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What is a Pyramid Scheme?

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By Brad Schneider

Pyramid schemes are sometimes confused with network marketing because they have a similar structure and are largely built by word of mouth. Yet, unlike Network Marketing, Pyramid schemes pay based on recruiting rather then on product sales, and in many instances, no product ever exchanges hands. Pyramid schemes are illegal because their structure eventually collapses, leaving people at the top wealthy and people at the bottom holding the bag.

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Selling through explanation and demonstration of products to a group of prospective customers by a Direct Seller, usually in the home of a hostess who invites others for this purpose. “Product” Product includes goods and services, both tangible and intangible. “Pyramid Scheme” Pyramid schemes are illegal money making schemes outlawed in terms of Consumer Affairs (Unfair Business Practices) Act, 1988. Such schemes generally involve large numbers of people at the bottom of the pyramid who pay money to a few people at the top for a chance to advance up the pyramid and profit from others they recruit below them. level marketing programmes.

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Most people these days have heard of the term "Pyramid Scheme", but not everyone knows quite what the term refers to. Pyramids are businesses that involve earning money from those who are beneath you in the pyramid. Many of these businesses are perfectly legitimate, and one can be quite successful without recruiting anyone else.

Pyramid schemes generally ignore the actual selling of products and services, and concentrate on the commissions one could earn by recruiting new distributors. Pyramid schemes may or may not involve the sale of products.

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There are many businesses that you might be familiar with that are pyramids, including:

EC of the European Parliament and of the Council of March 3rd, compensation schemes, Investors Compensation Fund (ICF) was established in Bulgaria. The Fund guarantees payment of compensation to the clients of an investment intermediary ( Securities Broker) by the raised money in the Fund, in the cases where the investment intermediary ( Securities Broker) is not able to pay its liabilities to the client, due to reasons directly linked to its financial condition.

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The "Bad" ones are those that will not make you money unless you recruit more and more people. These are the schemes that bring the bad name to the business, and are otherwise referred to as "Pyramid Scams". If and when you are approached to be recruited, you should ask the hard questions. Be sure to ask how much money you make without any recruits. Also find out how long they have been affiliated with the program, and how many recruits they have underneath them.

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The only time I would recommend getting involved with one of these pyramid type businesses is where you make regular purchases and you enjoy dealing with a certain product (Such as Mary Kay, Stampin' Up!, etc.)

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Brad Schneider writes financial and blog related articles for his blog as well as www.blog-hints.com and www.investingpub.com

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This article is copyright © 2005 www.bradsblog.net and is free to distribute as long as this copyright statement and all links and text are included.

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Online Brokerage Firm Brad Schneider is the owner of www.blog-hints.com and maintains his own blog at www.bradsblog.net. Feel free to distribute this article as long as this box is included.

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