Pyramid Schemes are hitting New Brunswick, Canada, and probably other areas! Often these Schemes are cleverly designed to dup well meaning people out of their money!
Pyramid Schemes are also illegal, and should definitely be avoided. On the News tonight, CBC reports
However, it falls short on defining what a “Pyramid Scheme” is,
the best definition I can find is on wikipedia.com
“A pyramid scheme is a business model that recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products or services. As recruiting multiplies, recruiting becomes quickly impossible, and most members are unable to profit; as such, pyramid schemes are unsustainable and often illegal.” (Read More at Wikipedia.com)
They definitely are illegal in both Canada and the United States.
The CBC Report does state that these Scams usually offer high rates of return.
The Report also quotes Brian Maude of the New Brunswick Financial and Consumer Services Commission,
who says he wants people to be aware of the scams.
Thus the purpose of our writing this Blog Post.
Often, Illegal Pyramid Schemes are confused with legitimate Multi-Level, or Network Marketing Companies like Amway and Melaleuca.
So, what’s the difference between the two?
Mainly the difference between the two is that while Pyramid Schemes promise income, usually high incomes, for those that recruit new members via a promise of payments or services for enrolling others into the scheme. Pyramids are also noted for having little, if any, real products, or products of value.
Whereas a legitimate Network Marketing Company does have quality products, often of a better quality than many Name and Store Brands!
One reason for the better quality in quality network marketing company products is due to the structure of the Business.
In traditional retail stores, with store and name brand products, about 70% of every dollar goes into advertising to encourage you to buy their products!
With another 10 – 15% (or more) going into Overhead, and profits for the company. Often leaving only about 3-10% of the price actually going into the Ingredients.
Compare that to a Multi-Level, Network Marketing, Company where there is usually 10-20% of the price made up from the Ingredients.
This means that most Multi-Level (MLM) Companies having from 2-7 times the Ingredient Value, as compared to Store and Name Brands.
The Reason MLM Companies can put, on average 5 Times the Ingredients in their Products as compared to Store and Name Brands is
MLM Companies do not have to pay as much over head for things like Offices, Staff, Lights, Internet, Phone, Etc., Etc. and
typically pay out just 50-60% to their Distributor Base, as compared to traditional businesses who may pay 70% on Advertising.
With MLM Companies the advertising is done primarily through Word of Mouth by their Distributors.
The reason MLM Companies are often lumped in, or mislabeled as Pyramid Schemes, is that both Pyramid Schemes and Multilevel / Network Marketing Companies rely on mass recruiting techniques to build their distributor base. However, Pyramid Schemes are Illegal because of the lack of any real product, and the promise to pay benefits simply for recruiting others.
Whereas, legitimate MLM Companies do provide quality products, and the money is made through sale of these products to the end user. Regardless of whether those end users are Distributors buying at a Discount, or Retail Customers who pay full retail prices for those products.
The question begs, that since MLM Network Marketing Businesses like Amway and Melaleuca are legal, ethical, companies with better than name and store brand products, allowing people to become Members why do more people not join them… even if it’s just for their own products and the discounts provided for their Members, or Distributors? It certainly makes sense that if a company has quality products and we can get a discount just by being a member then it makes sense for us all to have these memberships! Right? (Of Course it Does!)
Now, it should be mentioned here that most, if not all, MLM Companies require their Members to purchase so much every month just to get the Discounts.
Perhaps this practice of requiring Members to commit to monthly purchases, often in the $100 – $200 range, is what discourages some.
However, even with these requirements in place, many of these MLM Companies have hundreds of thousands of Members.
Now, at this point we hopefully have a better understanding of the difference between Illegal Pyramid Schemes and legitimate Multi-Level Network Marketing Companies.
So, what then of Direct Sales Companies? (I’m glad You asked) 😉
Direct Sales Companies, like Regal and Watkins, have the advantage of bringing their products directly to the end user in the same way MLM Companies do.
Thus Companies like Watkins bring top quality products to the Consumer without the Advertising and Overhead Expenses of traditional Retail Stores.
In fact, as far as We know, Watkins was the first Company ever to offer a 100% Money Back Satisfaction Guarantee… and they are still back that Guarantee today, some 148 years later!
So, You just know Watkins Products have to provide both Quality, and Economy, in order to survive and thrive over such a long period of time.
Now, a purely Direct Sales Company like Regal Gifts, does have a Distributor or Consultant base, but do not require their Members to Recruit other Members, which is one of the main features of a MLM Company. Usually Direct Sales Companies like Regal and Watkins provide larger discounts to their top performing Sales Consultants. So it encourages their Members to do more, but they are not bound by policies to do a certain amount of volume, or sales, each month just to maintain their Membership.
Watkins, for example, does not require Members, referred to as Consultants, to commit to meeting any quotas, nor minimums, to maintain their Membership!
Thus Watkins Products Consultants pay a low Membership Fee, under $40 a year, and can get Discounts of up to 35%, and Bonuses of up to 12%, even on their own Products!
All this without fear of loosing their Membership, or having to worry about the quotas or minimums often required by other Companies.
Now, for those who wish to build a Sales Team for their Watkins Products Business, they are rewarded with Watkins paying them up to 12% on their Group Sales.
However, it is interesting to note, their is no requirement to Sponsor, or Recruit! Nor are their any minimums, nor quotas, necessary to maintain their Watkins Membership!
So, as you can see Watkins does have a Multi-Level aspect, but is and has been primarily a Direct Sales, Multi-Channel, Company with Quality Guaranteed Products ever since 1868.
Should You suspect You, or a Friend, has been the victim, or target of an Illegal Pyramid Scheme please contact the local Authorities.
Should you have questions about this Blog Post, the information presented here, or if You’d be interested in learning more about Watkins, Watkins Products, or Earning an Income with Watkins Products, please contact me…
PS: Our Featured Image is from MLM FRAUD- Why Network Marketing Could Be A Pyramid Scheme