Many people confuse the illegal pyramid scheme with the legal referral marketing. How can you distinguish this? Every structure of a company has the shape of a pyramid. For example, look at defense. At the top is only the general and each level lower there are figures. At the bottom is Jan Soldaat. There are most of them. A classic pyramid ... but a legal one. Conclusion: a pyramid is not by definition illegal. How is that exactly?
Recommendation Marketing or Affiliate Marketing is also referred to as Network Marketing or Multi Level Marketing. Word of mouth is the most natural way of advertising. And also the best! After all, we only talk about products that are good. The user is so satisfied with it that he or she grants this benefit to others as well. Hence, there are companies that use this human trait as their sole marketing tool. There is one condition: The product must be very good. Otherwise this marketing form will not work.
What is recommendation marketing?
This form of marketing is very interesting for companies. Traditional advertising is unnecessary in referral marketing, making the sales and marketing department largely obsolete. The customers share their findings with others and through the recommendation they proceed to purchase. The company pays out a reward from the marketing budget to those who successfully promote the product. It only costs the company marketing and sales costs for successful sales. That is different with traditional marketing. There, tons are spent on utterances that are not even noticed. Furthermore, a company with referral marketing keeps customers very engaged, because customers can earn money through promotion. As a company, who do you give the more money? Advertising agencies and sellers or your own customers?
Recommendation marketing is also very useful when promoting a new product. Such a company has all customers on file and the affiliates will immediately start testing and promoting after the release. More and more companies are using referral marketing, such as Bol.com, Amazon and Ali Express. They all engage in some form of referral marketing in addition to their traditional marketing. But older MLM companies such as Amway, Herbalife and Tupperware, which only use referral marketing, are also good examples of successful companies in this industry. Referral marketing is a proven concept and is increasingly used as traditional marketing loses its power.
How do you recognize a pyramid scheme?
The triangular corporate structure says nothing at all about whether or not it is a Pyramid Scheme. As previously described, every healthy small and medium-sized enterprise structure is in the shape of a triangle. However, there are important differences, namely:
First: No products are sold in a Pyramid scheme.
You buy, as it were, a place in the structure. Some of the money paid goes to the person who brought you in and the rest to the top. You can never earn more than the one who brought you up.
In referral marketing you always buy a product. If you are satisfied with the product, you can start recommending. This should not be mandatory. If you don't want that, no problem! Then you enjoy the product and it stays that way. As a customer you have never been duped, because it is all about the product. The nice side effect is that you can earn by promoting, but only if you choose to do so.
Second: In a Pyramid scheme, the company's only source of income is new members.
There is only one way to make money in a Pyramid scheme and that is to register new members. If that does not work, you have lost your investment and you have been duped.
In referral marketing, the company's source of income is revenue from product sales. This turnover can consist of purchases from existing customers as well as purchases from new customers. Every business needs new customers, and that's no different for referral marketing companies. However, there should be no direct dependence on new customers to keep the business going. If you can contribute to more sales for the company, that promotion will be rewarded by the company according to the marketing plan. This can mean that multiple affiliates in the network are rewarded for the same sale of a product. In this way, the development of a network creates passive income for the affiliates.
Third: In a Pyramid scheme, you are more likely to make money if you get there early.
Most is earned in the top. It means that your income depends on the place in the structure.
In referral marketing, it doesn't matter when you start. You have as many options as anyone else. Even equal to those who are at the very beginning. Your income does not depend on your sponsor (the person who registered you). You determine what you earn with your commitment. It couldn't be fairer. You should also be helped by your sponsor. Because the better you perform, the better it is for you and your sponsors. In this business, your entire network gives you the best. There is no competition and you can develop yourself through the cooperation and therefore earn more again. That is different in the business world. There you certainly do not determine your own income and the question is whether you can be promoted. In any case, your colleagues will not help you.
Too good to be true?
You can see that despite the same triangular shape, there are still clear differences between a Pyramid Game and referral marketing. The amounts shown in the marketing plan for referral marketing often seem 'too good to be true', but are really very realistic with a good system. Because you will eventually work together with a lot of people, an enormous leverage is created. Leverage is a multiplier that significantly increases income. If you continue to develop your structure properly, your income will eventually become passive and you can live off the marketing plan. Financial freedom through referral marketing is entirely possible. According to Robert Kiyosaki, author of the book 'Rich Dad, Poor Dad', referral marketing is the way to become financially free. Referral marketing generally has a low barrier to entry and the potential is enormous! We have also walked this path to financial freedom and recommend it to everyone. You can go very far in this business through personal development. And if you know what to work on, it is also very doable. Actually much easier than expected. Setting goals, making a plan and proper guidance is key. Do you want to work a day less? That is quite possible. Do you want to work even less? Also possible!. The more you want, the more you have to do. Anyway, for a different income you also have to invest time and energy, often without any prospect of financial freedom in the short term. Passive income is not free money! But once you push the ball over the mountain, it will roll down on its own and you have it done.
If you have the idea and see the chance that you want to earn your money this way, do not be fooled by people who have no experience with referral marketing themselves, but who know everything about this business, so to speak. There has always been a family member or friend who has been harmed by a Pyramid scheme. Most have heard the bell ring, but have no idea where the clapper is. The confusion with a legitimate system and the Pyramid Scheme makes sense, but often not justified. It could just be that you are missing a very good chance by being influenced by incorrect information from your environment. You can't blame your environment either. It is not intended to be bad. Those people love you and want to keep you from making mistakes. The warnings are out of love, but mostly based on fear and ignorance. Do your own research and draw your own conclusion. Wouldn't it be a shame if those well-intentioned advice would miss a chance and in hindsight you could have lived a free life if you had taken the chance?