Sometimes when I mention I work with Avon I get the response “Isn’t that a pyramid scheme?”
The answer is No. If it were, I’d probably be in jail, because pyramid schemes are ILLEGAL.
Avon is a multi-level marketing business (MLM). That’s not just a fancy change of words: it’s a whole different business model. Let’s look at both in turn.
The pyramid model
We all know what a pyramid looks like, right?
Pyramid schemes usually start with one person at the pointy end. Let’s call him Barney.
Barney offers an opportunity to get rich quick. He interests people by claiming huge instant profits or by promising future income through their investment in a group that has interests close to their heart.
Barney recruits 10 people paying £200 each and earns the full amount from each of them. He may or may not invest that original “investment”.
Each of those 10 people then have to recruit 10 more in order to recoup their original investment. They receive far less than the full amount each recruits put in, because a large percentage goes to Barney for him to “invest”. Still, 50% of £2000 just for signing a few people in is great, huh?
Note: There is usually no physical product involved in these schemes, just the promise of wealth through connections or investments. So no way to make money other than buy bringing new people in to the business
So now there are 111 people in this business. Each of whom has to recruit another 10 in order to receive any payment. If any of the people they recruit drops out, they have to refill that hole. And so it goes on...
Every layer of this business increases tenfold until the market is saturated with nobody else wanting to join, nobody involved having the opportunity to create income by recruiting more, and -poof!- the whole scheme collapses.
Image source: Forbes.com
The only people who make money from a pyramid scheme are those sitting right at the top who recruited those initial 10 from whom all income has flowed back. Usually by now they have vanished to a tax haven with no extradition process.
I found this description quite helpful:
Pyramid Schemes: Cheat Sheet: Stuff you need to know
- A pyramid scheme is any "business opportunity" in which the only real way to make money is to recruit more salespeople.
- If recruiting new salespeople is the only way to make money, then those who get into the game late will never be able to find enough new recruits to recoup their money. In fact, the success of the top few levels of the pyramid requires that many people below them lose their money.
- In a product-based pyramid scheme, 99.88 percent of participants never make any money. In any pyramid scheme, it's a mathematical fact that 88 percent of participants will be on the bottom level.
So how does this differ from Multi-Level Marketing? Let's have a look.
First of all, MLMs are not a way to get rich quick. Yes they can provide fantastic payoffs and residual income, but you have to put the effort in! Nobody earns in an MLM unless products are sold.
Source: Texas Online
- MLMs do NOT rely solely on recruiting more members - they sell products that people want and for which there is a demonstrable market.
This is especially the case with AVON. It's been in business for over 130 years (and in the UK for 60) - because of the quality and diversity of its products and its unique selling model, direct to people's homes.
There are many many Avon representatives in the UK who do not take the step to becoming a sales leader, but still generate an income at a level they are happy with. The advent of online selling - and AVON providing a FREE UNIQUE WEBADDRESS for each representative - has really opened the doors to the ability to earn big with Avon as a representative, without the need to build a team.
- MLMs do NOT pay members simply for recruiting people. In fact the opposite - as a team leader for Avon you are charged a nominal fee (£4) for each new representative you introduce. Those new people have to work in order for their team leader to be paid, and if you are their team leader you need to invest your time to train them to be the best they can be, to keep them motivated and earning for themselves and you.
- There is no ongoing fee payable to join an MLM, and starter kits are priced at or below the value of the products they contain and at a level that most people can afford. Pyramid schemes, on the other hand, often cost a large amount to join, with no products, and charge a membership fee on a monthly or annual basis.
Avon provides a range of starter kits, all of which can be returned without charge within 14 days if the new recruit has second thoughts. There is no ongoing charge, no monthly minimum order to stay a part of the team, no hefty charges for mandatory training.
- MLMs limit the level of recruits from whom a recruiter can earn. Pyramid schemes do not. Hence Barney, the top dog in our pyramid scheme, earns from every single person who is brought into his scheme, even if he has no involvement with or knowledge of them or their recruiter.
Avon allows its team leaders to earn only from three generations - that is, if I recruit Gilly, and Gilly recruits Andy, and Andy recruits Barbara, I earn a diminishing percentage from each person's sales. But if Barbara recruits Fred, I would not earn from those sales because Fred would be too far down the chain for me to earn. I would not have had any input into recruiting Fred, so why would it be fair that I would earn from him? Let Barbara and her upline Andy take that percentage, and Andy's upline Gilly, who is probably still providing Andy with support.
- MLMs are mostly publicly listed companies, with a large shareholder base. This provides balance, credibility and most importantly ACCOUNTABILITY. Pyramid schemes are often run by one-man companies or partnerships of criminally-minded individuals who are out to fleece as many people as possible.
Image source: consumer,sd.gov
I hope this helps clarify the differences between a pyramid scheme and MLM. Avon works for people of all ages and all circumstances, right across the globe. Nobody is left financially ruined by an MLM such as Avon. If people don't succeed, they have either not tried the avenues available to them for promoting their businesses and the MLM products to the widest possible market, or sadly they may not have received adequate training from their team leader. This is why it is important to thoroughly research the team you are applying to, in order to ensure its working methods are a good fit for you.
Any questions? Comment below and I will do my best to answer them!