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ARTICLE TITLE: Pyramid Networks versus Pyramid Schemes |  |
11/27/10, 2:08 PM |
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| Author: Manus Moolman for My Wealth |
| Pyramid Networks
versus Pyramid Schemes
When presenting a Network Marketing concept, one often hears the expression: “This looks like a Pyramid Network or a suspicious Pyramid Scheme!” This misconception is the reason why90% of South Africans remain poor. This is also why they will keep on spending most of their life being unhappy at work. The sad thing is that they do not bother to educate themselves and find out what the difference between a Pyramid Network and Network marketing is. When a someone tells me it is a Pyramid Scheme I normally ask them “What is a Pyramid Network?” and only 5 out of 100 of those people actually have an answer. The other 95 do not have a clue what a Pyramid Network actually is. They perpetuate the negative pyramid network myth and bury it with other illegal schemes. Unfortunately the South African media does not help either. In fact they are just as misinformed concerning pyramid networks and are always looking for ways to run these businesses down. Rapport, Moneyweb and itiweb are among those who like to publish one sided views about other busineses for the sole purpose of creating sensational reading. These poor folks do not understand what network marketing is and while earning their measly salaries, working themselves to death, they have to run down a good idea in order to justify their own media position. Even the Internet giant, @lantic launched their own pyramid network this year.
All those pyramid network skeptics better get ready to run. The pyramid network
structure is here to stay. Within a couple of years from now more than half of
everything you use on a daily basis will be distributed by means of network
marketing. You can either adapt to the modern world or benefit from it, or you
can remain narrow minded and suffer for the rest of your life. It is true, that there were a lot of illegal pyramid networks and many people
have lost huge amounts in them. So the first thing you must do is to educate your potential clients and teach
them the difference between an illegal pyramid scheme and a legitimate network
marketing structure. The law in South Africa clearly sets out the parameters for LEGAL NETWORK MARKETING structures. The three most important
requirements are: (a) The pyramid network and it’s
business must have a product or render a service. (b) The pyramid network must have
limited levels in order to prevent the top person from earning the most - (it
must be an equal opportunity business. (c) The pyramid network may not
be sustained only from the registration fees of members. The first point is easy to explain. If the company you signed up with provides
a product or service, it adheres to that portion of the law. The product or
service must be fairly priced. A good way to test this is to take the business
part away from the product or service and see if you are then left with a
fairly priced sustainable product or service. The second point is the most important. People tend to think that everything
about a pyramid network structure is illegal. What they do not realize is that
any successful business, government, family, church or organization, after a
certain size takes on a pyramid structure. Furthermore, a network business must be limited to a certain number of levels
in order to prevent the top person earning all the most money - this makes it
an equal opportunity business which will give anybody the opportunity to become
the top earner, irrespective of where he / she is in the pyramid network. Example: Lets say your friend Peter joins a network business and the business is limited
to 4 levels. Now Peter is a bit slow and he and all the people under him only
signs up 2 people each. Peter’s business will look like this: Levels
Peter 1
ii 2
iiii 3
iiiiiiii 4
iiiiiiiiiiiiiii But now you sign up on Peter’s level 4. Now Peter has potential.
You are a live wire. You are eager and hard working and you and everybody in
your business each sign up 5 people. Your business and Peter’s business will
now look like this: Levels
Peter 1
ii 2
iiii 3
iiiiiiii 4
You + iiiiiiiiiiiiiii Levels 1
iiiii 2
iiiii iiiii iiiii iiii iiiii iiiii 3 iiiii iiiii iiiii iiiii
iiiii iiiii iiiii iiiii iiiii iiiii iiiii 4 iiiii iiiii iiiii iiiii iiiii iiiii iiiii iiiii iiiii iiiii
iiiii iiiii iiiiiiiiii iiiii SO let’s assume that you get paid R10 per person per month for
each person in your business in the example above. WHO will earn the most
money? Peter (at the top) or You (at the bottom of your business)? Obviously you will earn the most. So it is clear that the person
at the top or the first person in DOES NOT make all the most money. It is the
person who works the hardest who earns the most. This makes it an EQUAL
OPPORTUNITY BUSINESS. No matter who or what you are, if you have the drive, the
passion and the motivation, you can be the person who then earns the most. Each
person’s business starts with that person and not with the person above that
person. There is a general misconception that the people at the top of a
network always make the most money. The above example clearly disproves this. Now lets look at another interesting example. We all know a big companies like Pick & Pay, Telkom, etc. Let’s see what
their structures look like: The Company (CEO)
i ( Directors)
iiiiiiii (managers)
iiiiiiiiiiiiiiiii (branch managers)
iiiiiiiiiiiiiii iiiiiiiiiiiiiii (supervisors)
iiiii iiiii iiiii iiiii iiiii iiiii iiiii iiiii iiiii (employees) iiiii iiiii iiiii iiiii iiiii i iiiii
iiiii iiiii iiiii iiiii iiiii WOW !!! What a nice pyramid!
The Million dollar question: Can the employee at the bottom, the person who puts the
tins on the shelves, EVER earn more than the CEO at the top while he is in
level 6????? NEVER! If you follow the logic of most comments on pyramid networks then most
successful big business should be 100% illegal! The above example is not an
“equal opportunity business” as the first one in earns the most money!
You can see from the examples above that a good pyramid network structure is
not even close to being an illegal pyramid scheme. Where do they get the money to pay the commissions?
This is why people are skeptical about network marketing. They do
not understand the concept and they do not understand where the money comes
from. It always sounds to good to be true, giving them all the excuses they can
think of not to get involved. Explanation: I can get people to market a product for me. I decide that if I
sell the product for R150.00 I can afford to spend R40.00 on commissions. So,
now I can involve people to market my product for me and pay them R40.00
commission on each successful transaction they conclude. With the scenario above we go back to traditional business. If the consultant
does not sell anything, that consultant will not earn any money. If the same
consultant goes on maternity leave for six months, she then does not have an
income for that period. Now if we decide to split the R40.00 into 4 payments. We decide to pay 4 people
R10.00 each rather than paying one person R40.00 per sale. We then create more
jobs for more people. We tell the lady in this example (lets call her
Stephanie) that if she refers or introduces another sales consultant to the
business we will pay her R10.00 of each sale that person makes. And that person
can do the same and the next one can do the same. We continue that up to four
levels. So now Stephanie gets paid for her efforts AND she gets paid on the
efforts of the people she signed up under her. She has just started up her own
business. She now has consultants working in her business and she earns a
portion of their commission, she now has consultants working “for” her but
still each one runs his/her own business.
If Stephanie goes on holiday, she still earns her part of the commission
even though she has actively done very little. Now Stephanie can actually go on maternity leave for six months
and still earn an income. The money to pay commissions must therefore be built into the price of the
product or monthly service fee rendered by the company. This is also a good
check to see if a network marketing business is legal and sustainable. You must
be able to see that the commission money is paid by the product or service. If
you find a product offered at R100.00 per month with a commission promised at
R400.00 per month then instinctively you should know that this is illegal.
Rather run a mile than getting involved with something like that. So network marketing is nothing other than the distribution of
commission or the distribution of wealth. We do not pay one person big
commissions, we pay several people smaller amounts from the same total
commission amount. Types of Pyramid Network Structures
There are different types of network marketing businesses
available. Some sell physical stock and others market a service or an insurance
product. There are even systems where you can get discount on your cell phone
bill and get paid for the people under you and on their cell phone usage. So if you do get involved in network marketing you can choose a company with
which you feel comfortable. The company you choose will depend on your
interests and needs. If you need something that can build you a good income in
a fairly short time, it is important to look at the commission structure. Do
not look at the potential income with everybody having signed up 10 people.
That can take three or more years and be unrealistic. Look at the shorter term
results. Work out an example where everybody signs up at 3 people and see what
your income will be after levels 2 and 3 have also recruited 3. This will
give you an achievable indicator of what you could earn. If you urgently need
money it is important to be sure that the company you choose will pay you a
good income in a short period of time otherwise you will become discouraged and
give up. All your hard work will be lost. There are network marketing companies that will offer you an
excellent product and support, but it will take you two to four years or even
longer to earn a proper income. These are good if you are looking for a pension
fund or long term benefits instead. My experience is that
you can be successful in almost any network marketing company. It all depends on YOU. It depends on your need and your desire to
achieve success and, very important, on your own MOTIVATION. You may find companies which sell physical products. Many people make a lot of
money in companies like this so there is nothing wrong with product based
network marketing. The problem is that your market is limited to the people who
need and can afford that specific product. Your income will also depend on the
sales of your down-line. If they do not sell you will not earn a sustainable
income. Ideally look for a network marketing company which renders a service or financial product which pays monthly by debit order. In that way you only have to sign up a client once and are assured of getting paid for as long as the client pays his premium. Also remember if that client is earning commission, he will never ever cancel, and you will have a client and an income for the rest of your life. Most companies who run networks as above normally offer charity fund raising,
insurance products, shares, motivation or monthly magazine subscriptions as
products. A good example of a well managed Network Marketing company which pays out monthly
is BE MOTIVATED TODAY. They offer a 14 day trial period and
are well worth joining now that they have expanded globally. The future looks bleak for most people on this planet. Everything is getting
more and more expensive each day. The fuel price is rising at an alarming rate
and we all know that the price of everything else follows. Do you have a plan?
How are you going to survive during the coming years? I suggest you get involved in Network Marketing and start building a PASSIVE INCOME. The sooner you start the better. Kind Regards P. Pretorius |
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