There are many good MLM companies, however, companies with a negative reputation have appeared, masquerading as MLM companies. Among them were several firms using the "pyramid" concept.

What do we know about the pyramids? The pyramid is one of the most stable geometric shapes. The wide base allows it to grow upward and remain strong and stable.

Dr. Dean Black, in the book “How to Succeed in MLM,” describes the pyramid as follows: “Having reached a certain stage of development, any organization engaged in the distribution of goods and services takes the form of a pyramid, forming many levels. There are more and more of them as you go from top to bottom. Any organization built on an elective basis is a pyramid. Our government is a pyramid, the church is a pyramid, schools are a pyramid. The power of any pyramid structure comes from its base.

Our government extends services from the top down, but the source of its power lies in us, at the base of the pyramid, for we choose our leadership by voting. Trading companies distribute goods from the top down, but draw their strength from the base of the pyramid, since it is the source of their cash flow. Thus, the pyramid creates a flow flowing in two directions: first - from top to bottom, then - from bottom to top. Value is at the base of the pyramid, power is at the top. If the flow from top to bottom suddenly stops, then power (in the form of money or votes in elections) will also stop flowing upward, and the system will perish."

The question is not whether any organization is structured as a pyramid or not. There is nothing wrong with a pyramid structure! The question is how it is used!

The lack of fair compensation for the effort expended makes any type of activity questionable from the point of view of morality, ethics and law.

When a company does not compensate its employees for the value they actually earned, then, regardless of its name and type, it is called fraudulent. Such an organization operates according to a certain fraudulent scheme.

How to distinguish an MLM company from a “pyramid” that disguises itself as an MLM company?

As already mentioned, in MLM - money comes from produced and sold products, and in a “pyramid” - from contributions from participants.

The second difference is that in MLM there is no recruitment of people, but sponsorship.

Sponsoring is teaching someone how to do what you do, or how to help your partner build their own business. The Sponsor assumes certain obligations to provide assistance and training. This does not happen in recruitment; it is important to simply recruit as many people as possible.

There are pure “pyramids”, and there are disguised ones (all kinds of club movements).

To resemble an MLM company, a “pyramid” takes some products and claims to sell them. Instead, money is made in a typical pyramid scheme: from recruiting new members. Before signing a contract, you are forced to make a large deposit, or after signing a contract, you are forced to buy a large amount of a product for a serious amount - they are “hyped to buy.”

For example, you should buy back about $1,000 worth of nearly worthless goods that you don't need (or goods that you can't sell). Part of the money from this thousand (about 500 dollars) will go as a commission to the person who recruited you and your superiors, the rest goes to the company. Those. the newcomers chipped in, received nothing, the top ones received, part of the money went to attract new people. Therefore, “pyramids” strive to get money from you quickly.

Most disguised pyramid schemes, however, are not easily distinguished from network marketing companies. They often choose cheap-to-produce but “miracle” products, exotic panaceas, etc. In such cases, it is very difficult to say whether there really is a consumer market for these goods.

In many cases, people quite sincerely believed that they were paying for the help they received in starting their small business. These people were deceived by the fact that the "pyramid" was disguised as a legitimate business. In order for everyone to make a profit in the “pyramid,” the number of participants must be infinitely large. From a mathematical point of view, everything is absolutely correct, but in practice, the number of participants is limited and each new level of participants has less chance of recruiting new ones and more chances of losing money.

What else do you need to know about “pyramids” in general? You already know that tens and hundreds of thousands of people have lost millions of dollars from participating in them. Moreover, many of the victims knew that they were participating in a gambling game, although they did not realize that the advantage was not on their side.

Why did “pyramids” flourish so magnificently in Russia? Our man is not embarrassed by deception. He is ready to be deceived, just to have the opportunity to deceive himself! Even if a person is told: “This is a deception. Most people will be deceived,” he thinks: “Nothing, I will have time to be among those who deceive.”

A person calmly goes for it, as a result he loses, he doesn’t even rebel - these are the rules of the game. In America, for example, people are very rarely deceived, because they themselves very rarely try to deceive!

The organizers of the “pyramid” are specialists in group psychology. At recruiting meetings they ridicule and dismiss all rational thought and serious questions, creating an atmosphere of frenetic enthusiasm in which crowd pressure and the promise of easy money play on human greed, stupidity and the fear of missing out.

Summary of traditional "pyramids":

It is almost impossible to win in a “pyramid”; it is built on the principle: many losers pay for a few winners.

This is a scam: participants most often deliberately deceive those they recruit. Not many newbies will play if they are shown the probability of their winnings!

They are illegal in any country. Their activities can be interrupted by the authorities at any time.

Signs of a disguised "pyramid"

Entrance fee.

Large entry fee or mandatory purchase of goods for a large amount. Carefully! The entrance fee to an MLM company is generally small (in some it is free and there are no conditions for participation at all). These companies want it to be inexpensive and easy for you to get started. In "pyramids" almost all the money is made from recruiting newcomers. Therefore, the entry fee is usually high.

Warning. "Pyramids" often disguise the entry fee by explaining that the money is charged for a "contract", for training, computer services, etc.

Refusal to purchase goods back.

If there is even the slightest chance of ending up on a mountain of unsold merchandise, be careful! Legitimate companies that require mandatory purchases of goods will buy back unsold product if you decide to go out of business within a certain period. - Lack of consumers of the product.

Is the product sold to end consumers? Are the products unique and relevant?

If it doesn’t sell or sells in small quantities, don’t go into business." MLM companies (like all types of retail sales) depend on consumers of their products and conquering the market. To do this, the company, as mentioned above, must produce entire lines of high-quality and unique products.

Disguised pyramid schemes are not concerned about making a sale to the end user. All of their profit is made on sales to newcomers who buy the product not because they or their customers need it, but because they have to buy it to play in the game.

Don't let anyone rush you into making a decision. The opportunity to build your own business does not disappear instantly. Make your decision wisely!

The market today offers a huge number of opportunities to make money. One such method is network marketing or MLM. In Russia, MLMs are very prejudiced, but there are reasons. In this article we will objectively examine the question of what MLM is and whether it is possible to make money from it.

Modern ways to make money: why MLM?

MLM has a very interesting property; ordinary people who do not have special education often achieve success here; they are also called “of the people.” The whole secret of success lies in the ability to communicate with people. It is the factor of interaction with people that is key in direct sales. If you don't like communicating with people, then it's better to try to make money in another way. If you have other talents, then perhaps it’s worth trying to realize them, more about this is described .

MLM is one of the ways of doing business, but it is not suitable for everyone, for the reasons described above. It might be worth trying to open a more conventional business. Do you want to know what needs to be done, how to open a business with minimal costs? All this is described in the article

What is MLM: understanding the basics

Before talking about network marketing, you need to understand what MLM is. Network marketing or MLM is a method of selling goods in which sales occur through a network of private, independent distributors or agents. In essence, MLM can be called direct sales from the manufacturer to the final buyer using one link.

To understand the essence of MLM, it is worth looking at a simple example. The price of any product increases several times before it reaches the final buyer. The final markups can be up to 1000%, all this occurs due to an increase in price at each stage of resale of goods. Typically, the sales scheme for a product goes through several stages: from the manufacturer to the official distributor, from the distributor to a large wholesaler, from a large wholesaler to a small one, only then does the product enter the store where the end consumer purchases it. The average markup at each stage is 10-15%; as a result, the end consumer receives a product at least 50% more expensive.

In the case of selling goods through an MLM network, there is only one link between the manufacturer and the end consumer - the sales agent. The main idea of ​​MLM is to make the product as cheap as possible for the end consumer. In addition, everything unnecessary is removed from the sales system: advertising, information support for the product. The output should be a product that, in terms of its consumer properties, is many times superior to its analogues in the same price category.

But to fully understand what MLM is, you need to look at this matter from the other side - from the earnings side of the organization and the distributor. Those who have ever encountered network marketing know very well what the main postulates are:

• The opportunity to work only for yourself. What MLM is - work at a convenient time, at least that’s what the trainers say. Is this true - partly yes, but you need to understand that if you want to earn decent money, you will have to work hard. It is worth considering that some MLM structures set sales plans, which even experienced sellers are not always able to fulfill.
• Building your own product distribution network. The whole principle of MLM is based precisely on attracting new sales agents by existing ones. For the organization, these are new people who will sell the product, and for the attracting person, additional income, which over time allows you to climb the internal hierarchy of the organization.
• Opportunity to organize passive income. Organizing passive income is the main feature, the lure of MLM. What is MLM - the opportunity to organize passive income, lie on the ocean, while receiving millions. Is this true - partly yes, there are people who were able to achieve impressive results with the help of MLM. The downside is the number of such people, there are very few of them and, as a rule, these are the sales agents who stood at the foundation of this network, but there are precedents when distributors in a developed network achieved such success.
• It is passive income that attracts most new network agents to MLM organizations. But it is worth noting that network marketing is far from the only way to organize passive income. You can read about other ways to organize passive income

If you look at this situation, it becomes clear that the MLM network is a sales system built through a multi-level referral system, which provides income to agents from the turnover of attracted agents, and so on down the chain. If you invited three people, and they, in turn, ten more, then your income from the referral system will be structured according to the following principle: a percentage of the sales of the network members you invited, a percentage of the income of those invited by them. The income from attracted referrals can reach such an amount that selling your own products will not make any sense. How to make money is to organize your own network, but do not forget that you will have to work a lot and it is not a fact that your network business will take off.

What is MLM from the point of view of companies: why is it profitable?

We have dealt with the question of what MLM is from the point of view of a sales agent. But to complete the picture, it is necessary to analyze this issue from the point of view of the organization. Why is this type of distribution of your product beneficial for organizations:

• Product competitiveness. This type of product distribution removes a significant portion of marketing promotion costs from the manufacturer. Thanks to this, it is possible to increase its cost by improving consumer properties. Or set a low price for a product, making this the main means of competition with store counterparts.
• Eliminating the possibility of product falsification. This method of product distribution almost completely eliminates the possibility of counterfeits reaching the end consumer, so the company’s reputation will not suffer undeservedly from falsification. And the buyer will always be satisfied with the quality of the product received.
• Employee motivation. The entire income of sales agents depends on two factors: their own sales, attracting new sellers. They are very beneficial to the manufacturer, since only the goods sold will be paid for, and the network of distributors will itself expand; it will be enough to simply make the first powerful push for development.

This method of distributing goods is beneficial from all sides for the manufacturer, except for one thing - customer trust. MLM has been surrounded by scandals throughout its history. Only a few MLM networks were able to “make” a face for themselves, but more on that a little later. But this does not confuse MLM organizations: how to make money - pursue an aggressive sales policy. Such precedents exist everywhere, which once again shows the lack of understanding of many agents about the basic principles of recommendation sales.

Basic principles of network marketing

We have dealt in detail with the question of what MLM is from all possible points of view, but let’s look at what principles this business is built on, whether it is possible to become a successful, rich person by distributing products through direct sales.

The operating principle of such companies is quite simple: there are several factories involved in the production of products. There are also warehouses in all major cities and a well-functioning logistics system. At the same time, there are no advertising campaigns or marketing campaigns that are familiar to the common man, which should help promote products on the market. Instead, MLM organizations rely only on direct sales.

How direct sales technology works. The scheme of such sales for MLM companies is widespread; it works according to a single system:

• A city is selected to open a new representative office As a rule, large cities are selected. A small office is opening that will deal with all organizational issues. There is also a staff consisting of several people, usually no more than ten.
• After this, preparations for the first presentations begin. Premises are rented, usually conference rooms. Usually, rich places are chosen: hotels, large business centers. Conference rooms can be rented for several hours, so even such organizations can afford a few hours of presentation.
• Search for the first sales agents. Such people are found in several ways. The first is job search sites, this is the most “fishy” place for MLM firms, because people who need money are gathered there. The second is conducting a marketing campaign using advertising on the Internet and the media. MLMs, especially young organizations, do not like to spend money on advertising, so this method of attracting distributors is not used very actively.
• Conducting a presentation. The next stage is the presentation of the product to potential network agents, the presentation of the principles of operation of the MLM system, and the conditions for starting cooperation. After the presentation, as a rule, there is a small buffet, “consolidating” all the advantages of working with this MLM network. Several such presentations are held over the course of a month or two. During this time, the required number of sellers is recruited to begin full-fledged work.
• Start of work of the first distributors. The first buyers are friends, relatives, colleagues, then the word of mouth system begins to work - new people become participants in the system.

All young MLM organizations are starting to work on this principle, but there are already established ones, they work according to a completely different system.

The work of large MLM companies in the modern market

The key difference between large network marketing firms is that everyone knows about them. Even a person who does not know what MLM is has probably used the products of such companies and was satisfied with their quality. The work system is different; you can become a sales representative simply by submitting an application, but you should understand that cooperation with such companies will not bring you a lot of money, but it can add a pleasant addition to your budget. Let's take a closer look at the differences between these MLM companies:

• Advertising campaign. Such brands do not need advertising, but they actively use it, promoting their products and attracting new distributors.
• Much more lenient conditions for their agents. You can simply buy products for yourself, while you will receive insignificant, but still money.
• Perhaps the key difference is a weaker referral system or its complete absence. Such MLM businesses no longer need to spread their network as aggressively, so the referral system is significantly weakened.

The “old guys” that have conquered the market are much more reliable, but it will be clearly beyond the capabilities of the average person to get rich with such companies.

History of network marketing, how MLM began

Let's digress a little and look at the history of network marketing. Everything related to trade and sales appears in the USA, MLM is no exception. The first company to begin distributing its products through a referral sales system was the Californian company Nutrilite. The production itself was founded back in 1935, when the first product was registered. But the work itself on distributing products based on the principle of recommendations began in 1945-1946. These dates are considered to be the birthdays of modern MLM firms.

Subsequently, seeing the effectiveness of the MLM sales system, new companies began to emerge like mushrooms after rain. One of the first was the Amway company, which still exists successfully, enjoying enormous popularity throughout the CIS countries.

The MLM movement continued to gain momentum; by the end of the nineties it was possible to buy almost anything: cosmetics, detergents, household appliances, electronics, dishes. A huge number of people were involved, everyone bought and resold goods, cherishing the hope of becoming fabulously rich.

It was then that a wave of large-scale litigation began against a huge number of MLM firms. The first “call” was the 1975 case against the famous company “Amway”. Networkers were accused of organizing a financial pyramid. The trial essentially ended in nothing, but thanks to this trial, the fundamental principles of honest MLM became known:

• No large down payment. At that time, Amway was selling an agent starter kit for $15.60.
• Product consumption. No more than 30% of the products produced must be consumed by the distributor himself.
• Free exit from business. If the seller wants to leave the MLM system, Amway has pledged to buy back all remaining products for 90% of the initial cost.

There were a lot of high-profile scandals and lawsuits, so a strict regulatory system for network marketing was introduced in some US states.

Direct sales came to Russia relatively recently - after the collapse of the USSR. And, as one would expect, MLM has acquired its own unique flavor, distinguished by the particularly aggressive sales of many network agents, but more on that a little later.

Network marketing: business or financial pyramid

In our countries, the majority of the population considers MLM organizations to be financial pyramids and a simple scam. It’s worth looking at the reasons for this opinion, because at its core, MLM is an honest business.

• Too aggressive behavior of network agents. The 90s were a difficult time, people got their hands on legal business and went to great lengths, while MLM supported it in every possible way and motivated this behavior with cash bonuses. Adding here the general poverty of the population of that time, we get a wild result. There are known cases when doctors, instead of prescribing medications, sold patients “miracle cures for all diseases,” while being members of well-known MLM organizations.
• The emergence of financial pyramids hiding behind the guise of network marketing. Fraudsters also did not miss their chances to make money from the population. Luring money out under the guise of MLM companies. And if we take into account that the companies themselves made quite aggressive presentations, it was almost impossible to distinguish scammers from sales agents.

Thanks to these two factors, there is a very biased attitude towards network marketing in our countries. Large companies are trying to correct this by using TV advertising. And smaller organizations step on the same rake, pursuing an aggressive marketing policy. Almost all of us have friends who have been involved in network sales; it becomes difficult to communicate with such people.

How to distinguish network marketing from a financial pyramid

1996 became a key year in the development of the Russian MLM business; this year the Russian Direct Sales Association was created, designed to regulate the work of network businesses in the country. The activities of the organization are quite controversial and some of the major players have already left it. The website contains a list of honest network companies that are members of the association or associate members. But many organizations are not members or have left it.

Let's take a look at the main criteria by which you can distinguish an MLM organization from a financial pyramid:

• First payment. In MLM it is minimal and rarely exceeds 1000 rubles. For this money you get the necessary literature and a seller’s starter kit. A financial pyramid requires a significantly larger amount; usually, the entry price starts at $200-500. But here it is worth making a small remark. Even simple network companies have multi-level sets. The price for which can be several hundred dollars. Marketers like to keep quiet about starter kits, suggesting that you start with the most expensive ones.
• Referral system. Honest companies build your passive income from your referral’s turnover. Financial pyramids focus on the number of referrals provided.
• The product itself. In honest organizations, the product is the main focus; for financial pyramids it is just a cover. It is worth remembering that the fundamental principle of any MLM organization is that the distributor can keep no more than 30% of the purchased products, the rest must be sold.
• All transfers of funds must be documented: checks, invoices, invoices - you must be provided with a full set of documents that say exactly what you paid for.
• Quick earnings. Financial pyramids promise quick earnings and instant money; honest network organizations usually do not make such statements. But it’s worth remembering our color and the aggressive behavior of some marketers who can promise anything.

These points will allow you to calmly distinguish a financial pyramid from network companies. Unfortunately, some work literally “on the verge of a foul,” since sales agents themselves do not always understand what MLM is.

Earning money in a network company - basic sales tools

If you still decide to earn your first million with the help of MLM, then it’s worth talking about the most effective sales tools. They are all entirely tied to online advertising; today this is the most effective way to promote products in terms of cost/result ratio.

But here it’s worth making one remark: many organizations prohibit the use of any advertising, citing the fact that ordinary sellers simply will not be able to competently manage these tools, spending a disproportionate amount of money. Such companies include the well-known distributor of vitamins NSP. If these rules are violated, all relations with the agent are terminated.

Let's look at the main, most effective tools that answer the question of how to make money in MLM:

• Creation and promotion of your own website. Technically, this is the most difficult method, which requires a lot of time and money. The only advantage is that all financial costs are evenly spread out over a long period of time. But if you decide that online business is your calling, then you simply need your own website.
• Community development on social networks. The method is faster and easier, but has the same high efficiency. What is the main mistake of such communities is the strong focus on selling online goods. It’s better to create a community with a general focus on making money and self-development, this way you can gain an audience much faster and begin to gradually promote your product.
• Use of contextual advertising. This is the most expensive way to promote a product, but it gives the fastest return. However, it is worth remembering that many products related to MLM are not moderated. Permits are also sometimes required. Not all MLM organizations have such documents, which can make it difficult to quickly promote goods.

Of course, you can use the traditional method of direct sales, but its effectiveness decreases every year, as more and more people “go” to the Internet when buying a variety of goods.

Large companies in the Russian network marketing market

But let's touch on more specifics and look at the main MLM companies operating in Russia and the CIS countries:

• Avon- one of the most famous cosmetic brands on the market today. It is very difficult to underestimate the influence of this brand. According to rough estimates, Avon occupies more than a third of the Russian MLM market. In 2014, the company left the direct selling association, stating that the association's activities did not cover all network marketing and it was not interested in developing direct selling. There is a three-level referral system; the company does not promise endless passive income.
• Oriflame- Swedish company, Main activity - sale of cosmetics. Slightly inferior to Avon in MLM market share. According to experts, these two companies occupy about 65-70% of the total network business in the CIS.
• Amway is an American company that produces almost everything: cosmetics, detergents, household goods. The general catalog contains more than 450 items of various products. Amway is not very popular in Russia, but definitely everyone knows about this brand.
• Herbalife- perhaps the most scandalous representative of the direct sales association. There are too many scandals around this organization around the world. It was Herbalife’s aggressive marketing that became one of the reasons for Avon’s exit from this association. Sells nutritional supplements and products for a balanced diet.

This list of well-known companies can be continued for quite a long time. It was thanks to them that the whole world learned what MLM is.

Opening your own business based on network marketing: pros and cons

To be objective, MLM is just one type of doing business, which has its own advantages and disadvantages, let's take an objective look at all aspects of doing business in this way:

• Starting a network marketing business itself looks much easier than opening a regular store. But it is worth remembering that during your work you will receive a large number of refusals, plus your income will not grow as quickly as you would like.
• The quality of goods from large chain companies is indeed very high. The price is almost always lower than the price of store-bought analogues. But often a multi-level referral system can create a huge increase of up to several hundred percent. And in this case the price will be unreasonably high.
• Company reputation. The reputation of large network companies among the population is almost always very high. The products of such organizations are loved and bought. The flip side is overall reputation. Having learned that you belong to an MLM network, many will simply refuse to contact you.
• Possibility of working via the Internet. Many companies help their agents by providing various online tools. By attracting your efforts and resources, you can get really big income without resorting to direct sales. But on the other hand, not all organizations allow the use of any advertising. The use of some tools is very difficult due to the specifics of document flow.

If you like to communicate with people, are not afraid of refusals, and want to earn big money, then you can try working with network marketing, but you should leave the opportunity for more conventional earnings, since working with MLM carries an increased risk.

If you decide that you are ready to work with network marketing, then you should pay attention to several main points:

• Choosing an organization to work with. It is better to choose a company whose products you can work comfortably with. Also pay attention to the age of the company; the minimum threshold is 3-5 years; there is no point in working with younger organizations. Be sure to read reviews about the company on the Internet; of course, they will be ambiguous, but you will be able to get a general idea of ​​the organization. The company's products must be in demand, and marketing plans must be realistic and stimulating.
• Be sure to leave yourself a financial cushion. You won't be able to earn big money right away. The ideal amount would be one that can provide you with an acceptable standard of living for 6 months or more. If your network business doesn't take off, you risk being left with nothing.
• At first, your sales will be small, but you need to try to make every buyer a regular customer, and in an ideal situation, a participant in the system and your referral. It is advisable to look for people who want to build their own business. The best place to search will be specialized communities on social networks that are dedicated to personal growth, self-development, earning money, and starting a business.
• Attracting new people to the MLM system is not so easy; you should focus on the quantity of products, a flexible schedule, payment terms, receiving bonuses, as well as the possibility of organizing passive income.
• Be sure to evaluate the conditions for leaving the organization; they should be as lenient as possible for the agent. As mentioned above, Amway buys up remaining products for 90% of the cost.

Choose a company wisely, take your time, talk to other agents, read reviews. There are a lot of MLM networks on the modern market and everyone will find something that suits them best.

Is MLM a financial pyramid?

1. Pyramids.

3. What is MLM?

5. MLM companies.

6. MLM is not for everyone!

1. Pyramids

Over the past twenty years, we have been taught to fear the word “pyramid” in anything that is not related to ancient Egyptian structures and their counterparts in modern architecture and design. At the same time, almost all systems in the world have a hierarchical pyramidal structure. Look at the structure of an ordinary commercial company: many, many ordinary employees, much fewer managers above them, over whom there are even fewer and fewer, until this decline reaches the top - which is usually one person. Another example is the structure of the state. For example, in Russia, the USA or France, the head of the executive branch and the most powerful figure is the president, a variety of structures are subordinate to him in one form or another... In general, not the simplest, but clearly a pyramidal system. And so in many systems built by man - there are pyramids everywhere, because the pyramidal system often turns out to be one of the most stable.

2. Financial pyramid? - Ew!

It seems that everything is clear, but the word “pyramid” is still alarming, isn’t it? I completely agree! To this day, crooks of various types and stripes happily use this one of the most effective systems as a basis for fraud. We all remember the notorious pyramid of “shares” of the MMM company. We all know that HYIPs (HYIP, High Yield Investment Program - a highly profitable investment program) work according to a similar scheme, but even more efficiently. You should beware of such systems, since they are all initially built on deception: the founders of such systems know from the very beginning that they will simply have nowhere to take obviously inflated profits on deposits, so they simply collect money. At the very beginning, for the “scam” to work more efficiently, they often even pay out money (remember the MMM scheme), but all the first payments come from the contributions of subsequent participants in the pyramid. When the flow of deposits begins to decline - or stops growing at the required speed, the pyramid collapses, and the participants are left without deposits, and the creators of the pyramid disappear with the money.

3. What is MLM?

What is multi-level (network) marketing, and why is it actually not quite the same as a financial pyramid?

Multi-level marketing is a system in which the manufacturer of a certain product distributes it not according to the classical scheme through stores, but directly to customers through distributors (sales agents) - i.e. Sales are conducted through numerous partners. In this case, the distributor’s earnings consist of a certain established percentage of the cost of the products sold by him, as well as the sales volume of the lower-level network of distributors he has built.

It seems like the scheme is similar to a financial pyramid scheme? - Yes and no! On the one hand, this scheme is used by both HYIPs and a variety of other structures. On the other hand, there is a fundamental difference. In the case of MLM, we are dealing with an organization that sells real goods or services, so no matter how large the pyramid is, it will not collapse due to a small influx of new personnel - because it depends not so much on the number of distributors, but on product sales. And each new member has many of the same opportunities as the one who became a distributor before him.

4. So familiar multi-level marketing on the Internet!

Let's make sure once again that there is nothing fundamentally scary in network marketing! I think that now almost everyone who has already read to this line will be able to cite many systems that work on the Internet precisely on the principles of network marketing - and at the same time they work well and honestly. The most striking example for our site is mail, surfing and a variety of other sponsors! Also, some affiliate programs and other systems work according to a similar scheme. In general, many people liked the scheme. Of course, you can rarely see it in its pure form, but still, this is it.

At the same time, we should not forget that, along with honest players in the market, there are also scammers who do not pay out the money they earn or otherwise deceive participants in their system. Here you also need to be careful, but there are scammers everywhere - and they work not only in the MLM field, so you just shouldn’t believe in the impossible! Be smart!

5. MLM companies

As I said, you should be careful when dealing with an MLM company. If you want to work with a particular company, find out more about it: where it is registered, what products it produces, whether the products require certification in the country where you live. If required, are there all the necessary certificates, is it possible to get acquainted with them somewhere, etc. Find out from your friends if any of them use the products of this company and what reviews they can give about it. In general, find out more. Of course, there are no guarantees anywhere - even such well-known giants with global brands as Nutricia or Bayer make mistakes for which they later pay, but most large network companies value their brand no less than companies that use other principles to operate.

Often, network companies do not conduct active advertising campaigns, leaving all advertising at the discretion of distributors, so even the world's largest brands of MLM corporations may suddenly turn out to be unfamiliar to any of us - or even to all of our acquaintances. What can I say in this case? Of course, everyone has the right to take risks. And in young companies, the chance to succeed is always greater (if the products offered are of high quality), because there is less chance of encountering already registered distributors. But there are also corresponding risks. Therefore, if you want to try to work in multi-level marketing, then you should start with well-known brands - and get there, at a minimum, an idea of ​​​​this line of work and skills. Offhand I can name several network companies that I know: Amway, Avon, Mary Kay, Oriflame, Tiens Group. As far as I know, these companies have Russian state certificates for their products, large extensive networks of branches around the world and meet other characteristics of large network companies. Of course, these are not all large network companies, so you should always carefully read the company you decide to work with. It’s a good idea to look at additional information on the corporations I mentioned.

6. MLM is not for everyone!

Often, in order to quickly form a lower-level network of distributors, networkers paint mountains of gold for future distributors and forget to mention that they will have to work a lot. Yes, with large network corporations it is quite possible to earn decent money: tens of thousands of dollars a year are far from the ceiling. But not everyone earns that kind of money, because any job requires a calling. Some people have it, but others don’t: MLM business is not suitable for every person - for this you need to have a very specific mindset and a special temperament. For example, I worked with several corporations, even had my own small networks, but in the end I realized that this was not for me, so I quietly and peacefully left - and now I work in completely different areas. At the same time, I believe that the experience I gained in direct sales, the information I received about the principles of the network, the advice of higher-level distributors and the lectures of networkers gave me a lot of useful things - first of all, knowledge.

What I would like to say in conclusion: do not be afraid of the words “pyramid”, “MLM”, “network marketing” - there is nothing scary in them! But you should always be attentive to the organizations you are going to work with, and not only online ones.

It would seem how good it would be to get “free” money! But it’s good when you manage to earn such money without your own financial losses. But more often than not, it turns out that Internet companies offer us a specific “investment” before receiving income, and then happily fall apart. This is the principle used by another Internet scam under the loud name “financial pyramid”.

Such a pyramid exists mainly due to the constant attraction of new participants. As long as it is replenished with newcomers, it exists. But this newbie, as soon as he gets into it, becomes a “hostage”. As soon as the ranks of the pyramid begin to thin out, you can forget about your investments.

MLM pyramids

There is no unequivocally negative attitude towards MLM pyramids. This is real multi-level marketing, on the basis of which many well-known brands operate quite successfully: Amway, Oriflaime, Avon, etc. The emphasis in such organizations is on selling a specific product or providing a service. This method of work cannot be categorically called bad; it all depends on the quality of the product or service being sold.

The problem is that MLM pyramids are often disguised as bona fide MLM companies, which have recently attracted Internet users into their ranks. The difference is that they actually sell air. They don't have any unique product or service to sell. The group of like-minded people that makes up the top of the pyramid attracts newcomers, who, in turn, invite newcomers to the third level, and so on, as long as there are those willing to join it.

Naturally, to join this scam, an entry fee is required. It is small, because clients receive the main “earnings” from newly arrived participants. But all good things come to an end. It is impossible to engage in empty attraction of people for too long and pay dividends from newly received contributions. Ultimately the pyramid collapses.

The most famous financial pyramids

Typical Madoff scam

Madoff was a unique man. Although this can probably be said about any financial fraudster. Enterprising people, since they managed to involve so many people in their “brainchild”. So Bernard Madoff's pyramid lasted about 50 years! More than three million defrauded investors totaling 65 billion rubles!

At first, the scam did not bode well. A solid investment fund, a large number of investors, reputation, dividends for investors amounted to 12-13% per annum. When in 2008, a number of investors demanded that Madoff return their 7 billion invested funds, the company was unable to pay them, because it turns out that it simply had not been investing for the last 13 years!

The would-be fraudster was betrayed by his own sons, to whom he revealed the secret of his fraud. He used the Ponzi scheme, known at that time, to create his pyramid. As a result - 150 years in prison!

Ponzi scheme

The Italian fraudster came up with his business scheme back in 1919. He created the company “SXC” and began to attract investors who, through his company, could make good money by selling and buying goods in various countries. But he offered to invest in the securities of his company and in 45 days offered investors to get rich by as much as 150%!

Ponzi well fueled the passions about his miracle company in the newspapers. This created good publicity, and Boston residents rushed to buy his papers.

In fact, the company paid old investors money from new investors! A common pattern these days. And Ponzi himself, as the top of this pyramid, had a very decent income - 250 thousand dollars daily. After an inspection of his company by the authorities, it became clear that it was a pyramid scheme. As a result - 5 years in prison.

America's Insurance System

It may seem strange to you, but the American insurance system, introduced back in 1935 by President Roosevelt, has a structure similar to a pyramid. At that time, it was called upon to fight poverty; pensioners and the unemployed could receive at least some money. And the revenue came from taxing working people.

The system has undergone significant changes over the years, but the meaning remains the same: old investors have the opportunity to receive “dividends” at the expense of new ones. Analysts believe that by 2018 this insurance system will collapse. There are more and more pensioners in the country, but there may not be enough money for everyone.

How to recognize modern Internet pyramids?

Recently, casinos and sweepstakes have already flooded the Internet. Pyramids also began to look for their clients on the Internet. A tool such as a webinar helps a lot with this, where you can competently explain to citizens where and how to send money. And without them, there’s no way - you won’t get the income that so beautifully beckons on the pages of websites.

Experts have long figured out the basic principles by which a pyramid can be calculated.

• Often such companies do not even sell any product. They are selling levels of participation in the company.
• It is impossible to go through such a pyramid from beginner to top. This is clear from the start. The top of the pyramid will still receive all the main income! You will only be entitled to a certain percentage of the newcomers' income.
• Constant connection of newbies will not last forever! Again, because there is no product or service here. And keep in mind that when you connect newcomers, there is no guarantee that they will not turn out to be a weak link in the chain that, according to the terms of participation, you need to build.
• A company that does not have an office in Russia and is not officially registered as a legal entity, then it does not have the right to engage in any activity at all. There are many foreign companies on the Internet, but will you go to America or Japan to sort things out with an unscrupulous payer if he suddenly stops paying you bonuses?
• You should be wary of large interest rates on income. A high annual percentage rate is sometimes beyond the capabilities of even a reputable bank. Pyramids offer to receive income in a short time.
• If you notice any psychological pressure on newly arrived people in the form of mandatory purchase of talismans that guarantee success in business, miracle products, collective trainings, joint repetitions of special chants, etc. - know that this is also a scam.

There is a lot of deception on the Internet these days. The most “enterprising” comrades are always trying to deceive us. To avoid becoming a victim of such a scam, you need to pay attention to even small details in the activities of companies. Arm yourself with information, be smarter!

But when we talk about network marketing on the Internet, then here the product is distributed in a slightly different form. He is virtual. It is also called an artifact or digital package. Other names are possible. That is, speaking figuratively, air is being sold, i.e. the opportunity to make money is being sold.

If you compare these sales, you can see that, in general, there is not much difference between them. Those who work in a network company give their money. And the same story is observed in the MLM pyramid. Here a person pays money when he registers. He pays those who attract him. Subsequently, everything becomes the same, only on the contrary - the people already attracted by this person will bring him a certain percentage. The only significant difference is that in a classic network company it is much more difficult to find people. And with the help of the Internet this is much easier to do, and besides, the cost of such activities will be lower.

The basis of all network companies is the network itself. But this network is the same MLM pyramid that we are talking about here. Of course, at one time Mavrodi with his “MMM” created a lot of “naughty things”, so today people, especially of that time, associate it with his brainchild. That is, they consider them fraudulent. Just don't forget an important point. In fraudulent pyramids, all funds were accumulated in one hand. That is, the creators of this pyramid could bring down this pyramid at any moment. By the way, in most cases this is exactly what happened.

But in the MLM Internet pyramid everything is somewhat different. All money received as a result of the activities of the pyramid participants is distributed among them in different shares. That is, funds are not concentrated in this case only in one hand. The organizers of an MLM pyramid on the Internet cannot “cheat” their participants by taking their money and hiding, because the money of the pyramid participants is always in the hands of the participants themselves. But I must say that there is no point in hiding for the participants of Internet pyramids, because they receive constant passive income from them. And minimal funds are spent on maintaining these MLM pyramids. A huge Internet pyramid can be managed by just one person, and hosting can be found from $10 per month.

But note that I’m not at all saying that everything is clean on the Internet and that there are no freeloaders here who dream of getting rich at your expense. There are a lot of them. Therefore, as in real life, you need to approach the choice of an MLM pyramid thoroughly, carefully studying all the pros and cons.

We’ll talk about exactly what you need to pay attention to now.

Contribution amount. As a rule, it is small. Because the cheaper the initial payment, the more people will join such a pyramid. This means that there will be more rapid growth and more profit for the organizers. Entry fees usually range from a few cents to $10. I think that today this is not a lot of money. But if the amount exceeds $100, then always be very careful

Internal structure. Here it is necessary to study all the nuances that may arise during the activity. These include commissions and other equally important points.

The number of MLM pyramid participants (referrals) attracted by you personally. There are many pyramids that act quite cunningly. Everything is organized there in such a way that you do not have the opportunity to have more referrals at a certain level than are defined in the rules of the MLM pyramid. That is, at one level, the number of referrals can be 3, at another 7, etc. And all the referrals that you attract at a certain level above the norm are “sent down.” Thus, it turns out that the MLM pyramid is developing deeper. It would seem that this is really very cunning. But from a mathematical point of view, this is not so smart. It’s just that people’s approach in this case is passive. They know that the pyramid will still develop. At least that's what they promised.

What conclusion should be drawn from this? Only such that there should be no liability on your part. You shouldn't just be a bystander. Of course, if you are not active, you can still get several referrals, which will then “go down”, but the amount of your earnings in this case will also be small. But if you put your hand into all this, you will see that the return will not be long in coming.

Well, it is also important to take into account the fact that there are several levels in the pyramid. Therefore, you need to know how many there are and the characteristics of each of them. Typically standard contains from 2 to 5 levels. This is considered optimal in terms of income stability. Of course, there are pyramids with a significantly larger number of levels, but their creation and development will require more time and money.

Visual assessment of the MLM pyramid. Always evaluate the site you visit from the point of view of a picky customer. Pay special attention to closed sections. As a rule, all information should be available. But if something is hidden or accessible only to members of the pyramid, then this should raise some suspicions. In addition, those pyramids that have been operating for a long time will probably cause more trust. In any case, they should inspire much more confidence than the pyramids that were created yesterday. But even when you decide to settle on an MLM pyramid that has been operating for more than one year, it is not a bad idea to evaluate its current state.