‘‘This network marketing system presents
itself like the infamous Ponzi Scheme in
that the company’s sales force spends more
time trying to recruit sales people into their
networks and less time making actual sales.
The more the number of sales people under
your network, the more money you generate
for the company through the various fees and
the more your commissions.’’
operator generates returns for older
investors through revenue paid by new
investors, rather than from legitimate
business activities.
According to Wikipedia, operators
of Ponzi schemes can either be
individuals or corporations, and they
grab the attention of new investors by
offering short-term returns that are
either abnormally high or unusually
consistent.
Companies that engage in Ponzi
schemes focus all their energy into
attracting new clients to make
investments because they rely on a
constant flow of new investments to
continue to provide returns to older
investors. When this flow runs out, the
scheme falls apart with a dramatic bang.
The scheme is named after Charles
Ponzi, who became notorious for
using the technique in the 1920s, a
technique that has been used over the
years by several other individuals and
corporations worldwide.
Talks of scam aside, it is noteworthy
that the concept of network marketing
can be quite an invaluable and
legitimate marketing tool if used
correctly. Any advertising or marketing
professional will affirm that word of
mouth is the most effective marketing
tool. The only reason it is not popular
is the cost implication.
Network marketing is the solution
to this. With a network of about a
million individuals, word of mouth
can be relayed within seconds with
just a click of a button to everyone
within that network. Advertisers
would relish such a tool.
As things stand however, this is not
the key selling point for corporations
and individuals using this concept.
Whether it is a legitimate money
making venture or a scam, is down to
an individual’s own interpretation.
Eugene Wanekeya is currently
the Communications, Marketing
and Advocacy Officer, I Choose
Life - Africa and a Marketing/
Communications Consultant. To get
to interact and know more about this
trend spotter you can reach him via
mail at: [email protected].