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Legal network marketing business vs illegal pyrimid scheme
Must know information
Legal Network Marketing Business
1. Product or Service Focus:
a. Primarily sells a legitimate product or service.
b. Income is generated through the sale of products, not recruitment.
2. Compensation Structure:
a. Participants earn commissions based on their sales/purchases and the sales/purchases of their organization they have built.
b. Commissions are directly tied to the volume of products sold or purchased.
3. Emphasis on Sale/purchase:
a. Encourages participants to sell products to consumers outside of the network.
b. There is a focus on customer acquisition and retention.
c. Encourages participants to purchase products/services for personal consumption.
4. Sustainability:
a. A viable business model that can sustain itself over time.
b. Participants can earn income through legitimate sales efforts.
5. Transparency:
a. Clear information about the business model, compensation plan, and products is provided.
b. There are usually safeguards and regulatory compliance.
Illegal Pyramid Scheme
1. Recruitment Focus:
a. Primarily earns income through the recruitment of new participants rather than selling products or services.
b. The business model relies on a constant influx of new recruits.
2. Lack of Legitimate Products:
a. Often lacks a genuine product or service, or the products are overpriced and of little value.
b. Sales may be minimal or non-existent, with a focus on fees paid to join.
3. Compensation Structure:
a. Participants earn commissions mainly for bringing in new members, not for product/service sales.
b. The structure is unsustainable as it relies on continual recruitment.
4. High Dropout Rates:
a. Most participants do not make a profit; many lose money.
b. Only a small percentage is at the top of the pyramid profit, while the majority lose their investment.
5. Deceptive Practices:
a. Often involves misleading claims about potential earnings.
b. Lack of transparency about the risks involved.
Conclusion
In summary, the key difference lies in the emphasis on legitimate product sales versus recruitment. Legal network marketing businesses thrive on the sale of products and services, while illegal pyramid schemes focus on recruiting new members to generate income, often leading to financial losses for the majority of participants. Always ensure to research and verify any business model before joining to avoid potential scams.
