It’s a Pyramid


The most common comment of people who do not know network marketing, to mention this business or the company that deals with it is: “It’s like a pyramid … pyramidal sale … a pyramidal system … a pyramid scheme.”

(Read more about pyramid sales in the text – pyramidal sales)

Oxford Dictionary defines pyramidal sales as a form of financial fraud, and as such is prohibited and punishable by law in most countries.

Many online marketing companies have been operating for decades, in tens and hundreds of countries around the world. Would it be possible to deal with illegal work?

People usually connect network marketing with a pyramid to show the payout system, but about it a little later. To make the irony bigger, these people usually work in companies that have a pyramid payment.

What does the structure of a classical corporation look like?

At the top of the pyramid is the Executive Director, and he certainly earns the most. Earnings are paid from top to bottom and the worker can not earn more than the director even in the month in which he worked overtime or was on the ground, and the director of the holiday. Of course, the worker has the opportunity of promotion, but how many chances are, what is all and how much time is needed for that?

The opposite is true in network marketing. It can only succeed if people bring to the top instead of keeping them at the lower levels.

The payment is here in the opposite direction, from the bottom to the top. The commission is first calculated by the people who have finally entered the job, and people above them receive their commission based on bonus differences.

This means that, although we look at this structure as a pyramid, within a timeframe means that you can earn more than those that are far above you to the top of the pyramid. If we look at it in the financial framework, it means that you can be at the top regardless of the time you joined the business.

Let’s go back to the aforementioned system of payout that creates people’s prejudices about the pyramid. Usually in the company’s marketing plan, the displayed network structure is in the form of pyreamides, as the identical performance of all distributors is shown.


Distributor Network does not show that It's a pyramid

Distributor Network

It seems that it would be easier to understand the mathematical model, that is, the method of earning and progressing in business. In such a structure, of course, they earn more over, but it is more precisely to say that they all earn the same, if we take into account the time lag.

This, however, is only a theoretical view, let’s now look at the example of a small network, which is more realistic in practice, since not all people are working the same and that some are only connected for the purchase.

Network of people does not show that It's a pyramid

Network of people

Person 1 was the first to get into the business and involved two people. Person 2 is underneath it and has included only one person, person 3. Person 3 has included 6 direct associates and some of them have helped to distribute their work in depth. 90% of the network is below the person 3, i.e. in real terms and about 90% of the traffic, and even about 90% of the profits of this entire network will earn a person 3, which means much more than persons 1 and 2 together, regardless of the fact that he went after them, and what is in the structure is beneath them. Likewise, the person currently at the bottom of the network can build up its network in some time period, which will say, for example, 50% of the network of person 1, and will earn the most from all people here, of course, provided that the traffic of this network is proportionate its size, because we repeat, you are not paid from the network itself, you are paid from the traffic that the network creates.

We can conclude that in network marketing is not the best one who is first, but is the first one who is the best, whenever he comes.