Ponzi Schemes Vs direct selling companies

 

Posted by: Ak Sharma Posted date: July 30, 2013 In: Featured, MLM News, MLM Resource, MLM Scam India, MLM SCAMS | comment : 0

There are few things to keep in mind while differentiating between a ponzi scheme and a direct selling company. As per Wikipedia, the definition is given below. Rest in detail, you can read the points to understand more about ponzi schemes and direct selling companies.

As per Wikipedia, A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organization running the operation. The Ponzi scheme usually entices new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent. Perpetuation of the high returns requires an ever-increasing flow of money from new investors to keep the scheme going.

• In a Direct selling company, the distributor is given commission, when the services or the products taken by the distributor for personal use or when it is sold to others.
• In a ponzi scheme, the earning to the network depends on recruitment of new people into the network.
• In a genuine Direct selling company, the products or the services of the company are already established in the market place.
• In a ponzi scheme, most of the times, the start-up cost to join is very low and the products or the services they offer are not recognized in the market place, basically they are cheap. It means, the person who is not connected to the company would not buy the product at the rate they are being sold.
• In a genuine Direct Selling company, the entry to get started and the cost of starting to sell for a certain market for the first time is quite low.
• In a genuine direct selling company,  the option to exit are always available.
• In a ponzi scheme, they do not offer exit option.
• In a direct selling company, a newly signed up person can earn even more than the person who had actually joined above and/or earlier than him.
• In a ponzi scheme, the person who joined as an early bird makes more money than the person who joins after him.
• In a direct selling company, the focus is on sales of products/services and therefore they emphasize on good amount of product training.
• In a ponzi scheme, the focus is on meetings and recruiting of new participants into the system..
• In a direct selling company, the business model is based on selling of the products/services to the right consumer and rewarding the people, who top the list.
• In most ponzi Scheme, there are no functions, and no real trading occurs. The cash from new members is distributed among the ones, who started earlier. To make it simple, its rotation of money and nothing else. Currently, most ponzi schemes are involved with collection and distribution of money from external sources like Foreign exchange trading,  Stock exchange, Surveys, Blogging, Time shares, Emu farming, Goat farming, buying gold or land, etc.
• In a direct selling company, the compensation plan which pay (from the margin assigned per product for distribution to the network) their distributors on the basis of products or services sold, not on recruiting.
• In a ponzi scheme, the money taken from people against guarantee of a high returns in the future. Their business plan is unsustainable, considering that it assures returns which fully rely on getting financial investments from new members.

Read more: http://networkingeye.com/2013/07/ponzi-schemes-vs-direct-selling-companies/#ixzz2fzXqOt8x

MLM Company And Distributer Earnings / Profits..!!

Comparing MLM success rates with no-product pyramid schemes and gambling

IMPORTANT: The estimates in Table 1 below are based on our careful analysis of reports published by the MLM companies themselves. These extraordinary loss rates were derived by removing typical deceptions from the reporting of these recruitment-driven MLMs¹. Before forming your own conclusions, you are urged to perform your own research and calculations based on actual company data, which all MLM companies should provide for prospects.

The odds of profiting by investing in a clearly illegal no-product pyramid scheme² (with all winners re-investing) is approximately –

• 667 times as great as the odds of profiting after enrolling as an Amway/Quixtar “distributor”
• 111 times as great as the odds of profiting after enrolling as a Nu Skin “distributor”
• 69 times as great as the odds of profiting after enrolling as a Melaleuca “distributor”

 The odds of winning from a single spin of the wheel in a game of roulette in Las Vegas*** is approximately – 

• 286 times as great as the odds of profiting after enrolling as an Amway/Quixtar “distributor”
• 48 times as great as the odds of profiting after enrolling as a Nu Skin “distributor”
• 22 times as great as the odds of profiting after enrolling as a Melaleuca “distributor”

Similarly, the odds of winning with a single bet on snake eyes in a game of craps in Las Vegas are far greater than the odds of profiting from any of these MLM programs. In fact, the odds of earning a significant profit from virtually any MLM is no greater than the odds of throwing three sets of dice and getting snake eyas all three times! 

 


CONCLUSIONS:

Contrary to popular belief, the worst pyramid schemes are product-based – or recruiting MLMs*, such as the ones listed above. One can do far better gambling in Las Vegas. We're not promoting gambling - just fair trade practices, as manifested in legitimate business opportunities (as opposed to phony MLM chain selling schemes, or product-based pyramid schemes).

Table 1

MLM COMPANY3	Approximate percentage of MLM participants who LOSE MONEY4 (spend more than they receive)	Approx. percentage who realize a profit4 after all expenses
AMWAY/QUIXTAR	99.99%	0.01%
RENAISSANCE (RTTP) - defunct	99.98%	0.02%
NIKKEN	99.98%	0.02%
SYMMETRY	99.96%	0.04%
CYBERWIZE	99.94%	0.06%
NUSKIN/ PHARMANEX/ BIG PLANET/ ETC.	99.94%	0.06%
TELCOM CO. - defunct	99.92%	0.08%
ARBONNE	99.92%	0.08%
RELIV	99.90%	0.10%
MELALEUCA	99.87%	0.13%
FREE LIFE	99.69%	0.31%
HERBALIFE	99.42%	0.58%

1.          A “recruitment-driven MLM” is a multi-level marketing (MLM) program that uses a compensation plan that allocates the majority of its payout to participants to those who recruit a large downline of participants, rather than to front-line sales persons for sales to persons not participating in the scheme. I have analyzed the compensation plans of over 400 MLM’s, all of which were found to be recruiting MLM’s, in which participants must aggressively recruit a large downline to profit significantly. Based on more recent data from the companies themselves, the loss rate for recruiting MLM’s is approximately 99.6%; i.e., 99.6% of ALL participants lose money after subtracting all expenses, including purchases from the company. Read about the “5 Red Flags” in the compensation plan that signal it is a recruitment-driven MLM – as are virtually all MLMs.

2.      The odds of profiting from a classic 1-2-4-8 no-product pyramid scheme increases from 6.7% to 12.5% for those who drop out after completion of a pyramid cycle; i.e., without reinvesting in a new pyramid. For references and public records used as bases for these calculations, see the author’s research reports posted on this web site. 3 Gambling statistics were obtained from Caesar’s Palace in Las Vegas.

3 .      Last updated in approximately 2006, although the statistics tend to remain fairly constant over  time becasue the compensation systems that produce these results rarely change.

4.       The estimates are based on our careful analysis of reports published by the MLM companies themselves. These extraordinary loss rates were derived by removing three sources of deception from the reporting of these MLM’s:
 (1) the practice of not counting ALL who signed on as distributors (agents, consultants, etc.) in the population of recruits who attempted to make the program work for them, but instead counting only those still “active;” i.e., deleting all dropouts in the calculation,
 (2) not subtracting expenses, especially products and services purchased from the company to qualify for commissions, plus minimal operating expenses, and
(3) assuming legitimate sales of products (to customers not in the network) that did not occur.You may also want to read how Jon Taylor discovered the abysmal loss rate of MLM in chapter 1 of his new e-book titled

The Case (for and) against Multi-level Marketing.


From: www.mlm-thetruth.com

Excellent Tips By Mr. Warren Buffer

Looking to Join or Start an MLM Company?

Looking to Join or Start an MLM Company? Check These Facts

Written by Priya N:

So you think MLM is one of the hottest money making business on earth. And you want to join or even start an MLM company.
But before taking any action read this article so that you can have complete idea & know facts about MLM business.

MLM is the short form of ‘multi level marketing’. Its also called as network marketing or direct marketing or chain marketing.
This is one of best way to promote any product provided you have quality products, a great income plan & you are doing everything legally.

MLM is a business of duplication where every buyer is a also a seller or distributor of the company. He uses the product & if he likes, refer to other people (usually their friends & relatives) & if those people like, then they will promote to their well wishers so that it becomes a chain of buyers & sellers & advertising spreads virally.
India has witnessed thousands of MLM companies in the last decade but only a few handful companies are genuine & working till date.
So you need to checkout some of the facts provided below, before you think of joining or starting an MLM company.

Basic Facts About MLM

You mightn’t like to know certain facts about MLM because it might turn against what you thought about MLM.
However, truth is truth you’ve to know the reality even if it’s bitter.

MLM May NOT be a Legal Business

There is no law or controlling body for MLM & network marketing so this mightn’t be a legal business. There could be MLM companies which are present in the market without a genuine product to sell.
Most of the companies are investment plans or fake concept like online surveys, watching or clicking ads etc.
They don’t have any product. They just rotate the money taken from new members to old members. To make it look like genuine, they create fake “revenue generation concept” but in reality there is no concept.
Companies like SpeakAsia, AllHitDeals, NMart, RamSurvey etc. already closed. There might be so many companies still running in the market.
They only make money by getting downlines. If an MLM company is able to sell their membership to downlines and they’ve made enough money then they prepare a plan to vanish.
Although they’ll claim that they’ve great products but they don’t. So MLM companies aren’t necessarily genuine.
If you want to join or start a company then your primary focus should be legality & its products. There should be no compromise in this.

A Business Process is Temporary and It Can Fail or Succeed

If you’re promoting or campaigning for a process in MLM then it might succeed or mightn’t.
To succeed you need to have great products, only then you could convince people to buy and get under you.
You’ve to keep in mind a process is temporary and it can be abandon by the company anytime if it’s not worthwhile pursuing it.
Hence, you must be prepared to shift to new process.

MLM is all About Hardcore Selling, NOT Necessarily a Product

It’s a common misconception about MLM that you don’t have to sell a product.
Well! You mightn’t have to sell a product but getting a downline or convincing a new guy to join under your network and paying membership fees is almost like selling.
So you must be a good seller yourself if you are planning to be part of MLM company. If you don’t have this ability, its very difficult for you to create a big network in the company.

Be Ready for Recruitment

To become successful you’re required new memberships under you. If you want to expand your team and get as many as new members then you’ve to recruit professionals just like any other company.
You might’ve to hire a marketing department to run all your marketing campaigns. Then you also have to look for trainer or helper that’s going to help you in guiding new members.
Hence recruitment is required for an MLM business.

MLM is More About Deceiving Rather Telling Truth

In MLM, even if you don’t have a good product or something genuine then also you can make money because it’s all about deceiving people rather telling them truth.
You can lure them to join your membership without telling any reality of your company.
It’s quite natural that an MLM company hasn’t any product but they’re still able to get new members under them just by creating a false impression.
Its one of the harsh reality of MLM company.
But if you are looking for long term future in MLM, you have to honest about the products & income plan.

An MLM Company Could Vanish in One Night

You mustn’t surprise if a MLM company vanishes overnight. You can’t tell anything about them.
Normally, MLM is not a genuine business in India & one can’t say if a company is legitimate. MLM companies are shrouded under great mystery they don’t have any proper registration except few of them.
You might come across daily new MLM companies emerging promising great wealth to their members.
People fell in their trap out of greed to make money quickly.
These MLM companies take your money and vanish.

MLM Companies in India and Abroad

In USA, laws for MLM & direct selling are very strict. Most of the companies in US have very genuine products & they are very strict about their products, plan, management etc. but its just opposite in India.
There is no control on the person who want to start an MLM company. One can even start by buying products from the market & even without any products.
You must be very cautious about that.
There is urgent need for government to bring some strict law for MLM companies in India so that Indians can feel safe about their investment. Only then people will come forward to join any company.

What You Need to Start an MLM Business

Now if you want to start a network marketing company or even join it you must’ve certain qualities in you.
Starting a MLM business could be very challenging.

Choose a Genuine Company That You Want to Promote

Before you start a new MLM company first you’ve to work as a member under someone. If you’re going to start a network marketing business then become a member for a company which is genuine and has some reputation.
You first enquire about the company and then pay any membership fees for it. You shouldn’t pay if a company does not look genuine.

Great Leadership and Teamwork Quality

Once you become a member, you’ve to get new members under your leadership.
Your success would totally depend upon how many members you get daily to sign up. More members you get means more profit you make.
For getting it you must’ve great leadership and teamwork quality. You must be able to command members under you as well as motivate them to expand their network.
Here are top 10 strategies to be a successful network leader.

Ability to Sell and Get Downlines

You need to have a great convincing power. Only then you’re going to expand your network. To get a member you must persuade him by telling benefits of becoming a member.
Moreover, you need to market well to get new downlines. In order to reach them, you’ve to learn about advertising techniques and attract them daily.

Get one genuine & unique product

A network marketing revolves around a product. If there is no product, there is no MLM. So if you feel, you are a great network leader & can start an MLM company then your first job is to find a genuine & unique product that can sell like a hot cake.

Be Pragmatic to Shift From One Process to Another

MLM is not at all static. If you’re running a campaign for a process then it might become obsolete after sometime and you’ve to choose another one.
Hence, you can stick to just one process. It means you must’ve knowledge of as many as processes.
Therefore, you explain to your customers and get new members irrespective of the process which is currently running.

Money Isn’t Going to Come Overnight

If you’re starting a MLM company or joining it then doesn’t expect money is going to come overnight.
You’ve to build your company slowly and expand your network rapidly. After you’re able to build a large network of affiliates then you’ll be making huge amounts of money.
Thus, you need a lot of patience and ability to learn new skills.

Promote online

This is one of the least focused area in MLM. Many MLM companies & its leaders don’t promote their products online.
Although few of the people promote through some forums or free classifieds but that is only 5% part of real online marketing.
If you want your company to become a big success then you have to promote your MLM through search engines like Google, Yahoo etc & social media sites like Facebook, YouTube etc.
A Word of Caution for Starting an MLM Company
If you’re going to start a company then you need to overcome the trust deficit of people. In India, after so many scams people don’t trust MLM programs.
There have been many MLM programs which turned out to be a big fraud in recent few years.
Hence, before starting a company and recruiting downlines you need to build a name among the people.

http://www.jobs8home.com/looking-to-join-or-start-an-mlm-company-check-these-facts.htm

How to differentiate a legitimate direct selling company from pyramiding using the 8-point Test ..!!

How to differentiate a legitimate direct selling company from pyramiding using the 8-point Test


1. Is there a product?
2. Are commissions paid on sale of products and not on registration/entry fees?
3. Is the intent to sell a product not a position?
4. Is there no direct correlation between the number of recruits and compensation?
5. If recruitment were to be stopped today, will the participants still make money?
6. Is there a reasonable product return policy?
7. Do products have fair market value?
8. Is there a compelling reason to buy?
If the answer to all the questions is YES, then the company being evaluated is a legitimate company.  But if the answer is NO, then there is a high probability that it is a pyramid scam.

Source : from icdsi web

The “Ponzi” Fact

     

What is a Ponzi Scheme?

Much has been written about Ponzi schemes, the rights and wrongs of such programs and quite correctly warning people of the dangers of getting involved in schemes such as these. Sadly, many companies have also been wrongly accused of being Ponzi schemes by those that do not understand the difference between a Ponzi scheme and a legitimate business plan thereby damaging the future of those legitimate businesses.
In a nutshell, a Ponzi scheme is a fraudulent investment operation that has been designed to pay investors a large return on their money, unfortunately this can only be sustained by using the money being paid in by new investors. The schemes do not generate any profit so therefore only the initial investors have any chance of making a return.
A Ponzi scheme entices new investors by offering higher returns on their original investment than other more traditional investment opportunities. This is usually given as short term payouts that are abnormally high. However, as the scheme generates no profit, the high returns need an increasing amount of new investors to “keep the cash flowing” and consequently the scheme going.
Inevitably a Ponzi scheme is destined to collapse, due to the payouts eventually eclipsing the money coming in from new investors. However Ponzi schemes are usually interrupted by the authorities before they collapse. This is usually because the promoter is either selling unregistered securities, is gaining a reputation for higher than average payouts, or is unable to maintain payments and complaints are being made which eventually come to the notice of the respective financial regulators.
These companies become a victim of their own success as more investors get involved the more the chance of the scheme coming to the attention of the authorities.
Ponzi – A brief history
These type of fraudulent investment opportunities are named after Charles Ponzi, the first great exponent of the scheme.
In 1920, some years after arriving in the United States from his native Italy, Ponzi launched his great “get rich quick” scheme. His scheme was based on the arbitrate with International Reply Coupons (IRC), used to purchase postage stamps.
Ponzi claimed that he would, through a series of agents, purchase IRC’s from abroad, places such as Italy and other European counties. These coupons would then be redeemed in the United States for postage stamps of a higher value. After costs, expenses and using international exchange rates Ponzi claimed to be able to make a profit of 400%.
The scheme generated millions of dollars in revenue before it was unmasked as a fraud. It was discovered that only 27,000 coupons had been purchased when in reality 160 million coupons were required to run the investment successfully. It was then discovered that Ponzi had diverted investor’s money to pay earlier investors and himself. Soon afterwards Ponzi was arrested.

Ponzi and the Internet
The Internet is rife with Ponzi schemes. Terms such as “High Yield Investment Program mes” (HYIP) and “Offshore Investment Opportunities” are used to conceal Ponzi schemes and mislead the buying public.
Some Ponzi schemes offer long term opportunities with only medium rates of return. This is still unsustainable as no profits are being generated.
Any scheme that offers high income returns for your investment must be carefully investigated and researched before parting with your hard earned cash.
Ponzi didn’t actually invent this system; there are references to similar schemes in Charles Dickens 1844 novel “Martin Chuzzlewit” and the 1857 novel “Little Durrit”. Ponzi however was the first person to bring the scheme to life. His scheme took so much money that it was the first to be recognized in the United States.
So reader beware – research thoroughly before taking a leap of blind faith into a scheme that promises to change your life. Yes there are some good companies and many great opportunities but you need to trust your research and not the words of others.

Compare MLM companies ..!!

                 Multi-level marketing (MLM) is a marketing strategy in which the sales force is compensated not only for sales they personally generate, but also for the sales of the other salespeople that they recruit. This recruited sales force is referred to as the participant's "downline", and can provide multiple levels of compensation. Other terms used for MLM include pyramid selling, network marketing,and referral marketing.

 

                Most commonly, the salespeople are expected to sell products directly to consumers by means of relationship referrals and word of mouth marketing.Some people use direct selling as a synonym for MLM, although MLM is only one type of direct selling, which started centuries ago with peddling.

          

               Companies that use MLM models for compensation have been a frequent subject of criticism and lawsuits. Criticism has focused on their similarity to illegal pyramid schemes, price fixing of products, high initial entry costs (for marketing kit and first products), emphasis on recruitment of others over actual sales, encouraging if not requiring members to purchase and use the company's products, exploitation of personal relationships as both sales and recruiting targets, complex and sometimes exaggerated compensation schemes, the company making major money off its training events and materials, and cult-like techniques which some groups use to enhance their members' enthusiasm and devotion.

 

             In contrast to MLM is single-level marketing, where the person is rewarded only for the immediate income between the exchange of a product and monetary benefit.

 

 

 

Direct selling, network marketing, and multi-level marketing

Network marketing and Multi-level marketing have been described by author Dominique Xardel as being synonymous, and as methods of direct selling. According to Xardel, direct selling and network marketing refer to the distribution system, while the term "multi-level marketing" describes the compensation plan. Other terms that are sometimes used to describe multi-level marketing include "word-of-mouth marketing", "interactive distribution", and "relationship marketing". Critics have argued that the use of different terms and "buzzwords" is an effort to distinguish multi-level marketing from illegal Ponzi schemes, chain letters, and consumer fraud scams.Some sources classify multi-level marketing as a form of direct selling rather than being direct selling.

The Direct Selling Association, a lobbying group for the multi-level marketing industry, reported that in 1990 twenty-five percent of members used MLM, growing to 77.3 percent in 1999.Companies such as Avon, Electrolux, Tupperware,and Kirby all originally used single level marketing to sell their goods and later introduced multi-level compensation plans.By 2009, 94.2% of members were using MLM, accounting for 99.6% of sellers, and 97.1% of sales. The DSA has approximately 200 members while it is estimated there are over 1,000 firms using multi-level marketing in the United States alone

 

 

 

Network Marketing-It's an Asset, Not a Job

By Robert Kiyosaki

I am sometimes asked, "Why do so few people make it to the top of their network marketing system?"

The truth is, the top of the network marketing system is open to everyone-unlike traditional corporate systems, which allow only one person to reach the top of the company. The reason most people do not reach the top is simply because they quit too soon. So why would someone quit short of the top?

Most people join only to make money. If they don't make money in the first few months or years, they become discouraged and quit (and then often bad-mouth the industry!). Others quit and go looking for a company with a better compensation plan. But joining to make a few quick dollars is not the reason to get into the business.


The Two Essential Reasons to Join a Network Marketing Business

Reason number one is to help yourself. Reason number two is to help others. If you join for only one of these two reasons, then the system will not work for you.

Reason number one, means that you come to the business primarily to change quadrants-to change from the E (Employee) or the S (Self-employed) quadrant to the B (Business owner) or I (Investor) quadrant.

This change is normally very difficult for most people-because of money. The true E or S quadrant person will not work unless it is for money. This is also what causes people to not reach the top of the network marketing system: they want money more than they want to change quadrants.

A B quadrant or I quadrant person will also work for money, but in a different way. The B quadrant person works to build or create an asset-in this case, a business system. The I quadrant person invests in the asset or the system.

The beauty of most network marketing systems is that you do not really make much money unless you help others leave the E and S quadrants and succeed in the B and I quadrants. If you focus on helping others make this shift, then you will be successful in the business.

As a B or an I, sometimes you don't get paid for years; this, a true E quadrant or S quadrant person will not do. It's not part of their core values. Risk and delayed gratification disturb them emotionally.

 

 

 

 

 

Why Network Marketing ..!!!

See What Mr. Robert T Kiyosaki‎ says about Network Marketing.




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See this website regarding MLM companies :
 www.strategyindia.com 
www.networkingeye.com



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