I decided that the time has come, for me at least, to do a blog post about my business. I make no bones about that I am in network marketing and have been with the same company for the last 3 years. The company that I am so proud of is 14 years old and is called WorldVentures. I suggest in the title of this blog that ALL OF US work in a pyramid scheme. All of us…you, me, EVERYONE!
How can I say that? Well, let’s look at a couple of things concerning a pyramid scheme. Listed below are the areas that I will hash out:
- Almost every business and many organizations are a shape of a pyramid.
- Network Marketing simply uses a different structure to bring products or services to the marketplace
- Pyramid schemes are illegal.
Lets say you just graduated from college with your student loan debt about $60,000. $15,000 per year sounds about right…if we are lucky. So we graduate, an accomplishment for sure…something to be proud of! You spend the last year, or last semester, or the summer after the graduation date…looking for a job. An entry level position that can help you develop your skill set and enhance the education you just completed.
You land a job and ready to start and take on the world. Finally out of school and ready to make some REAL money! College can be the best experience of your life and should be, but everyone gets to the point where they are ready to finish up and get to work. So you land the job at XYZ company and produce widgets. Your title is employee and there are 1000’s of employees. You are now the back bone of the organization, the pillars.
You report to a supervisor.
The supervisors reports to the Assistant Managers.
The Assistant Managers reports to the Managers.
The Managers report to the Vice Presidents.
The Vice Presidents report to the Chief Operations Officer (COO).
The Chief Operations Officer (COO) reposts to the Chief Executive Officer (CEO).
The Chief Executive Officer (CEO) reports to the President.
A typical business bring products or services to the marketplace from an idea into research and development through various stages until it eventually is for sale to consumers in the marketplace.
A network marketing company that brings a product to the marketplace…like nutritional supplements, weight loss products, water filters, cook ware, baskets, clothes, etc, etc, etc….follows similar steps as a “traditional” business.
Most network marketing companies have to follow the traditional chain of getting a product to the consumer in the marketplace. Nutritional and weight loss companies, essential oil companies, any company that produces a product that you must consume in some fashion to gain an effect must go through this process in one form or another. Product development and distribution is a VERY EXPENSIVE endeavor.
What travel companies have done with vacations and travel is simply ingenious. It is one of the many reasons I decided to become a representative within the travel space! Travel clubs have become the Uber and Air-B-n-B of travel and vacations! Uber is the largest transportation company that does not own ONE SINGLE vehicle! Air B-n-B is the largest provider of accommodations without owning ONE SINGLE property! Just for clarification, I am NOT talking about a TIMESHARE. It is a vacation club without any contractual agreements. Travel clubs cut out ALL the “middle men” and with all the savings generated by NOT having research and development, quality testing and control, and distribution it passes along to representatives in the form of commissions for doing “word of mouth” marketing and sales.
FROM THE FEDERAL TRADE COMMISSION…read it for yourself.
What is a Pyramid Scheme and What is Legitimate Marketing?
Pyramid schemes now come in so many forms that they may be difficult to recognize immediately. However, they all share one overriding characteristic. They promise consumers or investors large profits based primarily on recruiting others to join their program, not based on profits from any real investment or real sale of goods to the public. Some schemes may purport to sell a product, but they often simply use the product to hide their pyramid structure. There are two tell-tale signs that a product is simply being used to disguise a pyramid scheme: inventory loading and a lack of retail sales. Inventory loading occurs when a company’s incentive program forces recruits to buy more products than they could ever sell, often at inflated prices. If this occurs throughout the company’s distribution system, the people at the top of the pyramid reap substantial profits, even though little or no product moves to market. The people at the bottom make excessive payments for inventory that simply accumulates in their basements. A lack of retail sales is also a red flag that a pyramid exists. Many pyramid schemes will claim that their product is selling like hot cakes. However, on closer examination, the sales occur only between people inside the pyramid structure or to new recruits joining the structure, not to consumers out in the general public.
A Ponzi scheme is closely related to a pyramid because it revolves around continuous recruiting, but in a Ponzi scheme the promoter generally has no product to sell and pays no commission to investors who recruit new “members.” Instead, the promoter collects payments from a stream of people, promising them all the same high rate of return on a short-term investment. In the typical Ponzi scheme, there is no real investment opportunity, and the promoter just uses the money from new recruits to pay obligations owed to longer-standing members of the program. In English, there is an expression that nicely summarizes this scheme: It’s called “stealing from Peter to pay Paul.” In fact some law enforcement officers call Ponzi schemes “Peter-Paul” scams. Many of you may be familiar with Ponzi schemes reported in the international financial news. For example, the MMM fund in Russia, which issued investors shares of stock and suddenly collapsed in 1994, was characterized as a Ponzi scheme.(2)
Both Ponzi schemes and pyramids are quite seductive because they may be able to deliver a high rate of return to a few early investors for a short period of time. Yet, both pyramid and Ponzi schemes are illegal because they inevitably must fall apart. No program can recruit new members forever. Every pyramid or Ponzi scheme collapses because it cannot expand beyond the size of the earth’s population.(3) When the scheme collapses, most investors find themselves at the bottom, unable to recoup their losses.
Some people confuse pyramid and Ponzi schemes with legitimate multilevel marketing. Multilevel marketing programs are known as MLM’s,(4) and unlike pyramid or Ponzi schemes, MLM’s have a real product to sell. More importantly, MLM’s actually sell their product to members of the general public, without requiring these consumers to pay anything extra or to join the MLM system. MLM’s may pay commissions to a long string of distributors, but these commission are paid for real retail sales, not for new recruits.
Based on the information above from the Federal Trade Commision, travel clubs are NOT a pyramid or ponzi scheme.
- Travel clubs DO NOT make any guarantees regarding income. The company never promotes the business as a “get rich quick” program. Individual representatives may make promises that are not truthful regarding income. I do not and never will. It takes time to build a business….plain and simple!
- Travel clubs sell its travel club memberships to the general public.
- Travel club representatives DO NOT have to have inventory. Representatives don’t have ANY Fiji in my bedroom closet or a ton of cruises in my garage, or more Carribean vacations in my basement than i can shake a stick at!
- Travel club representatives only make commissions on the sale of travel club memberships, not on the vacations, hotel rooms, cruises, rental cars, activites, or resorts.
To wrap all this up…joining a network marketing company and developing your own business is NOT a pyramid scheme. Besides, would a company running a scam be so visible all over social media? The legitimate companies are just that, legitimate! We all work for companies everyday that are structured like a pyramid…a network marketing company just pays differently.
I write this blog post only to clarify and to educate. Every business has it issues. Not every network marketing company is a good one. All I am saying is, don’t lump all companies into one bag and call them a pyramid scheme without educating yourself and putting them to the test!
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