If you’re here from the Philippines, we have this association of direct sales companies – ‘The Direct Selling Association of the Philippines or DSAP for short. DSAP has made an 8 point test to ‘differentiate a Legit company from a
scam company. .
“How to differentiate a legitimate direct selling company from pyramiding using the 8-point Test”
1. Is there a product?
If it doesn’t have a product, it’s an obvious call, it’s a pyramid scheme period. Direct sales or Network marketing, whatever you want to call it, operates just like any other business. It provides/sells products to the society. If it does have some products, it doesn’t guarantee it’s not a money gambling scheme. That’s why we you should read the other seven questions.
2. Are commissions paid on sale of products and not on registration/entry fees?
I want you to be careful on this, some would think that just because there are products moving in their company it’s about product sales right? In my opinion, it depends. Ask yourself this question, would you rather have the required ‘Fix amount’
package ready set products or would you rather want the freedom to choose on:
- what products to buy?
- how many to buy?
- and have the freedom on how much money to spend on your first purchase?
I don’t know about you? but I think what most people including myself would choose is the latter.Here’s a little disclaimer- I’m not saying in any way that products packages are NOT good, if you can afford to buy product packages, Go, do it. I think it’s a great thing to have some products in your inventory. However, I also believe that product packages should not be a prerequisite purchase for an interested applicant to be a member.
3. Is the intent to sell a product not a position?
what does this mean? okay, If you are buying a product in a Legit company as a distributor – You are buying for ONLY 2 reasons: 1) Is because for your own personal use and 2) is because for retail purposes. While in a money game company – People buy because they need to secure a slot or something like that. They treat their business as if they’re in an investment industry.
4. Is there no direct correlation between the number of recruits and compensation?
I want you to ‘Pay Attention to direct correlation term right now.
5. If recruitment were to be stopped today, will the participants still make money?
That’s why understanding basic business concepts and compensation plans are important in this business.
6. Is there a reasonable product return policy?
In network marketing, since we are building our business for the long term vision, repeat purchases should be a necessity. Products that are sold by all companies should be high quality products. Having a product return policy shouldn’t be a problem.
7. Do products have fair market value?
This does not only talk about it’s competitive value on the direct sales industry but on the entire market place.
8. Is there a compelling reason to buy?
Would you still buy products even if there is no monetary gain?
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.