So, Your Prospect Thinks Multi-Level Marketing is a Pyramid?
Examining the structure of a pyramid scheme, as opposed to a legitimate MLM business model
Tim Sales of Brilliant Exchange
Adapted from a Tim Sales Newsletter.
Used by permission.
You're not in the MLM industry very long before you hear the phrase, "That's one of those pyramids!", or the question, "Is this one of those pyramids?"
The "pyramid objection" comes up because people have no knowledge, incomplete knowledge or wrong knowledge about the MLM industry and pyramids. Please, notice that I wrote "pyramid" there. In other words: A person could think MLM is a pyramid because they don't know what a pyramid is.
A car is not a bus, just as MLM is not a pyramid
When my son was young, I would point out a car and say the word, "car". He soon picked it up, and would point to a car and say, "car". Then, he pointed to a bus and said, "Car". I said, "No; bus". He didn't believe me. Why? Because he had already determined that anything that moved on four wheels was a car!
Have you had prospects who have already determined that MLM is a pyramid?
To solve this, I found a bus and a car that were parked side-by-side. I took the time to point out those features that make them different from each other, and those features that make them alike. Only then could my son determine if what he was looking at was a car or a bus.
Similarly, you must be knowledgeable about what a pyramid is, so you can point out the differences between a pyramid and MLM (network marketing) for your prospect.
What makes a pyramid a pyramid, and why MLM is not a pyramid
Here are the differences between pyramids and MLM. But first, we need to define some terms.
→ Pyramid: The word pyramid has come to mean, simply, a business that seems to be a scam.
→ Scam: A fraudulent business scheme. Fraudulent comes from the Latin word fraud, which means deceit. Deceiving someone means to trick them.
A basic fact that you must bear in mind: There is no activity (stock trading, charities, law firms, medical doctors, religion, MLM, government, etc.) that does not have some history of fraudulent activities. In looking at scams, therefore, it is important to locate the actual source that is creating the scam; there is always at least one person.
→ Source: One that causes, creates or initiates; a maker.
- If a person kills someone with a rock, don't blame the rock! The rock isn't the source; and, it didn't kill the person. A person with bad intentions is the source; and, he used a rock to do damage.
- If a scammer uses telemarketing to seduce his victims into a scam, don't blame the telephone. The scammer (a person) is the source; and, he used a telephone to deploy his scam.
- If a scammer (a person) uses MLM to deploy his scam, don't blame MLM. MLM is not the source, only the tool used by a person with evil intent.
An industry can't be a scam, as it's not capable of tricking people. People are the only ones capable of tricking someone. (Editor's note: This is actually pretty thin logic. While technically true, in some sense, some industries are inherently scammy — they were created by "a source" for the purpose of scamming others.) MLM is not the culprit in pyramids; the culprit is the unethical activities of a person or group.
The reason scams sometimes use MLM is because it's a powerful way to distribute anything.
→ Illegal Pyramid Scheme: An illegal business that involves the exchange of money primarily for enrolling other people into the scheme, usually without any product or service being delivered. Sometimes, there may appear to be a product, but it's only there to make the pyramid look like a real business. Few people outside of the pyramid desire the product, or they can get the same product elsewhere at a less expensive price.
If you enrolled me into your business, and I paid $300 to join, but there was no valuable product that was exchanged, that could be an illegal pyramid.
This does not mean that MLM is an illegal pyramid simply because people enroll others into a business. The fine line between a legal MLM and an illegal pyramid scheme (according to the Federal Trade Commission — FTC) is the exchange of a real product.
Yet, if you enrolled me, and I bought $300 worth of products to see if I wanted to do the business, then that is not an illegal pyramid — as long as the product is a "real" product, and not some gimmicky product.
Most legitimate MLM companies have a thirty-day, 100% refund policy on products, just in case you don't like them. And, if you buy inventory to sell, and then change your mind about the business, most legitimate MLM companies will give you back 90% of the purchased price.
So, the primary difference between an illegal pyramid and a legitimate MLM company is that a pyramid does not have a "real" product. A legitimate MLM company has a real product that people — outside of the business — desire.
Another difference the FTC (Federal Trade Commission) looks for, in determining if a company is a pyramid, is how the business is conducted. If there is a lot of hype (saying someone can make a lot of money with little or no work), or the emphasis is entirely on getting new recruits, instead of a balance between getting customers and getting new recruits, then it could be a pyramid.
Putting pyramids into perspective:
Sometimes, I like to point out that there is a lot of negative emphasis put on illegal pyramids; but, if you put it into perspective with other industries, it allows the prospect (or distributors) to see that this is undue emphasis. How I put pyramids into perspective is by pointing out the losses caused by pyramids, versus losses caused by other activities. Look at this graph:
As you can tell, pyramids do not cause a lot of financial losses, compared to other activities.
Please: Don't misunderstand my comment on pyramids; I dislike them — a lot. I want them eliminated. But, there is undue emphasis put on them, compared to where people lose the most money.
Handling the "Pyramid Objection"
Understanding the difference between a pyramid and a legitimate MLM opportunity is one thing; knowing how to handle the "Pyramid Objection" is another. But, now that you know the differences between a pyramid and MLM, you can employ the Objection Handling Remedy from Professional Inviter.
With admiration,
Tim Sales
About the author:
Tim Sales helps network marketers gain the skills necessary to be successful in MLM. His MLM training is based on his personal success of building a downline of 56,000 people. Instantly access Tim's free MLM training and learn the steps to achieve MLM success at www.brilliantexchange.com/mlmtraining.
