News On MLM “Is This A Pyramid Scheme?”

On a call yesterday following the pyramid post, people wanted to know what to say if, they’re presenting the business or product, someone pops the question,

“Is this a pyramid?”

Before you brainstorm over your winning comeback, how about a quick check to see whether 1) your company acts like one or not, or 2) if you are acting like one (without realizing it, of course)?

Here’s the question we discussed:

  1. Is your business all about recruiting?

If so, you are acting like a pyramid, according to Rushkoff’s book, Coercion:

“a pyramid scheme is…[where] the need to subscribe newcomers outweighs whatever benefits the products or system has to offer. Many MLMs sell distributorships more than cosmetics [name your product or service – KK].”

Yes of course you want to recruit reps – but if that’s all you do, you are in the pyramid zone, because you give the impression that the product and customers don’t matter, except to sell distributorships.

Everyone quickly re-evaluated what they were doing to be sure they weren’t coming across like that.

All could see how a fixation on doing 1. above might give someone else the impression that “Yep, there goes one of those pyramid schemers.”

After a quick review of 9 different company pay plans (of distributors on the phone) it became clear – it’s true what the recruiters say: “There’s no money in customers. All the money’s in the recruiting.”

Company owners decide where to put the money they pay their reps. Say a network marketing company pays out to the field, 50% of what it takes in. They have complete disgression on how to divide that up – between paying for recruiting and amassing customers (for those companies that make the recruiter/customer distinction – and some don’t.)

So, how much were companies paying for getting customers (who were not also distributors)?

On product orders ranging from $85-120, some people reported getting paid from 0 – 7%. In one company, they got nothing on those customer orders if they hadn’t reached a certain position in the company based on their sales; and for other companies, the reps reported getting 5 or 6% for orders of $100. (A few paid more. List to be posted soon.)

Five bucks for a hundred dollar customer order?

There are much easier ways to make money than that!

However, for recruiting, we got much higher returns. With sign-up bonuses and fast start bonuses of $50-350 or more, for orders ranging from $300-1000.

Who else wouldn’t rather make $50 than $5 for making one sale? Big money in selling distributorships (which may include products). Versus getting just customers.

So yes, companies whose pay plans are weighted so much to recruiting are acting like a pyramid. Worse, they make their reps look like it too, since they want to get the most return they can for their time, and would rather make $50 than $5. Who wouldn’t?

Well, as they say, if it quacks like a….

Oh. What to say to that question, “Is this a pyramid” (or ‘one of those things’)? One option (we discussed several):

Let me tell you what we do, and you can call it whatever you want ok?


We market products directly to consumers, people like you and me, and we also find people who want to do that with us. You think you could do that if I showed you what to do?

(That’s from the Truth book.)

And yes, there are other options…for another post…send in yours that have helped.

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