MLM Blog
Key Differences Between MLM and Pyramid Schemes
Multi-Level Marketing (MLM) and pyramid schemes are often confused but differ significantly in their structure and legality. MLM involves a legitimate business model where participants earn commissions through direct sales of products or services, as well as from the sales made by their recruits. Success in MLM relies on a combination of personal sales and team performance, with a focus on providing real products or services to customers. In contrast, pyramid schemes primarily emphasize recruitment rather than actual product sales. Participants earn money mainly by signing up new members, who, in turn, recruit others, creating a hierarchical structure where income is largely derived from new recruits rather than sales of goods. Pyramid schemes are illegal in many countries because they inevitably collapse when the recruitment base can no longer sustain the payout structure, often leading to significant financial losses for most participants.