Pyramid scheme Keyboard

Loes Knetsch ©

If you look a bit like me, you will be suspicious of everything on the internet. So many scammers and fraudulent websites. And they are all telling you how quick you can get rich. A comparison between a pyramid scheme, multi-level marketing (MLM) and affiliate marketing.

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There are many signs that can warn you about scammy websites, I wrote about this before, you can read that post here. But today I want to discuss the online pyramid schemes. Very devious and misleading sales pitches.

How To Spot A Pyramid Scheme

An example:

Number 1 recruits 2 and 3, which he both says they have to put in money and have to bring in new people for a commission.

2 and 3 each carry two new people, namely numbers 4, 5, 6 and 7. They also deposit money, which ends up largely at 1 and 2 and 3 receive a commission. 2 and 3 tell the new 4, 5, 6 and 7 that they too must find new depositors.

pyramid scheme gif

4, 5, 6 and 7 each have two new people, namely 8,9,10,11,12,13,14 and 15. They deposit money, for a large part they go to 1, a small part 2 and 3 and an even smaller part at 4.5,6 and 7. The new numbers 8 to 15 also have to recruit new people.

The pyramid quickly develops, while it takes several layers before 2 and 3 get their money out. The big winner is 1 because he has never invested anything and hugely get supplied money from all new depositors.

If you think logically then there really have to be losers with such a pyramid construction. When you are not recruited within the first 4 layers, it will most likely cost you money.

Why doesn’t a pyramid construction work?

The pyramid scheme

The pyramid construction is known for years. Already in the ’30th, a pyramid “game” was known under the name “Snowball system”. The pyramid scheme can also be compared with the system of the so-called chain letter.

Participants

Participants in a pyramid scheme must try to reach the top of the pyramid by means of a slide system. Most pyramid schemes have different levels. Sometimes they go 12 levels deep. At each level, each participant recruits one or more new participants. A new participant pays a certain amount to the participant who has recruited him and to participants who are higher up in the pyramid. After the new participant has again recruited new participants, he will be a certain amount. Although there are several variants of the pyramid scheme, they all have in common the gain is dependent on new participants who, in turn, deposit money.

A pyramid scheme simply circulates money amongst his participants...It does not create wealth! ~ Robert Ward Click To Tweet

The losers of the pyramid scheme

If a pyramid scheme on the first level starts with one participant who recruits two participants for the second level, who, in turn, each recruit two participants for the third level, the number of participants naturally increases very quickly. On the tenth level, there must be more than 1000 participants to maintain the pyramid scheme. If a pyramid scheme with two participants starts at the first level, there are more than 2000 on the tenth level. However, pyramid schemes are also known where each participant has to recruit three or sometimes more participants. In such cases, tens of thousands of participants are needed on the tenth level to keep the pyramid scheme running. Given the fact that several pyramid schemes are being organized at the same time, it is clear that candidates can no longer be found within a short time, as a result of which the pyramid scheme inevitably crashes. The participants who are still at the last level of the pyramid scheme, in other words, the last entrants, will no longer be able to find new participants. They and often the participants who are at the previous level remain empty-handed.

The pyramid scheme product

Often, there is no product involved, you just pay to be in it, as a participator. When there are products involved, they are mainly instruction DVDs about the how to…. recruit!

Multilevel marketing sales method

In addition to the pyramid scheme as outlined above, there are sales methods that resemble pyramid schemes in some respects. These sales methods are known as “multilevel marketing” or “network marketing”. These sales methods or form of marketing are not covered by the definition of a pyramid scheme and are therefore not prohibited. In this form of marketing, the buyer of a product acquires the right to also sell certain products with which he can acquire a bonus, a commission or a percentage of the turnover. The same applies to the successive buyers. In terms of structure, multilevel marketing resembles a pyramid scheme. However, the purpose of this form of marketing is fundamentally different from the goal of a pyramid scheme. Multilevel marketing is a sales method. An advantage being acquired in the form of a bonus, commission or turnover percentage serves to promote the sale of the products in question and therefore forms part of the sales system.

Product investment

Multilevel marketing does not involve paying a certain amount solely in order to obtain the right to participate in an organization or the right to recruit new participants/buyers, but the sale of products is central. The participant buys products at a fair price in order to sell them at a profit. In contrast to a pyramid scheme, there is a product sale. The customer does not pay for participation, but for the product. Customers who do not want or can not sell products are therefore not disadvantaged. They have unmarketable products in their garage, where they have invested in but have the value of their products

The advantage of Affiliate marketing

You may be asking yourself what exactly are the benefits of affiliate marketing?

The biggest advantage of affiliate marketing is that you do not need any capital to get started. No purchasing is necessary, the company that is promoted, has to deliver the products to the consumer and deals with all the finances. And you, as a middleman/woman, get a commission paid for the lead you have created.

Is affiliate marketing worry-free?

Affiliate marketing is relatively worry-free compared to other earnings models. You do not have to invest a lot and you do not run a big risk. This is of course completely different if your full income is based on affiliate income. If you have delivered fewer leads a month, you will earn less money that month. Against this fluctuation, you will, therefore, have to be able to be an affiliate entrepreneur. If the visitors are mainly organic (through search engine optimization) you do not have to worry about this. You do not incur any costs here and every euro that is earned can immediately be seen as profit.

How to start affiliate marketing?

Most companies who have an affiliate program will only approve you as an affiliate when you have a website. However, some will also accept you when you can show them a huge following on Social Media. (We talk about 100.000+ followers). Those followers will be your target group.
The most common way is a website and blogging about topics and products. With blogging, you can become an authority in your chosen branch. Websites older than 10 months get Google’s trust. People who are advertising for the affiliate method will never tell you that you can get rich with it over-night.

Affiliate marketing, the sky is the limit!

The sky is the limit2

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Hey, nice to meet you. I am Loes and I love to work, create and make money on the internet. My vision for the future is promising because the activities and sales go to triple over the next few years. You can take advantage of it too. Step into the world of affiliate marketing today, and work towards financial freedom for you and for your family. If you would like to learn how to build your own Wordpress website, click here to open your free account today!

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