What Is MLM and Why Is It Different From a Pyramid Scheme?
OK, before I start to answer the question, “What is MLM?” I need to define a few terms.
MLM is an acronym for Multi Level Marketing, and is a legal way of marketing products or services and earning a commission every time you, or someone you have referred, sells a product or refers a new marketer.
It’s also called affiliate marketing or network marketing, although there are subtle differences between the three.
A pyramid scheme involves no product and there is no legal marketing involved. It is purely exchange of money where the person at the top of the pyramid is supposed to make a profit. Pyramids usually collapse very quickly, and people at the bottom lose their money. They are illegal in most countries as far as I know.
Unfortunately, many people still distrust multi-level marketing or affiliate marketing because they associate them with pyramids. Even one of my own (free) affiliates emailed me the other day asking the question, “Isn’t this just a pyramid?”
I sighed inwardly, and then sent him a very nice email explaining the difference.
I also sent him to a website that explains all these definitions in full details and much better than I can in a short blog! The website is called FirstClassMLM and is run by Tim Sales. There is absolutely no hype on this website, and also no advertising or any call to sign-up with anything. It is purely informational and is full of excellent articles explaining all the questions you might have about mlms.
Here are some links to some relevant articles:
If you are interested in getting started in MLM, come back here after you’ve finished reading and have a look at my website for some opportunities.
If you want to find out more about MLM and affiliate marketing, I have given you some book suggestions below this post.
Thanks for reading.
Ros Bott
Tags: affiliate marketing, multi-level marketing, pyramid schemes, what is mlm
July 20th, 2008 at 10:07 pm
Ros,
Great post. Too many people consider MLM as a pyramid. MLM has nothing to do with pyramids. MLM is a very profitable, lucrative business that many have had success. This is a must read for everyone.
Thanks,
Matt
Internet Home Business Opportunities
July 21st, 2008 at 4:12 am
Good post on the differences between MLM and Pyramid Schemes Ros, there are too many people out there that don’t realise that one is a very legal way of earning a living online and the other is definitely not!
Carol Aston
July 21st, 2008 at 8:02 am
Hi Ros,
Excellent explanation. It frustrates me that so many multi level marketing programs get a bad name as people just assume that multi level = pyramid scheme.
Thankyou for educating people on this!
Cheers,
Suzanne
July 21st, 2008 at 10:08 am
Hi Ros,
This is an excellent comparison of the terms mlm vs pyramid schemes. I’m glad I read this post as I am often faced with this question myself. I now have a clear idea of the difference between the two terms.
July 23rd, 2008 at 8:41 am
Good article, Ros! In the past Amway and other MLM companies did hurt this industry, but the Internet is bringing it back in a big way.
As long as products can be sold either by wholesale or retail it is not a pyramid scheme. The other distinguishing factor is if your downline can make more money than you, how could it be a pyramid!
-Jeff Schuman
July 24th, 2008 at 9:50 am
Ros;
You explain the difference very clearly and easy to understand. It is unfortunate that a lot of people think “scam” when they see affiliate marketing opportunities.
Tara
Work at Home Business Opportunities
July 25th, 2008 at 4:09 pm
Hi Ros, I enjoyed reading this article because I have had to answer the quest many times. It can be confusing but one of my first answers is “all businesses are a pyramid”. Their just not illegal because they sell an actual product.
Thanks For The Post
Stephen Meyer
July 26th, 2008 at 6:54 am
Another great post Ros. Public understanding of mlm has improved over the last 20 years. Many people are desparate for extra income in these uncertain times so many are prepared to listen.
David Barker
July 26th, 2008 at 10:49 am
Hi Ros,
It can be hard for people to distinguish between a pyramid scheme and MLM when they see them first. Your post does a good job in setting the record straight.
Alan
July 28th, 2008 at 7:06 am
What Is MLM and Why Is It Different From a Pyramid Scheme?…
This is a very good explanation of the difference between multi level marketing and pyramid schemes….
July 29th, 2008 at 8:00 am
multi-level marketing…
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July 29th, 2008 at 8:33 am
Ros,
This is a great post, I actually found myself defending my home business the other day to my friends, it’s hard and some people don’t know how to recognize a pyramid scam, I found myself talking for about 2 hours, explaining. I love to talk
Tanny
Ideas for internet home business