Pyramid Selling vs MLM — Part One Pyramid Selling versus Multi-Level Marketing
By John Counsel
One of the perennial objections thrown at reputable Multi-Level Marketing companies and their people is the misinformed comment “Let’s be honest… it’s really just Pyramid Selling, isn’t it?” So let’s turn the spotlight on this vexed issue, once and for all. If you’re a distributor for a Multi-Level Marketing company, make sure you study this section, and tell your people about it, too.
It’s always better to be able to offer an independent, objective answer without a vested interest. So next time anyone tries to fob you off with this tired old put-down, ask them to read this section. And if you’re guilty of jumping to uninformed accusations, I hope this will give you cause to think again.
Pyramid Selling — the Mutant Offspring of MLM
Multi-Level Marketing has been around, at least in principle, since the late 1920s and early 1930s. After World War II, it began to rise to greater prominence when enlightened managements recognised the extraordinary leverage and equity that Multi-Level Marketing could provide — when properly applied for the benefit of all involved.
In the late l950s and into the 1960s, a few disreputable drop-outs from legitimate Multi-Level Marketing companies became frustrated by the fact that the ethics of Multi-Level Marketing prevented them from exploiting others — so they devised the Pyramid Selling system.
They recognised the potential for huge personal profits if the rules were changed. Now the key appeal was to greed — at the expense of others.
The irony of their scheme was that no-one victimised by it could legitimately call ‘foul!’ because they were, in fact, victims of their own greed. Willing to turn a blind eye to any personal misgivings, they sought to get rich by introducing others, just as willing (and greedy), into the scheme.
For the predators behind the system, it was a dream come true. For a short time at least… until the bubble burst.
Outlawed in the USA… Next Stop — Australia!
Some of the legitimate Multi-Level Marketing companies, concerned that the Pyramid operators were undermining the integrity they had so carefully nurtured, drew the attention of the US authorities to the problem. Victims were also beginning to complain to the government and media. Before long, the scams were outlawed.
Taking their fast-buck fortunes, the Pyramid operators cast their eyes round for other suitable feeding grounds. They soon found one that was ripe for picking.
Australia was just like home — same language, same customs, even the same open, trusting, friendly natives. By the early 1970s, Australian authorities were beginning to investigate and outlaw these insidious scams, too.
Pyramid selling fell into total disrepute, leaving thousands broke and disillusioned, repenting their greed at leisure.
MLM… Great Concept, Poor Timing!
Almost before the dust had settled, the honest, ethical Multi-Level Marketing companies began to arrive in Australia — only to encounter a market still licking its wounds.
Getting a foothold and building their credibility would be a slow, painful process for most. A hostile public wasn’t much interested in the fact that Pyramid Selling was now illegal in all States, and that these new companies had the approval of government watch-dog agencies.
The similarities between Multi-Level Marketing and Pyramid Selling were enough for many Australians to lump them together indiscriminately.
Despite the growing acceptance of Multi-Level Marketing companies during the 1980s and 90s, many people still regard them as suspect, believing them to be barely legal, if not outright frauds.
Only time and vigilance will change that perception.
How Do they Differ?
Because of their closely-related origins, there are superficial similarities between Multi-Level Marketing and Pyramid Selling. But there are substantial and significant differences. Some are quite self-evident, others are subtle — sometimes amounting to no more than a slight perceptual shift.
The real difference is motive and attitude.
Even in a legal, ethical Multi-Level Marketing organisation there can be people whose motives and attitudes relate more to Pyramid Selling than to true Multi-Level Marketing.
These people don’t last, because the system’s in-built ethical safeguards limit the damage they can do. But they can cause a lot of disenchantment that reflects on the organisation as a whole.
True Multi-Level Marketing is based on the Golden Rule of doing unto others as you’d have them do unto you. The real success stories are always of people who have risen to the top by unselfishly helping others to achieve their goals and dreams.
The manipulators and exploiters move from one new opportunity to the next, never staying long, and leaving havoc in their wake.
Unfortunately, as in any business or industry where there’s a lot of money to be made, there will always be the sharks who see any means as justifying their own selfish ends. Some Multi-Level Marketing entrepreneurs, eager to gain an edge that will build their companies faster, make the mistake of drifting towards the kind of features that were the hallmark of the Pyramid schemes.
Still treading the legal side of a very thin line, it’s not difficult to recognise these organisations. They’re usually the ones where distributors are eager to point out the ‘advantages’ they enjoy over conventional Multi-Level Marketing companies and methods.
They’re ‘faster’ and ‘easier’. You can short-circuit the system by buying the leadership positions — usually on your credit cards!
We emphasise the fact that, despite the problems inherent in these plans, most are still legal. Occasionally, the Trade Practices Commission or State Consumer Affairs ministries rub a company out because it crosses the border into Pyramid territory. Some reappear later with modified plans. Others simply vanish.
Just the same, we urge caution whenever anyone approaches you with either a ‘ground floor’ opportunity, or a system which can help you short-circuit reasonable performance requirements. Remember… those performance requirements are actually safeguards designed to protect you and your people, and your incomes.
There’s absolutely no future in joining an organisation where the leaders have little or no experience or knowledge. It’s a fact of life in Multi-Level Marketing that you cannot teach what you haven’t learned, you cannot share what you don’t have — and your people will do exactly what they see YOU do!
In Conclusion...
There is no fairer, simpler or more honest way to build your own business than Multi-Level Marketing. It’s a brilliant concept that has helped thousands around the world achieve financial independence and happier, healthier lifestyles. It works.
But, like most things in life, it’s still a case of “buyer beware!”
Check out every aspect of the organisation and, only when you’re satisfied that it’s entirely ethical in its appeal and methods, should you consider getting involved.
More than the company and its products and marketing plan, however, exercise caution in choosing a distributor organisation (or network) to join.
Any group that touts its superiority because of “secret” short-cuts or techniques should alert you to be especially careful. Because, although Pyramid Selling is illegal in Australia, and Multi-Level Marketing is quite legal, the real danger is people with selfish, manipulative, exploitative attitudes… the ‘users’.
After all, it was just such people who twisted the principles of Multi-Level Marketing to create the Pyramid scams in the first place.
Don’t be put off by the fact that there are lots of sharks in the Multi-Level Marketing lagoon. Get the correct perspective:If Multi-Level Marketing wasn’t a genuine, high-income industry, those characters wouldn’t be attracted to it. Their presence actually confirms that you can make very substantial money in Multi-Level Marketing.
Check out these other articles on Pyramid Selling vs MLM:
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©1998 The Profit Clinic Pty Ltd. All rights reserved. This page updated 29 June 2005.
