What is Pyramid Scheme?
There is one thing I should tell you about pyramid scheme: It’s a fraud. It is a marketing scheme by which promoters or so called “investors” get incentive for getting more people to invest in their company. They knowingly deceive you into a low quality but high priced investment. Instead of investing to sell products, you invest to encourage more people to invest. You pay for an entry fee so you become part of the network and you earn from getting more people to join.
Pyramid schemes are not recommendable for the market because first of all, it is not commercially stable. They serve anyone who is willing to pay their entry fee who in turn, gets someone too. If you could get the whole world to invest, then everyone will invest but how do you make a system as large as that stable? And yes, as a new recruit, there are a million of possibilities of getting new recruits, but you get lesser convincing skills than that of the promoter. Evidently, most of these schemes do not last long and those who entered last have no chance of getting their entry fee back. The scheme rewards you for each person you invite, the more the better. You’ll also notice that the company lacks any legit products or sustainable goods. In the long run, you’ll realize that there is no actual trading taking place just a transfer of wealth from each new participant to the promoters.
Maybe you’re thinking that I must be lying because most pyramid schemes do have products. But as they were analyzed, it turns out these products do not have real market value. These products only act as a display so a new recruit assumes that with their entry fee, they are purchasing the products but in reality, they are investing for the network. Most products that come with the entry fee are training programs, magazine subscriptions, miracle treatments that don’t do what they’re supposed to at all, and even discounts. When promoters are encouraging you, they discuss to you about the products but when you pay for them, you’re not paying for them at all. You’re paying for your entry.
Pyramid schemes are also not concerned with repeat sales but are very particular with volume sales. Simply because when you choose to participate, you are forced to purchase under market value products that do not even serve their purpose. You are forced to get overloading inventory that s up to you if you wish to sell them. Nevertheless, selling them would be useless as these products have very low market value. These schemes will not give you refunds for these overloading purchases. Should they allow this, there would be an immediate collapse of the scheme. And if to any extent does this collapse come, there is no way for those newly entered recruits to get back their investments.
In pyramid schemes, you are also given the chance to buy your way up. With a higher package, you are given more incentives and more freebies. But along with a higher rank comes an enormous price tag. Your rank is not based on your performance nor is it based on the number of recruits you get but it is based on the package you get.