Everywhere in the Philippines, you can find many different multi-level marketing (MLM) companies popping up every now and then. Some are small but some are so big that their founders and other personnel in higher positions have become multi-millionaires or even billionaires. Many of these known MLM companies which started in the US and Europe have been existing for decades and they have drawn a lot of support from both the government and the private sectors which includes famous celebrities, doctors, priests, prominent businessmen, and even poor economically struggling people. But what exactly is MLM and how does it really work? Is it really fair for everybody? Since many of these MLM companies are legal, is legality an appropriate basis for credibility and virtue?
These companies promise huge profits from their recruited, mostly poor and financially desperate, so-called investors. But unfortunately, it often turns out that money is produced through recruiting more or new people for investments rather than actually moving the products into a wider market for helping people. Otherwise, they would make it more affordable and they wouldn’t after its high percentage of profit. Technically, there is really no big difference between a pyramid scheme and a MLM since they are both on the same models of business which is having multiple levels of distributors and recruits. The only difference is that the so-called pyramid scheme is illegal and MLM is legal. If so, it poses a big question: why is it legal and how come the government allows it?
How does the MLM and pyramid scheme really works?
Typically, MLM and pyramid scheme works the same. The companies ask you to become a distributor by promising you large amount of monthly income by just simply working at home or working part-time. And in order for you to become a distributor of their products, you have to buy and invest a specific amount of money. However, MLM products usually cost hundreds or thousands of pesos and are very difficult to sell. This is the reason why most new investors end up recruiting more members for them to cope up with the amount that they have invested. This often leads to pressure on the part of the new members that result to recruiting as many people as possible, including their friends and family or relatives. So in short, your income will be solely based on how many recruits are under your team.
Through convincing people with misleading claims, MLM companies constantly gather more new aspiring entrepreneurs at the bottom level in order to profit and survive. Sometimes, they use high profile individuals such as athletes, actors, and famous business and community personalities that are willing to help them endorse the product and claim that these products are truly supported by scientists and other experts. In many of their gatherings, they also use luring images and projections such as giving away expensive cars and other material objects. They also use very attractive and very festive approach in enticing people with lots and lots of money. In some cases, some MLM companies use priests to involve the word “god” just to get people into the hook. One can sometimes say that it is somehow a kind of cult replacing the “deity” with its product; providing salvation to poor and hopeless people.
Furthermore, they would totally get your trust and tell you encouraging words such as if you work hard, you can be like that of a successful distributors on the top of the pyramid. Oftentimes, big MLM companies also provide you small royalty payments; sometimes including cars and pre-paid travel opportunities just to show you that you really have a sure opportunity to get rich. But through this, they also usually convince you to invest more from your money and be active in participating in training sessions and motivational speaking programs to promote, (therefore to victimize others) its exaggerated marketing claims and get more members. Although in most cases, many of their effective distributors do not really have the idea that they are scamming others.
So what you must do to avoid being scammed by MLM or pyramid scheme
First thing you must do is to educate yourself by reading articles like this one or by watching documentary films on the internet. Second is to be careful and do not let others pressure you into doing an investment without your full understanding of how the business really works. Do not easily believe just because someone very famous, a celebrity, or someone who is in a higher position tells you so. Protect yourself and always be smart when it comes to financial decisions. You can also get financial advices from people who have extensive knowledge about business and other things that involve money. Be very careful about choosing business products especially those that claim guaranteed huge monthly income which sounds too good to be true. And lastly, educate your relatives and friends about how MLM and pyramid scheme really works. Just because something is legal, doesn’t mean it is legitimate or not a scam.