Today, most direct selling/network marketing companies in the Philippines are on the rise. And so are those illegal pyramiding scams.
As a good citizen, it is our duty to make our due diligence before joining such entities.
For those who would want to join or are just planning to venture into Network Marketing or Direct Selling it would be advisable to know How to differentiate a legitimate direct selling/network marketing company from pyramiding using the 8-point Test.
But first, let us define the following:
Definition of Direct Selling, Network Marketing and MLM vs. Pyramiding
Direct Selling/ Network Marketing is face-to-face selling to the consumers through independent distributors or sales people. It is a legitimate marketing medium that is used to sell practically anything.
Pyramiding is an illegal money scam often confused with legitimate network marketing plans, where people are convinced to pay money for a chance to profit from the payments of others who might join later.
1. Is there a product?
2. Are commissions paid on sale of products and not on registration/entry fees?
3. Is the intent to sell a product not a position?
4. Is there no direct correlation between the number of recruits and compensation?
5. If recruitment were to be stopped today, will the participants still make money?
6. Is there a reasonable product return policy?
7. Do products have fair market value?
8. Is there a compelling reason to buy?
If the answer to all the questions is YES, then the company being evaluated is a legitimate company. But if the answer is NO, then there is a high probability that it is a pyramid scam.