TABLE OF CONTENTS
WHAT IS MLM?
MULTI-LEVEL MARKETING(MLM) refers to a strategy used by some direct sales companies to sell products and services. An MLM sales agent usually makes money from each sale in their “downstream,” creating a form of passive income. New recruits become the distributor’s network or downline and are, in turn, encouraged to make sales to earn money. The company operates under a model where sales are driven through a network of salespeople, through presentations, or in one-on-one settings in homes or businesses. This type of business model is also referred to as a direct sales model. One problem is pyramid schemes that use money from new recruits to pay people at the top rather than those who perform the work. MLM encourages existing members to promote and sell their offerings to other individuals and bring on new recruits into the business. Distributors are paid a percentage of their recruits’ sales.MLM restructures the traditional business model from manufacturer to retail shop to the customer such that sales agents working for the manufacturer sell directly to customers, bypassing the retail shop altogether.
MAJOR TYPES
There are generally 5 types of MLM plans:
1. BINARY MLM PLAN
Binary MLM plan is the most preferred and popular program among MLM companies. A binary MLM program, as the name implies, allows you to have only 2 live downlines on your network. It is very easy to use and highly profitable for users and project owners.
2. MATRIX MLM PLAN
The Matrix MLM program, also known as the Forced Matrix plan, is the most common type of MLM program. There is a limit to the funding of downstream members. Rewarded performance, easy modification, and acceptance by dealers and regulators are some of the benefits you can get from having this type of compensation plan.
3. MONOLINE MLM PLAN
The monoline business plan is also known as the single leg business plan. This MLM business plan is an attractive compensation plan because the compensation plan does not have a cap or a mandatory position to work with.
4. GIFT MLM PLAN
The gift scheme is based on the concept of giving/receiving gifts to one person and receiving from another. The gift scheme is widely known as the donation scheme because it is fully functional for sending gifts to one person and receiving gifts from multiple members who are distinguished by the MLM industry.
5. GENERATION MLM PLAN
The Generation Multi Level Marketing Plan is a compensation plan that is solely dependent on product sales. Other names for the generation plan are Gap Commission Plans and Repurchase Plans. It is, in fact, a motivating product-selling MLM scheme in which each affiliate pushes the downline to product sales and receives bonuses and incentives based on the fulfilment of certain goals.
SCAMS UNCOVERED
Fraudsters promise you to invest your money and generate high returns at zero risk. They pay money to new investors, after collecting from old investors, and they keep the majority of the shares for themselves.
Most MLM scams have no legitimate earnings, and such schemes require a continuous flow of new money to survive. When it becomes hard to recruit new members, they just vanish into thin air. Existing members earn higher commissions if they introduce new members, a typical multilevel marketing scheme. The vicious cycle in multi-level marketing is that ‘you get cheated to cheat others’.
MLM company promoters make extravagant promises about earning potential. Most multi-level marketing companies do very exhaustively paid PR campaigns via social media influencers to attract people to invest, luring them with high returns. A few MLM schemes that are illegal in India are
(a) Pyramid Schemes
A Pyramid Scheme is a sketchy and unsustainable business model used by fraudsters to lure participants with promises of quick, exceptional returns in a short period of time. It starts with a few original, top-level members or participants recruiting new members who pay them upfront costs and fees to take part in the business.
(b) Money Circulation Scheme
It is a scheme for making quick or easy money, or for the receipt of any money or valuable thing as the consideration for a promise to pay money, on any event or contingency relative or applicable to the enrolment of members into the scheme, whether or not such money or thing is derived from the entrance money of the members of such scheme or periodical subscriptions.
(c) Ponzi scheme.
In a Ponzi scheme, however, participants are promised returns on “investments”, supposedly into stocks or goods, but which are actually paid for by new investors, while a central leading figure takes a portion as profit.
MLM PLAN
Sales agents in MLM companies frequently work for commissions on sales. Many MLMs have fees for signing up or require sales agents to buy products up-front and make their money by selling those products. MLM companies can then convert customers into advocates for their products and possibly even sales agents. Many sites are devoted to MLM rankings, creating lists of companies likely to provide a return on investment to sales agents interested in the industry. Because there is no retail store for the products they sell, MLM agents typically work from their homes, interacting with customers in the community or, more often, over the internet. In addition, MLM agents typically get commissions on the sales of their “downstream.”
MY REMINISCENCE
Today I am going to talk about a scam that I had become a victim of. The story starts with a Bitcoin Mining Website which suddenly popped up on my phone and my curiosity made me lean for the website. The website at first seemed to be a legit mining site that I as a user had to deposit some amt of coins to get the server running and the whole website was leaned towards attracting new customers by showing fake accounts receipts on their website showing that it was a legit website for mining. So I signed up and deposited the sum required. They also had a policy that whatever profits in a month the server had made could be transferred to my account on the first of the next month. So I waited patiently for the date and on that day when I tried to transfer the money from that website to my wallet address, the pop-up showed that the transaction has been completed, refreshing my wallet showed no signs of any transaction. This gave me Goosebumps as now I started to get a feeling that I had lost the money invested. After that, I tried contacting their customer care and to my surprise they replied in an hour, stating that the transaction has been completed and it would take 24-48 hours to reflect in your wallet so then I waited for the same. After 2 days I opened the website but now here my luck goes for a toss, the site was not opening at all, and then suddenly it showed up in my browser that the link does not exist, I even tried contacting the customer care and till today they didn’t reply and this incident happened 2 months prior to this blog.
CONCLUSION
So in the end, I would say that Multi-Level Marketing is not a scam but it shows how people are using some loopholes to defame, generate Fake Bills and attract and pressurise people to get involved with them with luring schemes that help them gain an advantage over the traditional methods.
