IS MLM PYRAMIDAL SELLING?
There is always a thought that remains when it comes to MLM or Multi Level Marketing.
There is a company and products and the organization between the consultants is done on a pyramid basis, but does MLM mean pyramid selling?
Pyramid selling is an operation which consists in recruiting people in order to obtain commissions (or an economic benefit more generally) on memberships. The economic system is based solely on the acquisition of new members.
In pyramid selling, the human side is very little represented: it is in a way a portfolio.
Humans are money, they enter into a system that demands a specific amount of money. There is no human adventure, the company in question does not offer any products or fake products.
The pyramid system therefore does not focus on a problem, a need to be solved in a society. Its objective is only to bring in people in order to inflate a bubble to make as much money as possible fraudulently.
For me the biggest problem with the pyramid, besides the human side, is that it does not fit into a market. It is not subject to clear legislation, it is the door open to all scams.
What about MLM and pyramid selling?
The activity of a company in MLM therefore relates to a commercial activity where one focuses on a need to be satisfied. The difference is that a consultant in an MLM business is not an employee. She can therefore organize her activity and her network as she wishes, where she wants and when she wants.
It is often this freedom that appeals to people who want to get into network marketing.
To motivate a brand’s consulting people, percentages are assigned based on product sales and also on product sales from their own network of consultants. As in the organizations that we can see on a daily basis, which are made up of teams whose remuneration varies according to the objectives achieved.
This is also what makes it possible to create a group and to move forward humanely.
Like any organization that wishes to endure today, MLM operates by hierarchy and therefore forms a sort of pyramid. There are what are called “sponsors”, these are the people who make up the network and the “consultants” who are the people sponsored in the network and who are authorized to be assimilated to the brand. Brand consultants can in turn become sponsors. Both sponsors and consultants ensure that clients’ needs are met and contribute to the good image of the company.
To counter this negative image of MLM and pyramid selling, MLM companies do not distribute (or more) bonuses when referrals bring in new consultants. This is the case, for example, with the Nikken brand. This avoids any abuse and the new hires are involved with the company as well as with the customers.
The goal is to focus on the products and the ecosystem of people around the brand, to bring value to people and meet their needs.
For me what is problematic in the reputation of MLM pyramid selling is that people focus too much on the compensation system (also the fact of creating a team of consultants) and not on the added value of the products.
Customers are the ones who define product (and business) satisfaction. If products are good and the way to promote them is good too, then the way the system is organized looks healthy. Both for clients and MLM consultants.
Afterwards, of course, you also have to look from the inside, that goes without saying. This requires contacting several brand consultants to see how the system is organized.
The person must donate money to join an organization
In most cases, you have to donate money to register with a network marketing brand to get permission to promote their products.
Maybe that’s what’s blocking it, and people equating MLM with pyramid selling.
Personally, I don’t see it that way.
The problem with MLM for a business is that the people who make the sales are not employees of the business. These are VDIs.
But for a healthy basis, a kind of contractual link is still necessary. Both for the company to keep people from doing whatever it is, and for the consultants to avoid being abused. This is why the entrance is often chargeable. A person who wishes to be a consultant agrees and pays a registration to be authorized to sell a brand’s products and must adhere to the vision to promote the products. And the company, through this registration, respects the applicable labor and trade rights of the country concerned.
After checking the specifics of the company and the terms of the contract, the person signing may be able to defend themselves in the event of disputes that do not comply with a clause.
Whereas if you are looking for the right in a pyramid scheme…
So that MLM is not Pyramid
Personally I do MLM and I had this thought like everyone else. I looked at a lot of companies to make my choice.
For me it is necessary to take into account several elements for the MLM to be serious:
- The fact that there are no bonuses for the sponsor when they bring in a new consultant. This potentially avoids a pyramid scheme. This is not to say that the companies that give commissions on registrations are fraudulent sales systems (you have to look inside and find out, see the products etc).
- Everyone must move forward at their own pace. There are people who want to create their network of consultants rather quickly and then there are other people who want to sell just one product (eg a product that has brought them well-being) and then evolve later. These people, for example, do not want to be a sponsor and have new consultants enroll in their team at first.
For me, the company and the sponsor should not pressure a new consultant to recruit new people into their network.
The network remains the principle of MLM of course and that is what makes it successful, everyone knows that, but everyone moves at their own pace.
- To be successful the products must be of high quality. As it is direct selling, it is always more reassuring to know that the product is flawless, reliable and efficient.
- Pay attention to MLM made from digital products. You can see the quality live on a physical product but on a digital product it is not so obvious. Beware of MLM based on financial products or sometimes also personal development which is currently proliferating. I am not doing generalities of course and these sectors that I have just mentioned are not rotten for all that 😉
Take a good look at how the company communicates and educate yourself around you to see.
If you would like further information please do not hesitate to contact me.
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