The Network Marketing Pyramid

One thing that often comes up when people look at a Network Marketing company is the subject of the "Pyramid". Many people mistakenly believe that because a Network Marketing company has the internal structure of a pyramid that it must be a "pyramid scheme". It's important to note that "pyramid structure" is entirely different from "pyramid scheme".

A pyramid structure simply describes the arrangement of a company's structure. The truth of the matter is that most companies have a "pyramid structure". If you look at any large company - say a financial institution, government organization, medical facility, or university - you will see pyramid structure.

You will see a structure that starts with usually one person at the top, going to a few more at the 2nd level, spreading out to even more at the 3rd level and so on. Looking at the whole organization, you will see a pyramid structure. In fact the people at the top of the "pyramid structure" usually make the most money in these cases.

Most Network Marketing companies are no different except that the people at the top do not necessarily make all the money. So the structure alone does not make the company legal or illegal.

The legality issue involves the "pyramid scheme". A pyramid scheme is something else entirely. A pyramid scheme is defined as "... a non-sustainable business model that involves the exchange of money primarily for enrolling other people into the scheme, without any product or service being delivered.(1)" While some unethical network marketing companies have fallen under the pyramid scheme so have other business opportunities that don't really fall under the category of MLM or Network Marketing.

Therefore, a pyramid structure by itself is neither good, bad or indifferent. It's when the company weighs too heavily on its own opportunity promotions that it may be seen as a pyramid scheme. Pyramid schemes never last very long as they are usually shut down either by their own weight or a governing organization. So don't be scared off by the structure of a company. Instead just be sure it's only a structure and nothing more.

(1) Source