What Is The Difference Between A Pyramid Scheme & A Direct Sales Model?

It can be difficult to differentiate a legitimate company with a pyramid scheme. For this reason, many consumers are doubtful about the direct sales method. The easiest way to determine the difference is through the products and services that are offered. Here are some ways to tell the difference so that you can avoid being scammed.

Value of Product

Direct sales models offer products or services that have value on the marketplace. Many pyramid schemes lack products all together. They rely on you recruiting people into the organization to make money. Their gimmick is that you can make large amounts of money with very little effort. Selling products or services will take effort on your part. Be wary of any company that tells you it is extremely easy. If there is a product offered, check to make sure that it is something that has value. You should be able to search and determine if there is demand for the product being offered. A direct sales company often asks you to buy a sample of their product. This is so you can try the product out yourself. It also allows you to demonstrate the product to others, so that you can make a sale.

Recruitment Opportunities

A pyramid scheme relies on how many people you can recruit under you. You may be offered an incentive for the more people that you recruit. This is referred to as the headhunting method. There may not even be a product or service offered. With this scheme, a large up front deposit is requested to join the organization. Be careful of companies that require that you put down large amounts of money. This should be a red flag to you. It may not be exactly what it seems. Watch out for offers that seem too good to be true. A direct sales model rarely asks you to recruit others. They are more interested in you selling their products in order to build the customer base. This hierarchy model is common for pyramid schemes.

Encouragement to Buy Product

Companies that ask you to purchase large amounts of product aren’t legitimate. A true direct sales model will not make this request of you. The product that you are forced to purchase may not be worth very much. You may even find yourself struggling to find other people that are interested in buying it. Another red flag is that the company doesn’t allow you to return this unsold merchandise. This is called inventory loading. The pyramid scheme relies on this method to convince you that they are a legitimate money making model. There is often a lot of pressure for you to sign up immediately. A pyramid scheme doesn’t want you to take the time to reflect on their company. A direct sales model encourages you to do your research to make sure you are interested in working for them.

Relying on Confusion

Unlike ACN, pyramid schemes rely on confusion in order to generate funds. Pyramid schemes prey on feeding misinformation to people. They only make money when they find another victim for their scam. The best defense against this deceptive practice is to research the company. Having more information can allow you to ask questions. A direct sales company can answer your questions in a manner that makes sense. If something doesn’t sound right to you, it might be a scam. A pyramid scheme may give you the run around, and turn it back on you. There is a lot of confusing and misleading information posted on the internet. Check to make sure that there aren’t lots of complaints about a company. Use your resources to verify any company before you consider doing business with them.

Being an informed consumer can prevent you from falling trap to a scam. Use these items to determine the difference between a direct sales company and a pyramid scheme.