You must be clear on the differences between illegal pyramid scams and network marketing. Here are the factors that make for a genuine network marketing company:
- The company must be a bona fide retail organisation which markets legitimate products or services to the consumer.
- The company should offer quality products or services for which there is a genuine demand.
- The price of the goods sold must be fair and competitive.
- There must be no up-front investment requirements other than a low-cost starter sales kit.
- There should be no minimum purchase requirements to join the network other than those essential to do some trade.
- Commission should be earned on the basis of sales made, not on the number of distributors signed up.
- All legitimate network marketing companies have repurchase agreements to buy back unwanted products in usable condition within a reasonable period of time provided, of course, the products were not bought illegally.
- The emphasis of the marketing programme should be on increased sales and product promotion.
- The network marketing company must offer training to its distributors.
In contrast, a pyramid scheme or scam will tend to have these characteristics:
- The major reward is not for selling the product but for recruiting or ‘head-hunting’ distributors.
- Products are sold at an inflated price above the normal market price. In pyramid schemes the ‘real’ value of the product is the compensation programme — how many distributors you introduce. The product does not have intrinsic worth.
- Distributors are encouraged to take quantity orders. There is a fine line between what is a legitimate ‘bulk- buy’ incentive and what is known as ‘inventory front- loading’ — the practice by which distributors have to give money up-front for large volumes of products, often of questionable value.
- The distributor has little protection. There is rarely a repurchase scheme for unsold inventory or unused sales aids.
- The scheme is sold as a get-rich-quick operation. Financial projections of earnings are blown out of all proportion.
- There is misleading advertising relating to the value of the product or the opportunities offered. There is usually a claim that no selling is required, which is false.
Jeffrey Babener and David Stewart, in their book The Network Marketer’s Guide to Success perhaps sum it up perfectly when they say that ‘the single most valuable element in any successful enterprise is integrity’ Never hesitate to talk about network marketing — there is nothing wrong with the business. Be proud of it!
Most reputable network marketing companies belong to the Direct Selling Association of South Africa. This is an umbrella body that keeps a watchful eye on both its members and non-members to ensure that only the highest standards of professional conduct are employed.
