Tackling the "Pyramid" myth

For anyone who has ever been interested in, or associated with MLM, Networking, or Multi-Level marketing, there is always the question that comes up when you approach someone about your business opportunity, and that is, "Is this a pyramid?". What happens next is a deal killer before you ever even get the opportunity to tell your prospect about your business or product. and that is, you begin defending your Internet marketing or networking business against claims of illegality and not about the wonderful opportunity that you believe it is. Shortly after that, you get the "high eyebrow" look, and your done before you ever got going. Sad isn't it, that so many are so closed minded about the real potentials of networking and homebased businesses? So how do you cope with this particular issue? First off, you need to understand the law. And just what is the law? Check with your state officials to specifics about "pyramid or ponzi schemes" in your state, and if you do business in multi-states, then you should take the time to check in with the FTC for the federal position. But generally speaking, this is the loose definitions of these schemes of which you need to be aware.

Pyramid schemes are marketing and investment frauds which reward participants for inducing other people to join the program. In this type of scheme, products, if there are any, are secondary to the recruitment compensation, from which the "new person" is able to recover the cost of entry into the plan. In other words, the plan will reward the recruiter from funds required of the newly recruited, and in most cases there is no "earnings" from product sales. While products may be involved, they are generally used as a disguise for the recruiting scheme.

Ponzi schemes, on the other hand, operate strictly by paying earlier investors in the program, with money deposited by later investors, and without the emphasis on recruitment or awareness of a participation structure. Generally there is a promise of a high ROI, with the earlier investors being paid with deposits of the newcomers. Ultimately, the "robbing Peter to pay Paul" type schemes are headed for disaster with the scheme originators goal being to amass as many deposits as possible before abscounding with the principal deposits of all the unsuspecting investors.

With these explanations in mind, one should be able to differentiate between what is legal and what is illegal as it relates to the opportunity they are promoting. It pays to pay close attention to the company's compensation plan and be sure that it comes from earnings related to product sales or charges for real services rendered.

Now, with all that said, why should you allow the issue to arise at all, and if you know that the prospect that you are about to approach may have a dim or distorted understanding of MLM or network marketing methods of moving product to the general public, then deal with it from the very beginning, up front. Never let it be the focus of the conversation. Then, just be sure that you have done your homework, that the company's profits are based on real sales numbers of either the products or services offered, and not solely dependent on the recruitment fees. When you are convinced, it's much easier to make it clear to the naysayer.

Finally, there is always the possibility that the person you are dealing with has been "taken" in a real illegal scheme of some kind and your chance of convincing them that anything that even remotely resembles the "scheme" they were burned by, isn't illegal, is almost nil. Save yourself some time when you recognize this to be the case. Move on to the next prospect, politely, and let the person with the distorted view go on with their life as they see fit. It's a judgement call that you have to make from time to time, and you are the only one who can make the call, but unless your opportunity has a way for them to avoid recruiting, it's best to move on.

As for the way I handle it personally, which is also something that is different from person to person, I generally just return their question with a similar question, such as "What do you mean by "pyramid"? Give them a chance to tell you what they believe one to be, then you may have a chance to save your approach by just saying "no, it's not like that......and just go on into whatever your normal approach would have been without the question being asked.

Till next time... Good prospecting and good luck with your homebased business marketing program, whatever it might be, Internet or otherwise.