Pyramid scheme or pyramid selling is a type of sellling .The scam and fraud in mlm or direct selling is increasing daily. The most of the mlm and direct selling companies are running with the pyramid scheme.
The starter of these company make a huge profits from these schemes . It is quite difficult to come out and save your investment once you have invested in the pyramind selling or ponzi scheme, people also try to forcobly bring other people into the pyramid scheme, forthere own profit.
in this post you guys are going to read
The starter of these company make a huge profits from these schemes . It is quite difficult to come out and save your investment once you have invested in the pyramind selling or ponzi scheme, people also try to forcobly bring other people into the pyramid scheme, forthere own profit.
in this post you guys are going to read
- what is the pyramid scheme ?
- why pyramid scheme is different from ponzi scheme
- why pyramid scheme is different from mlm
What is pyramid scheme
The pyramid scheme started from first level and pyramid scheme have also different types of network and level like mlm. Here we understand from simple binary network .The level at the top the pyramid are the initiator of the company . now the new people are stert to join and they pay a fix amount of money to the company. Now those two people also asked to bring two more people to the company, instead of which they are promised a fix profit .
Now the first two people, two new people come under them. From which money os taken the fix. Which makes them and those below them belive that the company pays back the money invested, Due to which people start connecting under it .
To see an example, one has to invest 1000 rupees to join ABC company. Now two people join at the second level, from which 1000-1000 rupees get 2000 rupees by coming to the second level. Now two people join under those two people, making the third level and there are 4 people in it. 1000-1000 rupees are charged from them also.
That is, the company gets Rs 4000 from the third level.Now out of 2000 rupees of the second level and 4000 rupees of the third level, the company gives 700-700 rupees to those two people who are at the second level. Which makes him and his lower member believe the company. The same company is tempted to bring more people to get more profit.
But till the third level the company gets the full 6000 rupees (2000 + 4000). In which, 700-700 rupees are given to the second level member, which gives the company a profit of 6000-1400 = 4600 rupees.
In the same way, the level of the company and the people involved are increasing. In the same binary plan, at the lower level, twice as many people of the top level are added. Due to which their network grows very fast.
In the Ponzi scheme, the company claims to invest a lot of money up front. In the same pyramid scheme, the company describes itself as an MLM company, in which it is asked to buy the company's products when it joins the company.
The structure of Ponzi scheme is not like pyramid scheme. It will get so much money by bringing so many people in the pyramid scheme, it is decided by the company beforehand. But, this is not the case in the Ponzi scheme. And they are paid to keep the couple.
MLM operates entirely on the basis of the product. Where the joining people are told to sell the product and how to network and promote it.
However, in pyramid schemes, products are only for display, in which there is no emphasis on promotion of the product. Huge amount is charged for joining the pyramid scheme, they do not have the money to join the MLM. However, the company has to pay to buy the product.
The difference between an MLM company and a pyramid scheme can be found by looking at the product. In pyramid schemes, often the products are of poor quality, high MRP and not even worth buying.
Now the first two people, two new people come under them. From which money os taken the fix. Which makes them and those below them belive that the company pays back the money invested, Due to which people start connecting under it .
To see an example, one has to invest 1000 rupees to join ABC company. Now two people join at the second level, from which 1000-1000 rupees get 2000 rupees by coming to the second level. Now two people join under those two people, making the third level and there are 4 people in it. 1000-1000 rupees are charged from them also.
That is, the company gets Rs 4000 from the third level.Now out of 2000 rupees of the second level and 4000 rupees of the third level, the company gives 700-700 rupees to those two people who are at the second level. Which makes him and his lower member believe the company. The same company is tempted to bring more people to get more profit.
But till the third level the company gets the full 6000 rupees (2000 + 4000). In which, 700-700 rupees are given to the second level member, which gives the company a profit of 6000-1400 = 4600 rupees.
In the same way, the level of the company and the people involved are increasing. In the same binary plan, at the lower level, twice as many people of the top level are added. Due to which their network grows very fast.
Why Pyramid Scheme and Ponzi Scheme are Different?
In the Ponzi scheme, the company claims to invest a lot of money up front. In the same pyramid scheme, the company describes itself as an MLM company, in which it is asked to buy the company's products when it joins the company.
The structure of Ponzi scheme is not like pyramid scheme. It will get so much money by bringing so many people in the pyramid scheme, it is decided by the company beforehand. But, this is not the case in the Ponzi scheme. And they are paid to keep the couple.
Why Pyramid is Different from Scheme and MLM?
MLM operates entirely on the basis of the product. Where the joining people are told to sell the product and how to network and promote it.
However, in pyramid schemes, products are only for display, in which there is no emphasis on promotion of the product. Huge amount is charged for joining the pyramid scheme, they do not have the money to join the MLM. However, the company has to pay to buy the product.
The difference between an MLM company and a pyramid scheme can be found by looking at the product. In pyramid schemes, often the products are of poor quality, high MRP and not even worth buying.
Why is pyramid scheme fraud ?
- Many people think the pyramid scheme is a business model. However , it is nothing but fraud and scam. Some pyramid scheme stop in a very short time
- In pyramid schemes, most of the times the investment is increased over the time , si that the company get higher profit. But on the other hand the upper level member commision is reduced so that more money os not required to paid back to the people .
- Some of the pyramid scheme companies, do this also, so that the network grows slowly and the people are gradually added for a long time .
- In the end, pyramid scheme is suddenly closed or exposed, which puts it's invester money in the danger. the most difficult is those who are at the lower end of the pyramid. Beacause they are recently join the multi level marketing company, they don't get anything from the company, rather all the money invested goes away.
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