Comparative Characteristics of Pyramid Schemes and   Legitimate Network Marketing Companies

Legitimate NM Opportunity

Pyramid Scheme

Hype and high pressure

Facts and no pressure

Large $ investment or   front loading product

Small investment and   little or no required product purchase

Product secondary or no   real demand

Superior product primary   and product driven demand

Distributor Recruitment #1   goal

Retail sales #1 goal

Sales mostly distributor   to distributor

Sales mostly to end   consumer

Get rich quick emphasis

Emphasis on hard work,   slow steady growth

No valid compensation or   marketing plan

Distributor oriented   marketing and compensation plan

No upline support

Full-time upline support

Promoters make money,   distributors DO NOT; little or no income available long term

Distributors make $ based   on effort; monthly, permanent recurring income available on an equal   opportunity basis

No inventory buy back

90%-100% Inventory buy   back

Financially insecure; thin   or no capitalization; high debt

Financially secure; well   capitalized; no or low debt

Promoters and management   of questionable background; few or questionable references available; no   trade organization involvement

Experienced, full-time,   executives with impeccable reputation; Direct Selling Association membership

Little or no product   promotion literature available; emphasis on making money

Company brochures,   marketing compensation plan; readily available; emphasis on product sales to consumers

Attorney General, Better   Business Bureau or Trade Association call discouraged

Attorney General, Better   Business Bureau or Trade Association call encouraged

Illegal

Legal