There’s a lot of talk about MLM companies like Amway just being another pyramid scheme. Let’s take a look at the technicalities of this subject and see whether or not Amway truly mirrors a pyramid scam.
A pyramid structure is any organization in which there is a top level, usually CEO or a similar entity, and these levels continue to stream down to lower levels which are the supporting legs to this model.
This structure is extremely common in many popular businesses today. Although this hierarchy can be managed ethically, there is a way to abuse this system and that is how we end up with pyramid scams.
Before we go any further, let’s get an understanding of what a pyramid scheme is. Here are some of it’s characteristics:
- Generally promotes unattractive products which are hard to sell or low quality
- Primary source of making money comes from recruits start up fees and starter kit sales
- Pyramid-like design in which bottom line eventually loses money if it cannot get a ROI by getting new recruits
- Takes on the disguise of a legitimate multi-level or network marketing business model
- Only top level makes any significant money
So how is this different from network marketing and Amway? Although it can be hard to tell the difference between a legitimate multi-level marketing system and a pyramid scam, there are some core factors that can help differentiate. When looking at Amway, we know that it is not a pyramid scheme because of the following key points:
- Focus for generating income is not on recruiting, but rather on making sales
- IBOs are not given compensation or bonuses for recruiting (this also tells us that the business is product-based as it should be)
- No hefty fees for start up kits, mandatory training, and membership
These are just some pointers to help you understand and identify the difference between a rip off scheme and an ethical MLM opportunity. Remember to always do your research from reputable sources before deciding one way or another.