In our previous thread, we talked about how multi level marketing or referrals can generate huge incomes for anyone who is hard working and willing to learn..

In this thread, we will be sharing about how to distinguish between Pyramid Schemes and Referral (or Network Marketing or Multi Level Marketing)

I hope this thread will be able to educate correctly and shine the light on a real business model that works. We should be able to see why companies and banks now employ the use of word of mouth marketing and one-on-one instead of mass marketing and publicity as we are used to.


For self-motivated individuals with a knack for sales, opportunities abound to make a little extra cash. Working for a multi-level marketing company (MLM), also known as direct sales and network marketing, can even become one’s primary source of income.
It is easy to fall under the spell of misleading pyramid schemes. Grand promises, huge sums of cash, and minimal work are very tempting aspects of pyramid schemes. Knowing the difference between legal multi-level marketing and illegal pyramid schemes can help you make the safe decision when considering that job on the side.


1 Find out when the company was founded.
All of the top 25 MLMs have been around for 10 years, and most more than 20. There are certainly legitimate startup MLMs, but treat a company that has been around for less than 10 years with caution. Since pyramid schemes are illegal, the top executives generally close their doors as soon as they turn a decent profit.

2 Do a web search of the company.
With the internet, it is easy to find a wide number of impartial sources with opinions about companies. Add keywords like ‘scam’ or ‘reputation’ or ‘review’ to get directly to people’s opinions. Though pyramid schemes may hire internet marketers to produce false reviews – another illegal practice – you should find positive as well as negative reviews.

3 Look at the company’s structure.
Due to their large pool of self-motivated underlings, MLMs may seem similar to pyramid schemes on the surface. However, the MLMs use this system as a substitution for a larger advertising budget. This work is done instead by salespeople on the ground telling others about their product. If the company emphasizes the work of the executives in recruiting new members in their ‘downline’ over the role the salespeople play, it is probably a pyramid scheme.
’Downline’ is a term used by MLMs and pyramid schemes to refer to those who work under you. It can be confusing, since MLMs also give salespeople the opportunity for promotion to a supervisory role.

4 Look at the compensation.
MLMs make their money off sales rather than the contributions of new members. They want to recruit and keep better salespeople, so they compensate them well. Pyramid schemes will glaze over the compensation details of the lower tier to tell you how much money you can make after getting promoted. Push them to give you not only concrete profit margins for salespeople, but actual yearly averages of profit for entry-level workers – not the executives.



In order not to make this post seem so long, we will just deviate to simple points:

Fraudulent pyramid schemes — like Ponzi schemes — are illegal but often try to disguise themselves as MLM (multi-level marketing) programs. Traditional MLM programs are legal because there is a real product that is being sold through the channel.

Imagine earning money because you referred your friend to open a GTBank account? GT iRefer pays you money back.
Imagine getting a free ride on Uber because you referred your friend to use the Uber app for hassle free and comfortable transportation within Lagos.

That is simply making money off your network of friends whom you have referred to a PRODUCT or SERVICE

That is easy I suppose.

I am open to accept any questions on Referral, Network Marketing and the demerits of pyramid and ponzi schemes.