What difference is Amway different from a pyramid scheme?
how are the two different? both are multi-level marketing. Amway seems to have established itself as a legit business.
Tagged with: amway • Multi Level Marketing
Filed under: Pyramid Scheme
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In legitimate multilevel marketing, such as Amway, income is generated through the buying and selling of legitimate products to legitimate consumers – income is NOT made through recruiting people. In fact, for any given amount of product that goes through a network you develop, the more people in the network the LESS money you make.
The *goal* in MLM is to sell as many products and services as possible, just like any other business.
In contrast, in pyramid schemes the *goal* is to recruit as many people as possible – money is not made through the sale of legitimate products to legitimate consumers, but through recruiting people. Indeed in pyramid schemes you actually get paid for signing people up. This does not happen in Amway or other legitimate MLMs. Sign up a million people in Amway and nobody buys or sells anything, you won’t make a cent.
Note that many pyramid schemes try to hide their nature by including some product at signup. In reality the product has virtually no legitimate consumer demand and the only reason people buy it is to convince other people to join and buy it to make money. Interestingly, if you pick one of the hundreds of different products Amway manufacturers, and build a network of people who don’t legitimately want and use the product (and don’t sell it to non-reps) then you’re technically running Amway as an illegal pyramid scheme. You’re breaking Amway’s rules to do it though!
Amway manufactures some of the best products available, having won many many consumer awards around the world. Legitimate products = legitimate consumer demand = legitimate business.
Network marketing perfect legal while pyramid schemes are not.
Pyramid schemes involve no product other than the scheme itself.
Amway, herbalife and the numerous other network marketing systems, have a product and encourage people to sell the product. But mostly they make the money by bringing people into the network marketing scheme, just like a pyramid scheme.
Generally people join the scheme, sell no products and make no money. However the sale of the products do happen. Often products go through 3 phases. Number 1, network marketing, 2 direct sale on late night TV, then finally they turn in stores. So even though network marketing is somewhat unethical and the sales techniques they use border on illegal, they do in fact serve to bring products into the market place.