There is a difference between network marketing and a pyramid scheme.
I’ve done Network Marketing before and I’m familiar with what a pyramid scheme is.
So instead of me just rambling on, let’s break this down so you can get an understanding of the differences.
Network Marketing usually has two payment structures in order for people can make money.
The first way is through their products and the second way is through a recruitment process.
If you ever heard of Avon or Mary Kay, these two businesses mainly fall into the Network Marketing spectrum.
Most Network Marketing business model has a product for their Representatives to sell to obtain profits.
Just like Mary Kay’s products.
If you ever been to a Mary Kay party, the Mary Kay Rep obtains clients and sales by throwing a beauty party.
There Are Expenses
Being a part of a Network Marketing business, there is a monthly fee that must be paid in order to get paid, it’s called an auto-ship payment.
Depending on the company you choose to go with, the fees vary.
Some companies allow their samples to be part of the auto-ship fees while other Network Marketing businesses require a person to purchase a certain amount of products on a monthly basis.
The Recruitment Process
The other aspect of Network Marketing is that people are also allowed to make money when they recruit others into the business.
There are width and length parts to their comp plan. The width may never have a cap, but the length may stop at a certain level.
This means that you are able to make commissions on the people you or your associates recruit that are in your downline.
The payments can stop for example at the 7th or 10th level.
It depends on the way a Network Marketing Company decides the way they want their compensation plan to be.
So in a nutshell, Network Marketing has a product and allows their Associates to get paid based on a number of people they recruit into the business down to a certain amount of levels.
A Pyramid Scheme
A Pyramid Scheme has no product at all. It is based on recruiting people and passing money to each other.
There are many variations but to give you an example, Some Pyramid Schemes work like this, I would give one person one hundred dollars. I would not get paid until I recruit 2 others to pay one hundred dollars.
If I were to achieve the recruitment process, I would make a certain amount of money. Then the two people that I recruited would each have to find their own two people to enroll in the scheme.
I would supposedly make a substantial amount of money based on if my recruiters and I were able to achieve getting 2 people on and on in enrolling in the scheme.
The problem with Pyramid Schemes is that these schemes rely on being successful based on the recruitment process. There is no product to sell, it is based on recruiting people and moving up levels.
Is Network Marketing Scams?
There are so many variations out there but, I wouldn’t call all Network Marketing Scams. I would personally suggest doing your research before you join any Network Marketing Business.
Even if any type of Pyramid Structure has a product, it may fall under a Pyramid Scheme. Some of these businesses have a product but the product is of low-quality.
People who are in these recruitment based businesses may not even use the products. The whole intention of the business model is based entirely on recruiting others into the business and passing money.
There also may not be commissions based on the sales of these so-called “products”, it’s just a way to appear legal.
How I Personally Feel About MLM Or Network Marketing Business Models
After the final Network Marketing business that I tried, I decided I’m done with the whole Multi-Level marketing types of business models. The reason being is that it can be quite challenging.
You have to keep up with your clients, go to seminars, conference calls, and there are marketing expenses along with the auto-ship you need to pay.
It can add up to quite a bill if you’re not hustling all the time. There are Network Marketing that uses a list building method to build to help recruit people.
Even if you have that list building method, it’s another added expense and you’re probably not going to recruit as many people as you think. In my opinion and from my experience, it’s just a difficult business model period.
Are There Other Ways To Make Money Besides Network Marketing
The best and most effective way I learned is through Affiliate Marketing. Affiliate Marketing is NOT Network Marketing.
The way Affiliate Marketing works is by you recommending a product or service to people and if people purchase a product through you, you make a certain percentage of commission. You are not limited to the number of products you can recommend.
With Network Marketing companies, they tend to want their reps to only sell their products.
This could be five to 10 items depending on the company’s inventory.
Also with Affiliate Marketing, there is no downline, there is no recruiting, there is nothing like that.
I feel that anyone can do Affiliate Marketing.
The problem that people face is that there are a lot of so-called affiliate marketing services and they may even fall into the Network Marketing Spectrum.
Finding the right one can be a daunting task.
People can fall into a very expensive service thinking it will work when it turns out to be another business down the toilet.
I’m Going To Give You Some Tips
When you’re thinking about having some sort of second income, you gotta look at what these services want you to do.
Is it some sort of gimmick or scheme? You gotta really weigh everything out and do your research.
If you think about it, everyone is selling something to make money.
The product should have value.
If it doesn’t then why are you selling it?
What are the fees? There shouldn’t be any hidden fees.
People should tell you exactly what the expenses are for you to achieve your goals.
Another myth is how quickly you can make all this money.
There is so much stuff out there in the online world that people claim.
Please, Please before you try anything, please research, read the comments too.
You will read people’s experiences, this way you can decipher if the business is right for you.
Anything that requires a minimal amount of work is just a gimmick.
Work is always required, it’s about putting in the effort to making it happen.
If you are trying to build a business online, the fees (I’m giving you a number to go by), $1000 should be at the top of your yearly expenses when starting out.
If you don’t have the money, you don’t have the money.
DO NOT and I mean this from the bottom of my heart, pay to start a business that you can not afford.
All you’re going to do is think about the money and why am I not making money.
This is not the way to build a business, Period.
Any business you start you are going to start in the negative meaning you gotta pay your expenses.
So if you can’t afford it at that time wait. Don’t let people force you into it because they want to move up a level.
They are only thinking about themselves and making another commission.
It shouldn’t be like that, that is another reason why I stay away from MLM.
You may think that a job is your money tree, yes a job pays the bills, but your time is your money tree.
You gotta put in the time to see results.
It’s important to budget your time just like you’d budget your money.
It’s not going to happen overnight. Patience and keeping faith is key.
Faith and Patience are the toughest part because people have high expectations and expect it to happen overnight.
It’s not the case even when it’s making money online.
All In All
As I said earlier, Network Marketing has a product and allows you to recruit people into the business to make money.
A pyramid scheme only recruits people into the scheme to make money.
It’s so important to research a company before you get involved. Some of these “Network Marketing” businesses may have a product, but they based their income mainly on recruiting people.
If you’re not into the whole Network Marketing business model, then maybe you should take a look at Affiliate Marketing.
I’ve been doing Affiliate Marketing for over 2 years now and really enjoy it.
If you would like a starting point on how Affiliate Marketing works, then I would suggest you check out Wealthy Affiliate.
Don’t worry you can check them out for free. They will give you 10 free lessons, hosting, and a website. This way you can see how the process works and decide for yourself if it’s a good fit for you.
What is your take about the differences between Network Marketing and A Pyramid Scheme Tweet me @evelynbaz!