Learn the difference between network marketing opportunities
and network marketing scams.
Ever wonder how to recognize network marketing scams? Do you question the legitimacy of network marketing? Have you been burned by network marketing scams?
Listen, the truth is that network marketing is not a scam. It is actually a legitimate business opportunity. However, there are times when scams or schemes mask themselves in network marketing's clothes.
Network marketing is often
critisized
because of these scams. It is hard to tell the difference sometimes.
The initial appearance of these scams are often confusing. Here's some information to help you distinguish legitimate network marketing opportunities from scams.
Is Multi Level Marketing legal?
Yes, multi level marketing (mlm, network marketing) is legal. In 1979 the FTC (Federal Trade Commission) ruled that mlm businesses must meet three criteria in order to operate legally.
1.) An mlm company must provide a product or service that is saleable and being sold.
2.) Independent marketers promote and sell their product or services to consumers through direct sales instead of through traditional retail stores.
3.) The mlm company must compensate independent marketers for their sales of the product and also a percentage of the sales of those they recruit to the company.
To learn more about mlm legalities, click here.
Warning Signs of Network Marketing Scams
Network marketing scams give themselves away when they don't sell a product or service. This is like the big pink elephant in the room. If a company's revenue depends solely on the recruitment of other people, this should send up a red flag.
And if there is a product or service, is it "real"? Sometimes network marketing scams will have a "dummy" product for the sole purpose of recruitment. You put up a substantial investment and receive a product that is of no value in the real world.
Another sign of network marketing scams is when you have to recruit others in order to make money. You should have the choice to sell the product, the business opportunity, or both. You know you are dealing with a reputable company if they allow you to sell the product alone.
Something else to watch for is companies that want you to put up a bunch of money for training materials after you join. Oftentimes prices are inflated to cost thousands for something that should cost hundreds. They should have plenty of free product trainings to offer.
Finally, you should avoid companies that require you to sell product or recruit others within a specific amount of time. By doing so, you will risk losing your initial investment and getting stuck with the product.
Types of Network Marketing Scams
There are a couple different types of these scams masquerading as legitimate network marketing opportunities. These programs are called
pyramid schemes,
ponzi schemes,
and investment schemes. To learn more about these schemes, click on the individual text links.
People often confuse these fraudulent programs as if they are the same thing. There are small differences between them that often go unrecognized. Make sure that you understand the difference so that you don’t get caught up in any one of them, believing it is network marketing.
They are all scams and 100% illegal.
These network marketing scams prey on the ignorance of people. The goal is to get your money and then have you recruit another person so they can take their money too. This is their entire reason for existing.
Some Guidelines
Here are some guidelines to help you better understand what to look for so you know the difference between a network marketing opportunity and a company hiding behind the front of network marketing.
1.) Use caution if the initial investment is a substantial amount of money. Lawful network marketing companies tend to require a small start up cost. Scams often will pressure you to pay a massive amount of money to participate in their program. Sometimes the investment is disguised as an inventory charge.
2.) If the company sells a product, will they buy back your inventory? Now, legit mlm companies offer inventory buy-backs for 80% of what you paid.
3.) Is there an established market for the product or service the company offers? If the company generates its money ONLY on recruiting, then you should run away as fast as you can.
And at this point you will want to find out as much information about the company's business plan. Make sure you get all the facts about the company itself, the people who started the company, and if the company offers a buy-back policy.
Read any written copies of the company's literature. Communicate with other people in the company about their experiences. And always use caution when presented with inflated get rich quick claims.
Remember that network marketing scams take full advantage of your ignorance if you allow them too. So always do your research and ask lots of questions.
A little common sense goes a long way sometimes. If you get the impression that you can get something for nothing, forget about it!
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