Just as various sorts of business opportunities continue to sprout like mushrooms on a rainy day, so do misconceptions about network marketing abound practically everywhere.
Are you one of those people who get confused as to what network marketing is and what it is not? Let's have a clearer understanding of the concept and the practice by debunking some of the myths behind network marketing.
*MYTH NO. 1: Network Marketing is the same as the Pyramid Scheme.
**FACT NO. 1: Network Marketing is NOT a Pyramid Scheme.
Pyramid schemes are illegal, whereas network marketing is legal.
When you participate in a pyramid scheme, you shell out a certain amount of money for practically nothing. You get no goods or services in exchange for your precious money. Instead, you merely pay for luck or for a chance. Why? Because only the person or persons on top of the pyramid will win.
Practically a gambling scam, a pyramid scheme is merely a venue for transferring funds from the hands of one person to those of another.
In contrast, when you participate in network marketing, you are actually getting involved in a legal business system. In such set-up, real and legal products and/or services are distributed among huge networks of clients or buyers.
*MYTH NO. 2: Network Marketing is the same as the Ponzi Scheme.
**FACT NO. 2: Network Marketing is NOT a Ponzi Scheme.
First, what is a Ponzi scheme? A Ponzi scheme is an investment scheme named after Charles K. Ponzi, who operated such a financial scheme in 1919-1920. In the said scheme, the older members or investors receive their proceeds or profits completely from the funds invested by newer members.
Unlike the pyramid scheme, a Ponzi scheme does not necessarily follow a particular hierarchical system. In fact, only one person or company is in charge of collecting money from new investors. The said collecting agent or agency then uses such fund to award the older investors with the proceeds promised to them.
Thus, when you get involved in a Ponzi scheme, you are actually just helping the collecting agency to pay off the profits it has promised to the older investors. The organizers behind a Ponzi scheme make you believe that you will MAKE MONEY WITH THEM