IS AN MLM A PYRAMID SCHEME?

Network Marketing is sometimes referred to as a direct selling or multi-level marketing (MLM) company.  In the past some MLM companies have tarnished their reputations by very shady business practices. There has been a lot of hype advertising that sounds at times like winning a lottery. That's why it's important you take time and do your research before joining a company. It's important you know about their reputation, understand thoroughly their compensation, and know something about their products and services.  There are scams out there, and you need to know how to spot them.  A genuine network marketing company will have

1. A good product or service at a reasonable price
2. The ability for you to make a profit on the sale of the product or service
3. A dynamic company support system with well developed marketing materials
4. Good training for you to learn about the product/service

OK--so why is it not a pyramid scheme?  Well, pyramid schemes sometime look like network marketing, but here is the difference.  There is no product or service, or if there is it is priced too high to be reasonable.  You make money by signing people up and not by selling a product, and you cannot earn more than the person that recruited you. 

In a network marketing company you are rewarded for you efforts.  It is entirely possible for you to earn more than the person that recruited you.  Yes, it's true they may get a small commission on your sales, but you get a whole lot more.  If you sell more than they do you can end up making a lot more than your upline. This is never true in a pyramid scheme.

You can also think of it this way.  In the corporate world the sales person is paid a commission on their sales, but the manager and director of the department also get commissions for the activities of their sales force.  Paying you a commission on the sales of those you recruit in a network marketing company is really not so different. Just because you get some commissions on sales of your downline does not make it a pyramid scheme.