DIRECT SALES, NETWORK MARKETING
Is that a PYRAMID??
"Is this one of those pyramid schemes?" This question is every direct marketer's internal eye-roll opportunity.
What we want to say is this: "Yes, that is exactly why I wanted to share this with you because I don't really like you and I just want to scam you, take all your money, leave you broke, and hope we can still be friends or at least friendly at the family reunion."
But we don't say that, nor do we actually feel that way! If someone is sharing a direct marketing opportunity with you, it is because they would LIKE to work with you and feel you have what it takes to be successful.
Robert T. Kiyosaki, the author of Rich Dad, Poor Dad, said, "The key to financial freedom and great wealth is a person's ability to convert earned income into passive and/or portfolio income."
This article explains the difference between Direct Marketing, other Side Gigs, and Pyramid Schemes. Let's the pyramid one out of the way first, shall we?
Pyramid Scams (Ooops I mean Schemes)
Many business models look like a pyramid.
Let's consider Starbucks. Starbucks wanted to sell coffee. They opened a stand-alone store, and then many stand-alone stores. All these stores sell coffee. Then they set up mini-stores in airports. This works well, so they set them up in Target stores, kiosks in malls, and even hospitals. Now the demand is even higher for their product, so they put their product in grocery stores.
The story goes that the McDonald's Corporation approached Starbucks and said they wanted to be an exclusive fast-food partner, and Starbucks declined. Now you can find Starbucks in several thousand other fast food locations. How big is this pyramid exactly?
When people refer to pyramid schemes, they often mean a Ponzi Scam. Wikipedia defines A Ponzi scheme/scam as "a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors."
Ponzi scams exist. They are illegal. If you Google Ponzi Scheme Minnesota you will find that the past decade has not been kind to the sorts of people who run Ponzi Scams.
Side Gigs
To clarify the difference between what I call "Side Gigs" and "Direct Marketing Opportunities," it comes down to initial investment and the requirement for personal initiative.
Technically a side gig could be ANY second job. As a teacher, I had a "side gig" as a nanny in the summer. Today, many people associate it with app-based businesses which connect consumers and those of use willing to meet the consumer's need.
Examples include Air B&B, which does not own a single piece of real estate, and yet (in a normal BC--Before COVID--economy) would rent out more rooms world wide than many of the largest hotel chains combined. In my post Gig Economy--Making Money on the Side, I cover several of these, from Lyft and Uber to Instacart.
For investment, these side gigs are often free to set up, such as with Uber, Lyft, and Instacart. AirB&B and its competitor VRBO offer higher placement or a reduction in their commissions if homeowners pay a small premium.
As for the personal initiative requirement, most side gigs do require quite a bit of that, with AirB&B being a notable exception. Specifically, with rideshare and grocery delivery apps, no one is going to do it for you; you won't make a dime unless you are out of your house. Furthermore, the best time to make money with rideshare is late nights and weekends, which many people feel should be "their" time to relax. Are you willing to give that up for the best return on your time?
Occasionally with gigs work there are opportunities in some markets to make passive income by helping others get started in the business. I've done that quite a bit.
Now that we've explored what constitutes a pyramid scheme and how side gigs differ in terms of personal commitment and initial investment, let's shift our focus to Direct Marketing Opportunities. Unlike side gigs, direct marketing typically involves a structured system where you not only earn through your own sales or efforts, but also through the successes of those you recruit to join your team.
In a well-designed direct marketing system, the emphasis is on quality products or services rather than simply recruiting members for the sake of commission. The goal is to cultivate a network that benefits from genuine product usage and customer satisfaction—two key ingredients for sustainable passive income. Think of it as building a community where every member's success reinforces the next, creating a ripple effect of financial growth and stability.
One of the main criticisms of direct marketing is its perceived resemblance to multi-level marketing structures. However, it's important to note that a legitimate direct marketing opportunity is built around transparency, clear compensation plans, and tangible product value. Successful companies in this arena invest heavily in training and support, empowering individuals to not only sell effectively but also to build teams and mentor newcomers.
Consider how companies like Amway or Herbalife have evolved over the years. They have shifted the narrative from merely recruiting to emphasizing product quality, customer feedback, and market reputation. This evolution highlights the importance of integrity in direct marketing—a stark contrast to the hidden methodologies behind pyramid schemes, which rely solely on recruiting without offering real value.
For those exploring a direct marketing opportunity, it's crucial to conduct due diligence. Look for businesses with a strong track record, transparent practices, and robust support systems. Ask questions about the product's market demand, training resources, and the company's history. By doing so, you'll be better positioned to determine whether an opportunity aligns with your financial goals and personal values.
In summary, while pyramid schemes and some side gigs may share superficial similarities with direct marketing, the underlying principles are decidedly different. With direct marketing, the focus is on building a sustainable business through quality products, thorough training, and mutual support. The result is not just a paycheck, but a pathway to financial freedom—a concept that, as Robert T. Kiyosaki famously noted, transcends traditional earned income.