What is a pyramid scheme? How do you identify pyramid scams?
Wait. Why are we even asking that question?
Simple Reason: It is important to ask that question because millions of people in Nigeria, Africa and worldwide often mistakenly confuse pyramid schemes for genuine network marketing companies.
Consequently, it is absolutely important to get a clear and concise definition of pyramid scheme to help millions of honest-hearted people all over Nigeria, Africa and the world make a clear distinction so they can intelligently avoid the thousands of pyramid scams out there (and save themselves from losing their hard earned money in the process).
A pyramid scheme (or pyramid scam) is any income opportunity program where the bulk of the commission paid to participants are earned primarily from money paid by new members they recruited to join the program or on the quantity of purchases by other participants they recruited to join the program instead of on actual sales to end users.
The answer to the question what is a pyramid scheme should be obvious from the above definition.
Let's take a moment to explain what that definition actually means to provide greater clarity to people who are not familiar with how business opportunity programs work.
Below is a list showing the features or characteristics of pyramid schemes:
1. Pyramid schemes focus heavily on existing members recruiting new participants to join the program instead of focusing on product or service sales
2. The majority of products or services sold by pyramid companies are sold to participants NOT to the general public
3. Pyramid scam companies often sell over-priced products that are difficult to retail (or sell to the general public at the company set retail price) because most sane consumers would prefer to buy lower priced competitor's products. (Sometimes, pyramid company products are sometimes twice as high in price than non-pyramid competitor's products! How can their distributors ever hope to sell those over-priced products to the public at a profit?) No wonder these pyramid scam companies focus on selling to their distributors who are willing to buy the over-priced products because of commission incentives associated with buying the products.
4. Participants are enticed to purchase more products than they actually need (referred to in the mlm world as product packages) in order to qualify to earn greater commissions (this is often referred to by government regulators as inventory loading)
5. Most pyramid schemes post misleading income claims on their websites and marketing materials to entice unsuspecting members of the public into thinking they can become multi-millionaires in 30 - 90 days of joining the pyramid scheme. These get-rich-quick approach has proven to be very effective in grabbing the attention of gullible individuals who think they can get rich fast through these illegal pyramid scams. Sure, they end up losing their hard earned money!
Types of pyramid schemes include:
3. Investment based pyramid schemes
Click on each of the links above to learn more about each category of pyramid scams.
NOTE: This information has been provided to help you correctly answer the question, "what is a pyramid scheme", understand how pyramid schemes work and finally avoid them like the plague!