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What is a pyramid?
Some people still consider Network Marketing as a
pyramid. Well, the main reason is because the
organization structure in a network marketing
organization is shaped like a pyramid. The truth is
that all organization structures are shaped like
pyramids.
Let's take a look at the corporate structure:
It is shaped like a pyramid with the top
management at the top of the structure. Then, there
are the middle management and lower management at
the bottom. Our government and church organizations
are all shaped like a pyramid. This does not mean
that these organizations are illegal. We give the
top structure power with our votes, support, money
etc. and in return, value must flow down from the
top. If value does not flow down, their organization
structure will eventually collapse.
Another important
thing to consider is that:
What makes an organization structure a pyramid and
therefore illegal as a system?
Let us now have a look at what makes a system a
pyramid. The presence of any of these features will
make the system a pyramid and therefore illegal:
- No legitimate products or
services
In a Network Marketing business, there
must be a sale and movement of
legitimate products or services. The
products must be of value and needed on
a consistent basis.
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- Over-priced products or services
A pyramid scheme is one where the
products often are over-priced and with
low perceived value.
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- "Head-hunting"
There are no sale of products. These are
merely the collection of subscriptions
and those involved are paid to recruit
others. This is called "head hunting"
because the more people you recruit the
more you will earn without the sale of
legitimate products. In some cases,
there may be a one-time over-priced
product; such as a diamond ring. This is
still "head-hunting".
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- Front-end inventory loading
The system requires members to purchase
a large amount of products to start the
business. There may be no refunds for
the return of products.
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- No overtaking
This means that those who join later
will never be able to earn more and have
higher rankings than those who join the
business earlier.
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These are some of the features that make a system
a pyramid. The presence of any one of these features
will make the system a pyramid.
I hope that I have given you the information to
know the difference between a legitimate Network
Marketing program and a pyramid scam.
All the best.
Richard Quek
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