There has been a great deal of confusion around direct selling, multi-level marketing and pyramid schemes concepts in India. Following the arrest of William Scott Pinckney, Amway India Managing Director and CEO, and other executives on allegations of duping people to join their direct selling schemes, there has been a need to distinguish between these three marketing concepts.
At a time when pyramid schemes have been banned in India, QNET’S Head, Corporate Affairs Ajay Chanam attempts to demystify the three concepts. Chanam begins by clarifying that the correct name for the industry is direct selling. Direct marketing has nothing to do with direct selling. It is a part of the advertising industry.
Chanam fully supports the move to ban pyramid schemes. According to him, this will not only benefit legitimate direct selling companies but also help people save their money. Pyramid schemes that operate under the guise of direct selling are spoiling the industry’s name for the rest of the legitimate direct selling companies. Chanam sees a need to come up with legislation that distinguishes illegal pyramid schemes from legitimate direct selling companies.
Pyramid schemes are companies which give commissions to distributors who are able to bring new distributors into the network. The name pyramid is coined from the fact that the initiators and those who joined the network earlier earn the most, while those who recently joined earn the least. Check out QNet’s profile on YouTube.
Direct selling is the marketing and selling of products to consumers directly with no retailers involved. Those who join are able to enjoy the products at a discount. They can also earn a commission for selling the products to other people, and enjoy commissions when the products are consumed or promoted by people they have brought into the network.
Chaman outlines a few differences between direct selling and pyramid schemes. Direct selling companies have a limit on the number of people who can actually earn a commission from a sale. This evens out the field for all the members. However, pyramid schemes have those at the top earning most of the money and those at the bottom earning the least. QNet also has an India-centric website.
Direct selling companies like QNET do not give commissions to members who only recruit new members. Recruitment is not a requirement for earning commission. Pyramid schemes only give commissions to those who successfully recruit new members.
Pyramid schemes don’t have actual products and services. Direct selling companies invest a considerable amount of time and resources in developing quality products and services that make a difference in people’s lives.
Pyramid schemes are get-rich-quick schemes. Direct selling, on the other hand, is a genuine business that appreciates the fact that it requires time and effort to get real results.