Let’s compare some aspects of Referral Marketing and Pyramid Schemes, which are both types of Network Marketing.
According to Investopedia, “Network marketing is a business model that depends on person-to-person sales by independent representatives, often working from home. A network marketing business may require you to build a network of business partners or salespeople to assist with lead generation and closing sales.”
Referral Marketing
Referral Marketing refers to a type of Network Marketing or Affiliate Marketing where you, the independent associate, recommend the company’s products to others, who then purchase directly from the company.
Typically Referral Marketing does NOT involve selling or purchasing stock to sell to others, because you are merely recommending the products to other potential customers.
It usually means you, as an independent associate, are also a customer, purchasing only the products you wish to use for yourself or your family. The strength of this business model is that with all associates making purchases for just themselves/their families on a regular basis, sustainable income is generated for them and the levels above through fixed percentages being paid in bonus payments.
Pyramid Schemes
Pyramid Schemes or Snowball Systems are also a type of Network Marketing or Affiliate Marketing, but in this case, the independent associate or contract partner must constantly recruit new partners (who in turn refer or sell to their recruits) in order to sustain the hierarchical commission or bonus payments system.
Contract partners usually pay a fee to join, or must purchase a product from the partner or company in order to join. Sometimes there is even a surcharge added onto the price of products as they are sold down the levels.
Pyramid or Snowball Schemes can quickly become unsustainable, because it can be mathematically impossible for lower levels to recruit enough new people to those levels (which would number in the billions if all partners kept recruiting). Some Pyramid Schemes are even illegal.
In summary…
- Referral Marketing opportunities tend to be easier to join and participate in, because their structures are often simpler and more transparent.
- Growth is generated when associates purchase their own consumable products and refer/recommend company products to others, who in turn become customers too. Everyone makes their purchases directly from the company, so there is no requirement to buy stock or sell it on to others.
- When associates keep purchasing their own products on a regular basis (usually monthly) and referring the products to others, who then become customers too, this business model is scalable for everyone who participates.
- As long as bonus payments are managed wisely by the company, never exceeding 100% across all levels, and as long as customers keep purchasing, then Referral Marketing is a sustainable and ethical business model, where all participants benefit.
Watch out for…
- Schemes, systems or opportunities where you have to pay to join, or where you must purchase something to become a member.
- Schemes where you are encouraged, often aggressively, to keep recruiting new members.
- Schemes with complicated commission or bonus payment structures.
- Schemes where no matter how many new contract partners you sign up, you don’t seem to earn much more commission, or where commission is only earned when you hit certain targets (which may be difficult to attain).
- Schemes where they emphasize the benefits as things like making lots of money, owning expensive things, driving fast cars, holidaying on tropical islands, living the dream, etc.
- Schemes where they tend to use emotive or exaggerated language in promotions, for example, “insane wealth”, “crazy rich”, “tons of cash”.
I’d like to recommend…
I am an independent associate and customer with a nutritional supplements company, who manufacture unique, holistic nutritional products based on ongoing research into the complexities of how nutrition works in the human body.
They have strict quality standards and many products are organic or contain organic ingredients where possible.
The company’s business model is Referral Marketing, which means customers recommend to other customers. There are no middlemen, so no surcharges are added on for wholesalers or retailers.
How this works is quite simple: I am a regular customer and purchase my own nutritional supplements, and I highly recommend these whenever someone asks why I look so young and healthy! 🙂
If they also become customers, buying directly from the company (quoting my associate PIN as reference), then I earn bonus payments, and they can too, by following the same simple process.
By participating, not only are you looking after your own health, but it allows you to build a sustainable home-based business too – it’s a win-win!
What I really liked about this opportunity when I first heard about it was its simplicity, based on one’s own health and then making referrals or recommendations – and it costs nothing to join, except for purchasing the wellness products you use yourself on a monthly basis.
The company is focused on creating a balanced lifestyle for all participants – customers and independent associates, emphasizing all aspects of wellness. It’s people-oriented and everyone is friendly and helpful, which was reassuring for me. When I joined, I instantly felt at home – it was like being welcomed into a big, supportive family 🙂
The information on this website is for educational purposes only. None of the information on this website is to be considered financial advice. To receive Lifeplus bonus payments requires a certain minimum spend per month on nutritional supplements for yourself, and that those you have referred are also purchasing a certain monthly minimum for themselves. Full details of the compensation plan are available on request. Any suggestions of earnings are merely examples for illustration only. Earnings will vary from individual to individual, depending on numerous factors, including efforts, marketing, abilities, and so forth. Some links on this website are affiliate links – in other words, I will earn a commission if you click on the link and purchase the product or service. Thank you for doing so, as this helps me to maintain the website and my ongoing dedication to providing quality information, products and services to you.