi-level marketing and a pyramid scheme seem quite alike. So, what makes it not the same? Well, a pyramid scheme relies 100% on enrollments to make money. Although MLM includes enrollments it doesn’t rely on them entirely. Companies in which use this strategy allow participants to enroll members to make money, however, the company also offers products. If the products don’t exist and it’s all about enrolling participants, it’s likely a pyramid scheme, which once again, is illegal!

Companies that use the strategy give you the ability to enroll other members but you’re goal, too, is to sell the products the company has to offer. You can both sell the products and enroll new members with Network Marketing. Therefore, there is no such thing as a collapse. It would be the same as, for example, owning a car dealership business. You can hire employees and sell your cars. Your employees will help sell your cars and when they do they will earn a certain commission payout from that sale. Additionally, they have the ability to refer people into the business in which will be able to do the same things as well such as sell cars and refer people into the business. The dealership constantly expands and never collapses.

Let’s Wrap This Up

This is a very brief and basic understanding of both a pyramid scheme and a Multi-Level Marketing strategy. However, hopefully you were able to understand what both are and the differences of each. But the answer is simple; Multi-Level Marketing is not a pyramid scheme. Pyramid schemes are illegal and companies have been using Multi-Level Marketing for years upon years.

Some well-known companies use this strategy to develop rapid expansion and growth while allowing their participants to also create a higher income for themselves. One particular company that is highly respected and well-known is Mary Kay Cosmetics; a vast majority of the world has heard about this company and maybe has been involved with the company itself or even used their products. However, most people don’t know that they are involved in Multi-Level Marketing and that’s one of the most important reasons they are so well-known.

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