Is Network Marketing Really Just Another Name for a Pyramid Scheme?

Please allow me to first clarify that I am not involved in network marketing, so the intent of this article is not to pitch you on a business opportunity. I did however spend nearly a decade working for one of the largest direct sales companies in the world, so I’m very familiar with the business model.

Despite the continued growth of network marketing, there remains a lot of confusion and outright misinformation in the marketplace, and I find I am continually fielding questions about the legitimacy of the business. In this article I hope to effectively address a few of the more frequently asked questions, concerns and misconceptions.

First, let’s look at basic descriptions of a network marketing business versus a pyramid scheme.

PYRAMID SCHEME (illegal scam)
A pyramid scheme is a fraudulent money-making scheme that is based on a non-sustainable business model that involves the exchange of money primarily for enrolling other people into the scheme without a legitimate product or service being delivered.

NETWORK MARKETING (legitimate, legal business model)
Network marketing is a distribution model that allows a company to sell their products directly to the consumer through distributors. Instead of advertising through traditional media or selling through bricks and mortar storefronts, network marketing companies reward distributors through commission in return for selling their products and finding new customers.

Therefore the main focus of a network marketing company is product distribution. In fact, in a legitimate network marketing company, distributors are not required to recruit new distributors in order to earn a commission; they can earn money purely by selling the company’s product.

Therefore the recruiting element of a network marketing business is merely a way of distributing more products in a way that allows the distributors to build a residual income.

Another big distinction between pyramid schemes and network marketing is the financial structure. To prevent network marketing companies from falling over like pyramid schemes (where people at the top make all the money and people at the bottom lose everything), there are restrictions placed in the compensation plan that limit the number of people who can earn a commission off any given sale. This not only makes the business model sustainable but also makes it fair in the sense that it doesn’t matter if you got in first or last, you have the same opportunity as everyone else.

Following is a checklist of things to look for if you are considering a network marketing opportunity:

* Is there a legitimate product involved?
If you're not getting a product or service or if the training tools appear to be overpriced you could have discovered a scam.

* Is the commission based on product distribution or on recruitment?
If they are paying commissions based purely on recruitment, walk away now.

* Does the company have a proven track record?
If the company has been around for a few years then there is a fair chance that governing bodies that police pyramid schemes have already pulled the business model apart and given them the ok. Publicly traded companies are normally your best bet.

* Will the company buy back any unsold product?
Most network marketing companies have a money back guarantee which means that if you are unhappy with the products you can send them back for a refund.

* Shop around
Don’t be pressured or feel uncomfortable about looking at other business models and products, particularly if you don’t know which company to join.

* What training do they provide?
A good company has a solid training system.

If you’ve decided that network marketing may be the business for you, chances are good that launching a blog will be an important part of your business plan. I’d like to suggest you consider linking with others in your industry as way to learn the trade and hasten building your visibility.

TSA or Tribe Syndication Association is not a business opportunity. It is a mastermind group of entrepreneurs supporting each other – popularly known as a “tribe” these days. Basically members of TSA syndicate (share) the content of fellow members with their friends and followers on the social networks.

There is no incentive for me to share this information with you other than my own personal experience. Not all member of TSA are network marketers, I am primarily an author and information marketer ... we however are all bloggers.

In the couple of months since I joined TSA Mastery, traffic to my blog has exploded and as an added bonus I’ve met a lot of really great people. To see for yourself what it’s all about visit http://www.tsamastery.com