- Well lahat poh is pyramid if we really understand or know about it..magtayo ka ng business may mga trabahador ka its a pyramid!magtrabaho ka sa company employee ka its a pyramid also!and that is a real pyramid but in what we are doing its also like pyramid ang structure but never poh maging parehas ng pagkakaalam nyo about pyramid. kasi in a normal pyramid yung nasa taas ang kumikita like magtayo ka sarili mo business ikaw ang boss meaning ikaw lng kumikita and the same with magtrabaho ka sa company president o may ari lng din kumikita kasi sya ang nasa taas..in our business even ikaw pa yung pinakamababa may chance ka lagpasan ang kinikita ng mas nauna sau and that is the difference ng business nmin sa lahat.
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Definition of MLM and Pyramid schemes
Multi-level Marketing (MLM) is a marketing strategy designed to promote their product by through distributors, offering multiple levels of compensation.
Pyramid schemes are, however, fraudulent schemes, disguising as an MLM strategy. The difference between a pyramid scheme and a lawful MLM program is that there is no real product that is sold in a pyramid scheme, and commissions are based only on the number of new individuals one introduces into the scheme.
Setup
The main idea behind the MLM strategy is to promote maximum number of distributors for the product and exponentially increase the sales force. The promoters get commission on the sale of the product as well as compensation for sales their recruits make Thus, the compensation plan in multi-level marketing is structured such that commission is paid to individuals at multiple levels when a single sale is made and commission depends on the total volume of sales generated.
In the case of pyramid schemes, money is charged simply for enrolling other people into the scheme and no real product is actually sold. Only a few people (those who are involved in starting the scheme) make money, and when no new individuals can be recruited, the scheme fails and most of the promoters, except the top ones lose their money.
Legitimacy
The Federal trade Commission (FTC) has set guidelines that help consumers discern legitimate plans from illegal ones. The difference between MLM and pyramid schemes under these guidelines are as follows:
- Sales of actual product or services to consumers, MLM offers products whereas Pyramid schemes do not
- Commissions are paid on sale of products and not on enrolments; MLM has a hierarchical commission set up on the sales of products, whereas pyramid schemes are based solely on new enrolments.
- Company buys back inventory from participants at the time of termination, pyramid schemes do not have any inventory.
Fraudulent pyramid schemes — like Ponzi schemes — are illegal but often try to disguise themselves as MLM (multi-level marketing) programs. Traditional MLM programs are legal because there is a real product that is being sold through the channel.
Comparison chart
 | MLM | Pyramid Scheme |
|---|---|---|
| What is it? | Marketing Strategy | Fraudulent scheme |
| Setup | Commission is paid to distributors at multiple levels when product is sold. | No real product is sold. |
| Promised compensation | Enrollees are asked to pay money upfront in order to enroll. Participants in a MLM scheme make money from enrollment fees AND by selling products. | Enrollees are asked to pay money upfront in order to enroll. Participants in a pyramid scheme make money primarily from enrollment fees rather than by selling products. |
| Legitimacy | Legal | Illegal |
| Product | MLM is usually used as a channel for selling tangible products | There is no product except a fake investment |
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