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Difference Between MLM and Pyramid

mlmMLM vs Pyramid

In today’s business scenario, MLM and Pyramid are two hot topics. We hear it at our work places, business meets, and even read it in business articles.

MLM is Multi-Level Marketing describes the marketing structure that a company uses to implement and expand the marketing strategy associated. In this structure, the promoters of the products are compensated for the sales generated out of personal contacts as well as for the sales generated by other promoters to the company. Pyramid scheme is more concerned with the exchange of money. This money is offered in exchange for the enrolment of people into a scheme.

The major difference between the two schemes is the mode of the business operations. When MLM strategy focuses on moving the product out into the market, Pyramid scheme focuses on just getting the money and making the people to recruit the others in a chain process. The MLM strategy is based on the principle that the products sell more when the number of distributors in the network is more.

The start up costs for an MLM business is not that high. But if you plan for a Pyramid scheme, you will have to shell out lots of money. The product or service is delivered to you only after you become a member and pay the required amount.

In MLM structure, you are required to establish a prime market solely for the products of the company. In Pyramid structure, you will have to work on building the market for different products and companies.

The major aim of Pyramid scheme is to recruit more people to the network than actually selling off the products. Fast profit is what the scheme eyes on. But MLM concentrates more on selling of the products to the consumers. In Pyramid scheme, the majority of the money comes in by the recruitment of the new distributors, rather than the sale. In MLM, the money comes in through the actual sale of the products.

The MLM structure is a very efficient method to sell of the products and build a market niche. But Pyramid schemes seldom focus on the market. In many countries, the Pyramid scheme is considered as an illegal form of marketing. Some of those countries are United States, Poland, Australia, South Africa, United Kingdom, and Japan.

Summary:

1.MLM focuses on building a market niche for the company’s products. Pyramid scheme focuses on recruiting in more distributors than actual sales.
2.The Pyramid scheme is considered illegal in many countries, but MLM structure is more widely accepted.
3.MLM concentrates on the money coming in through the sale of products, while Pyramid scheme looks out for fast profit through the new recruitments.


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3 Comments

  1. If the person showing you the opportunity ever says the product doesn’t matter you are probably looking at a pyramid scheme.

  2. Legal niceties aside, the effect is the same. The people at the top make lots of money and everyone else chases a carrot.

  3. “In today’s business scenario”

    I don’t think you know what “scenario” means.

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