Why Is MLM Considered A Pyramid Scheme And How To Handle It

by Diane Cossie on April 18, 2009

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If you are new to multi-level marketing and have made the voyage of discovery from employee to potential home based business owner then you should probably get prepared for the many occasions that you will hear your business branded a pyramid scheme or a scam.

First and foremost multi-level marketing is a legitimate way in which large companies choose a low cost distribution network to market their products to a global audience. This is no different to the corporate business model where a large organisation will have secured distributor outlets for its main business and each of those distribution businesses will have its own customer base just as you would as an individual distributor of your multi-level marketing business.

You will quickly come across people who will immediately declare your multi-level marketing business as a pyramid scheme or a scam and in the first few weeks this can come as a shock. The worst thing you can then do is try and defend the company to this person as it will more than likely escalate into a stand up argument. This is a common mistake new distributors make and it is because the vast majority of people who get involved with multi-level marketing do not take the time to learn sales and marketing principles and treat their business as a real business.

The other consideration when faced with pyramid or scam claims is with reference to the compensation plan structure. Once again take any large corporation and you will find highly paid Directors and Managers at one level, middle range managers and supervisors at the middle salary scale and the vast majority of workers at the lowest paid levels, this is the world of business most people work in every day.

The multi-level marketing business opportunities are numerous and there are more created every day. Companies such as Amway, Herbalife, Meleleuca, PrePaid Legal, USANA and others have successfully sold millions and millions of products using the business model. The business model itself is actually micro franchising and one of the biggest challenges today is keeping new distributors focused on the business with all the distractions the internet has brought.

Until a few years ago, you would only be able to hear about the products of these companies via word of mouth, but since broadband speeded up the way in which information is delivered, you can now buy anything at anytime via the internet.

Multi-level marketing has created many millionaires and there is simply too much evidence to the contrary to simply dismiss it a pyramid scheme or a scam, however with the growing popularity of the direct sales business model offering generous commissions from the first sale it may have to evolve quickly to keep up.

The best way to handle negative comments from generally ill informed people is to learn how to market more specifically to your target audience. If you are using Google Adwords add the words scam as a negative keyword as you should avoid doing business with anyone that uses the word in their vocabulary.

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