Pyramid Schemes and the Law: How to Use a Multi-Level Marketing Sustainably and Legally

Multilevel marketing can be an excellent way to make money and be in control of your own work life. Follow these instructions on how to use a multilevel marketing plan.

Unfortunately, this form of business can also be eerily close to a pyramid scheme – often an illegal and dishonest con.

So where exactly do multilevel marketing end and a pyramid scheme begin? Continue reading and we’ll walk you through how to use a multilevel marketing operation effectively and legally.

How Multilevel Marketing Works

When you’re a contractor who works in multilevel marketing, you’re going to make your revenue by selling your goods to other multilevel marketing employees.

You also make money by selling the company’s products to consumers directly and earning a commission. 

Popular multilevel marketing companies include Amway, The Pampered Chef, Mary Kay, and Tupperware.

How a Pyramid Scheme Works

The main difference between a pyramid scheme and multilevel marketing is that pyramid schemes put the majority of the focus on recruiting more distributors.

Generally, to become a distributor in a pyramid scheme, you have to buy a significant amount of inventory from another contractor in the company. Your main objective then is to sell inventory to another potential contractor. 

For example, the only “product” that the recent company 30 Day Success Story has sent to new distributors was a flyer on how to recruit more distributors. They’ve since been labeled a pyramid scheme.

A pyramid scheme is very similar to a Ponzi Scheme. Both schemes are sustained by paying one group of people with another group of people’s money yet without any legitimate exchange of goods or services. 

How to Use a Multilevel Marketing Operation Effectively

If you run a multilevel marketing operation, you should be focusing more on selling your products to consumers rather than recruiting more distributors.

For a pyramid scheme to continue, it needs more and more distributors to contribute money. So they focus almost exclusively on recruitment.

Also, look into the products themselves. Do they have real value and will consumers actually want to buy these products? Or do they just exist to help the company look more legitimate?

A legitimate and legal business will make its intentions clear and sell products that work and are in some demand. 

Your company also shouldn’t have it set up so that future employees have to buy large amounts of inventory in order to get started working.

Utilizing multi-channel marketing is a great way to run a legitimate multilevel marketing business. With this kind of marketing, you can market more easily to specific customers by figuring out which marketing tactics they respond best to.

An Effective Way to Make Money

By knowing how to use a multilevel marketing business strategy legally and sustainably, you can grow a business as well as a dedicated community. Just make sure that you’re always keeping the customer at the front of your mind!

Looking for other helpful articles about marketing? Check out the rest of our blog today for more!