I have read with worry lines all over my face over the last weeks, the counsel given by my friend and fellow blogger, Walter of FreelancerKenya, discussing an ongoing scam in Kenya. The mind that drives a scam and the mind that drives a criminal of any kind are the same. The only way to protect yourself is to be informed. This article will shed light on the difference between three words that are easily assumed to be the same thing.
Multi Level Marketing (MLM), affiliate marketing, and High Yield Investment Programs (better known as Pyramid Schemes in Kenya), are three words describing money-making ventures often, very casually, and deceptively used interchangeably. It is horrible to listen to someone use the words with a lot of authority to appear as though they are one and the same things. They are not!
To first get it very correct; MLM and affiliate marketing are legal business modules. HYIPs or pyramid schemes, in almost all countries of the world, are illegal. There is no way a legal and an illegal business module be the same thing.
Affiliate Marketing
The term affiliate marketing is almost always only used online. It refers to re-sellers of other people’s products through a unique affiliate link. In this module, the re-seller may sell other people’s products exclusively online, offline or both. However, for the affiliate to get credit for the purchase, interested buyers must click on the re-sellers unique affiliate link.
In a professionally managed affiliate program, every affiliate has a unique affiliate link issued by the seller. For most affiliate programs online, the affiliate product is hosted on an affiliate management company such as SFI, ClickBank, or Amazon. These companies give you a unique link that when clicked and conclude in a purchase, will generate you an income.
In short, affiliate marketing is a business module seeking to get products out in the market and into the hands of consumers. Affiliate marketing companies sell tangible goods and/or services.
Running a campaign for an affiliate program on your site is one of the most lucrative methods to make money online.
Multi Level Marketing (MLM)
Multi Level Marketing, network marketing or relationship marketing are all the same thing and refer to another method of moving goods from the manufacturer to the consumer.
In the most common sales chain, products move from the manufacturer, to the distributor, to the retailer, and eventually find their way to the consumer. Each of the participants in the distribution chain earns a commission on the one product.
But guess who pays those commissions? The consumer!
Therefore, to get the sugar in your sugar-dish from the manufacturer, you have paid the manufacturer, the distributor, and finally you pay the retailer who could be anyone from the huge supermarkets, to the smaller kiosk outside your gate. Theoretically, MLM companies slash the chain of distribution and simplify it to just the manufacturer and the consumer. The consumer then acts as distributor and retailer and keeps the commissions of both.
MLM operates on two primary principles; first, that you earn directly from your personal sales efforts as you would as an affiliate, and second, you earn from team effort at different levels in multiple ways from the same sale. Thus the term ‘multi level’. From these facts, you can immediately see the income potential of this business module to generate income.
Most MLM companies sell tangible goods or services. Some, though in the minority, do not and tend towards the next business module.
High Yield Income Programs or Pyramid Schemes
The simplest way of identifying a pyramid scheme is from its purported goods or services, and its purported rate of multiplication. Purported because HYIPs often do not sell any goods or services. They will attract you with the promise of pay when you move up a pyramid, or get to the top of a list. You move up by introducing others who push you up.
The second module of pyramid schemes is to put money together in an investment program (one that invests in undisclosed high yield quarters) where you earn 100% plus return on investment within days, or weeks at most. The hidden incentive in this module is; tell all your friends of this good thing.
There are three things a-miss with the pyramid business module;
1. Any business that does not give tangible value to its consumers in the form of goods or services is a sham!
2. Any investment program that will not disclose where they invest is a sham!
3. Any program that will give you 100% plus return on your investment in weeks or days is a sham!
Why Are HYIPs or Pyramid Schemes Illegal?
Here is the money principle that is true of all HYIPs; if three of us have a dollar in the morning, and we each give our one dollar to person ‘A’, though person ‘A’ by end of business has three dollars, they actually also owe three dollars. If the process ends there, as it does in pyramid schemes, then there is only debt created, not value. What pyramid schemes circulate is debt, not value. Distributing debt is illegal.
Is that not the same principle of a merry-go-round? Yes! But note, a merry go round puts the money together and invests it into a program that will give them returns such as construction or individual business. In this case, when person ‘A’ is returning the three dollars, they are not repaying a debt from their debt. They take money out of their now increased wealth and return it into the kitty to create wealth for others. The money in a well-managed merry go round adds value to its members!
The Common Lies Used to Woo Clients by HYIPs in Kenya
1. We cannot explain how the cash increases! Ever heard the cry ‘let leaders disclose the source of their wealth!’ All legitimate wealth has a trail. If a company cannot explain its trail, it is a con job.
2. We cannot disclose where we invest, because it is our “business secret”. Laughable! Even giant multi-nationals such as ColcaCola have ‘business secrets’. Yet, CocaCola will reveal what is in their soda. The only thing they keep secret is the percentage of each ingredient. If an investment company will not say WHERE they are investing, they are not investing anything. They are recycling debt!
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