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Pyramid Schemes vs. Legitimate Direct Sales |
Sometimes rejections against Direct Sales business opportunity come from perplex
comprehension of difference between a legitimate Direct Sales company and a "pyramid
scheme." Pyramid schemes have existed in Kenya in so many forms that people,
even some network marketers fail to distinguish a cleverly designed pyramid
scheme that is structured like Direct Sales opportunity.
Pyramid schemes are illegal because they reward people for their recruiting
efforts and generally overlook the marketing and selling of products.
Inevitably, pyramids collapse because sooner or later the members stop
recruiting, or the population doesn't support continuous recruitment. Most of
the people involved, except perhaps for the people at the very top of the
pyramid, lose their money. Some schemes may purport to sell products, but they
often simply use the products to hide their pyramid structure. Furthermore, the
products for disguising the pyramid scheme are usually non-consumables at
inflated rate. Pyramid schemes force members to buy more products than they
could ever sell, thus result in inventory loading. If this occurs throughout the
company's distribution system, the people at the top of the pyramid reap
substantial profits, even though little or no product moves to market. The
people at the bottom make excessive payments for inventory that is simply dumped
as junk. Another red flag that a pyramid exists is that they falsely promise
members large profits for little efforts.
Unlike pyramid schemes, Direct Sales companies have real products to sell. Actually Direct Sales
companies sell the majority of their products to the general public through
their members. Direct Sales companies may pay commissions to a long string of
distributors, but these commissions are paid for real sales, not for new
recruits.
DSA (Direct Selling Association of America) has been combating illegal pyramid
schemes for more than 30 years. Although there is no such organization that
regulates Direct Sales industry in Kenya, we, ProLife, call forth ethics and
professionalism. We offer the following tips to help you avoid any illegal
pyramid scheme:
ü
Avoid any plan that offers commissions for recruitment.
ü
Beware of plans that ask new members to spend money on big quantity of inventory
or high-priced
products.
ü
Resists plans that falsely promise enormous commissions with little efforts or
claim to sell miracle
products.
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