Joining direct selling companies is a great source of extra income. It only requires little or no capital and there is no education requirement or qualification needed, so almost anyone can join. It is also great as a sideline for those with a regular day job. There is no fixed time; you can work anytime and for as long or as short as you want. In direct selling, you earn commissions from selling a product to the consumer. With enough effort, direct selling may turn into a very profitable endeavor.
Sadly, there are companies, that are really just pyramid scams. Pyramiding is a scam of tricking people to register, pay and invest money with a promise of high commissions and earnings, usually without any product being sold but by making money (if not solely) from recruiting – or getting “downlines”.
So, before joining any company, how do you check and make sure that you’re not signing up for a pyramiding scam?
The 8-Point Question Test
Recently, the Direct Selling Association of the Philippines (DSAP), came up with the 8-Point Test. It is a series of questions that you can ask your MLM sponsor or recruiter that can differentiate a legitimate direct selling company from a pyramiding one. If the answer to ALL the questions is YES, then the company being evaluated is a legitimate company. But if the answer is NO, then there is a high probability that it is a pyramid scam.
1. What product are you selling?
The answer must be yes. All legitimate businesses sell a product (or service). If your sponsor says that there’s no need for you to sell anything, then you should be in doubt.
2. Can I make money without recruiting anyone?
The answer must be yes. You should be able to make money through commissions paid on the sales of their products. It’s easier to continuously sell products than to continuously recruit people.
3. Is it possible for me to make more money than you?
The answer must be yes. New members of a MLM company should have the same income potential as older members. The goal should be to sell a product and not to sell a position.
4. If I have no downlines, is it possible to make as much money as someone who has downlines?
The answer must be yes. Members should be able to earn as much from simply selling products rather than just focusing more on recruiting people to join.
5. If everyone stops recruiting, can everyone still make money?
The answer should be yes. If everyone can just focus on selling products to earn money, then the company is legit. Income from product sales should be enough to sustain the company, even if recruitment stops.
6. Is there are reasonable product return policy?
The answer should be yes. Consumers should have the right to return or get a refund for an unopened or unconsumed product purchase.
7. Does your product have fair market value?
The answer should be yes. Your sponsor should be able to explain why their product costs that much. Check and make sure that the price is not unreasonably high, whose only purpose is to pay the sales commissions for the uplines.
8. Why would non-members want to buy your product?
The answer should be yes. There should be a reason for consumers to buy their product, especially for those who do not want to become a member.
Remember, if the answer to ALL the questions is YES, then the company being evaluated is a legitimate company.
But if the answer is NO, then there is a high probability that it is a pyramid scam.
If you discover that the company you have joined is actually a pyramiding company, you may contact DSAP through (02)-638-3089 or e-mail email@example.com. Complaints can also be submitted to the Department of Trade and Industry (DTI).
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