Do-It-Yourself Evaluation of Multi-Level Marketing* Programs and
A Proactive Guide for Consumers, Regulators, and Consumer Advocates
By Jon M. Taylor, Ph.D., Pyramid Scheme Alert
Pyramid schemes in which no products are sold (Gifting Clubs, Matrix Schemes, Women Helping Women Schemes, etc.) are fairly easy to identify, and they seldom last long in any given area without government officials shutting them down or they collapse.
By performing this do-it-yourself evaluation, you can decide for yourself whether or not a MLM program should be avoided. As you answer each question, you will be given information that will enable you to make a more informed decision.
The key to identifying the potential harm of a multi-level marketing program is to look for elements in the compensation system that create extremely high leverage for the top persons in the hierarchy of participants. MLM "leverage" refers to the concentration of payments from the company to founding and other top-level distributors, who profit hugely from the efforts and purchases of a multitude of "distributors" beneath them, the vast majority of whom lose both time and money.
Note: the answer to the first question is "YES", because this test is specifically to identify "product-based" schemes. If you are evaluating a multi-level marketing scheme or any type of "product-based "opportunity", start by clicking "YES" and the follow this series of questions to make a more informed decision.
*a.k.a. "Multi-level Marketing," "Network Marketing," "Consumer Direct Marketing," etc. The acronym "MLM" is used as a generic term here for the sake of brevity and because it is a widely known and accepted acronym for any type of multi-level product-based distribution system.
© 2001 Jon M. Taylor. This analysis may be reproduced in its entirety - including credits - for consumer awareness, but may not be sold or packaged for sale without the author's written permission. For more information on problems with pyramid schemes or MLM/network marketing and possible solutions, check our other resources on the Pyramid Scheme Alert web site. The author may be contacted directly by e-mail at: [email protected].
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