A pyramid scheme is defined as a non-sustainable business model that involves promising participants payment primarily for enrolling other people into the scheme, rather than from any real investment or sale of products or services to the public. Pyramid schemes are a form of fraud.
Network Marketing, Direct selling, Referral Marketing or Multi-Level Marketing (MLM), is a term that describes a marketing structure used by some companies as part of their overall marketing strategy. The structure is designed to create a marketing and sales force by compensating promoters of company products not only for sales they personally generate, but also for the sales of other promoters they introduce to the company, creating a downline of distributors and a hierarchy of multiple levels of compensation.
Network Marketing is a product selling technique whereas a pyramid scheme is nothing but collection of money from new persons to distribute among those who are already in the chain above them. So, Network Marketing is a regular business and not a pyramid scheme.
Comparison of Network Marketing with Multi-Level Marketing is necessary before someone decides to opt this type of business. It depends mainly on one’s aptitude.
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