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How To Avoid Getting Scammed By Illegal Pyramid Schemes Marketing Articles | December 20, 2004
... ... (MLM) or network ... programs are a method of selling goods or services through ... These programs ... promise that if you sign up as a ... you'll


Multi-level marketing (MLM) or network marketing programs are a method of selling goods or services through distributors. These programs typically promise that if you sign up as a distributor Derek Carr Jersey , you'll receive commissions for your sales and those of the people you recruit to become distributors. These recruits are referred to as your "downline."

Some multi-level marketing programs are legitimate. However, others are illegal pyramid schemes. In pyramids, earned commissions are based on the number of distributors recruited. Most of the product sales are made to these distributors--not to consumers in general. The underlying goods and services Bo Jackson Jersey , which vary from car leases to cosmetics to vitamins, serve only to make the schemes look legitimate.

Joining a pyramid is a risky proposition because the vast majority of participants lose money to pay for the rewards of a lucky few. Most people end up with nothing to show for their money except the expensive products or marketing materials they're pressured into buying.

If you're thinking about joining what appears to be a legitimate multi-level marketing program, take time to check out everything about the program. For example:

What's the company's track record? What product does it sell? Does it sell products to the general public? Does it have the evidence to back up the claims it makes about its product? Is the product competitively priced? Is it likely to appeal to a large customer base? How much is the investment to join the program? Is there a minimum monthly sales commitment to earn a commission? Will you be required to recruit new distributors to earn your commission?

Be skeptical if a distributor tells you that for the price of a "start-up kit" of inventory and sales literature--and sometimes a commitment to sell a specific amount of the product or service each month--you'll be on the road to riches. Many times participants spend a lot of money to "build their business" by participating in training programs Hunter Renfrow Jersey , buying sales leads or purchasing the products themselves. Far too often, their own purchases are all they will ever see for their investments.

Also, if you decide to become a distributor Oakland Raiders Jersey , you are legally responsible for the claims you make about the company, its products and the business opportunities it offers. That applies even if you're repeating claims you read in a company brochure or advertisement. The Federal Trade Commission advises you to verify the research behind any claims about a product's performance before repeating those claims to a potential customer.

In addition, if you solicit new distributors Leonard Williams Jersey , you are responsible for the claims you make about a distributor's earning potential. Be sure to represent the opportunity honestly and avoid making unrealistic promises. If those promises fall through, remember that you could be held liable.

The Federal Trade Commission (FTC) suggests that you use common sense when evaluating a multi-level marketing opportunity and consider the following tips before you make your decision:

1. Avoid any program that pays commissions for recruiting additional distributors. It may be an illegal pyramid.

2. Beware of programs that ask new distributors to purchase expensive inventory. These programs can collapse quickly--and also may be thinly-disguised pyramids.

3. Be cautious of programs that claim you will make money through continued growth of your "downline"-the commissions on sales made by new distributors you recruit--rather than through products you sell.
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