What is the difference between Multilevel Marketing (MLM) and Pyramid Scheme?

Difference Between Multilevel Marketing and Pyramid Scheme

You must have gone through the words – Multilevel Marketing (MLM) and Pyramid Scheme many times in the past. Both of them promise a lot, but there is a huge difference between the two concepts.

You should be careful before being part of any one of them. Here, we will discuss the Difference Between Multilevel Marketing and Pyramid Scheme, and understand both the concepts more carefully.

Multilevel Marketing (MLM) can be an attractive business opportunity for many people, and it allows you to be part of a system for distributing products to consumers. Multilevel Marketing is also known as Network Marketing, where a person sells products through the mouth to mouth publicity or direct sales.

The main idea behind Multilevel Marketing is to promote the maximum number of distributors to increase sales. The promoters get a commission on every sale as well as the compensation for sales their recruits make.

A Pyramid Scheme is usually a scam or a fraud scheme, and often promoted or disguised as a Multilevel Marketing scheme. In the Pyramid Scheme, there will be no real product that is sold. The individuals who are part of the Pyramid Scheme make money by just recruiting new participants into the scheme.

The Pyramid Scheme promises a lot and high-sky returns within a short span of time. Participants need to deposit some amount of money that will be a part of the scheme and motivate others to do the same.

Difference Between Multilevel Marketing and Pyramid Scheme

• In MLM, the real product is involved for sale, while in the Pyramid Scheme, there is not any product involved for sale.
• The money earned in Multilevel Marketing is through getting a commission on the sales made by you and the recruiters under you, while in Pyramid Scheme, the money is earned only through by making new joinings.
• Multilevel Marketing shows a practical approach to earning money, while Pyramid Scheme makes sky-high fraud promises.

If you come across any plan or scheme where the reward for recruiting new distributors is more than selling the products, you should never get involved in it. Be honest and realistic while joining any such schemes and don’t become prey to any false and fraud scheme.