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Legitimate Direct Selling Vs Illegitimate Pyramid Scheme
Legitimate Direct Selling
Illegitimate Pyramid Scheme
Direct Selling means the marketing of the products/services to the consumers generally from home or workplace i.e. locations away from permanent retail locations. It is done through explanation and demonstration of the products by a direct seller.
‘Pyramid’ means a multi layered network of subscribers to a Money Circulation Scheme formed by subscribers enrolling one or more subscribers in order to receive any quick or easy money benefit, directly or indirectly, as a result of enrolment.
They offer genuine business opportunities. It involves quality sales plan of goods and services.
Pyramid schemes involve products which are cheap to produce and have no established market value. New miracle products, exotic cures, mattresses, online surveys are some of these.
The cost of entry is reasonable.
Cost of entry is extremely high.
Plans are entirely performance based.
No plan or pyramid plan.
Returns are dependent on the time invested and motivation of the direct seller and come slowly.
Returns are easy and quick.
Sales incentive is based on sale of goods/services.
Incentives are based on recruitment rather than on sales.
Enrollment is not compulsory of doing business.
Enrollment is mandatory for doing business.
Business is by sale of products. Enrollment is optional.
Commission based on recruitments.
Sales incentive to all distributors is through Direct Selling Companies only.
Payment through members and negligible pay outs by promoters.
Direct seller joining the business can exit the business within reasonable time. Investment is refunded as per the company provisions in the Initial Contract. Exit policy in place for termination of contract.
No refund or exist policy exists.
Products have 100% buy-back guarantees to ensure protection of end-consumer as per company policy.
Products usually do not have a buy-back policy.
Products are supplied to meet genuine demand and direct sellers are encouraged to hold minimal inventory and replenish as and when need arises.
“Front loading” is encouraged. Therefore, products are thrust upon the direct sellers, irrespective of their ability to sell the product and the actual market demand.
Rigorous product and product Sales training is done. Incentives based on sales or products and Sales performance are offered.
There is no emphasis on product or product sales training. Emphasis merely lies on collection of money from new enrollment.
Every sales person had to abide by the Industry Model Code of Ethics.
There exists no Code of Ethics.