So - Herbalife is being investigated to see if it is a Pyramid/Ponzi scheme.
Well - is it? As we talk about Herbalife, we need to understand that we are getting into the murky world of Multi-Level Marketing (MLM) which many people feel is a scam and fraud in and of itself. However, MLM's are not illegal, but they do tread into areas which are problematic.
If you read the previous posts on MLM's, then you realize the concept is simple - an individual is responsible for recruiting other individuals (called "operatives") who operate beneath the individual. The operatives can only purchase from the individual and the operatives are responsible, in turn, for recruiting OTHER operatives who work beneath them so the operatives will become an individual responsible for other operatives. Instead of selling directly to a customer, therefore, MLM's work on the premise that people must be recruited into the MLM program so they can begin to sell to other people.
It seems like a complicated way to go about selling products. Further, it seems strange to have such a system in the first place.
This rather strange and complicated system of selling products is what has troubled MLM's for years and Herbalife is no exception. The basic question asked is: why does a company need to recruit people instead of just selling products?
A cursory examination of this system can lead to the conclusion that it may fall into being a Pyramid or Ponzi scheme.
Well - is it? As we talk about Herbalife, we need to understand that we are getting into the murky world of Multi-Level Marketing (MLM) which many people feel is a scam and fraud in and of itself. However, MLM's are not illegal, but they do tread into areas which are problematic.
If you read the previous posts on MLM's, then you realize the concept is simple - an individual is responsible for recruiting other individuals (called "operatives") who operate beneath the individual. The operatives can only purchase from the individual and the operatives are responsible, in turn, for recruiting OTHER operatives who work beneath them so the operatives will become an individual responsible for other operatives. Instead of selling directly to a customer, therefore, MLM's work on the premise that people must be recruited into the MLM program so they can begin to sell to other people.
It seems like a complicated way to go about selling products. Further, it seems strange to have such a system in the first place.
This rather strange and complicated system of selling products is what has troubled MLM's for years and Herbalife is no exception. The basic question asked is: why does a company need to recruit people instead of just selling products?
A cursory examination of this system can lead to the conclusion that it may fall into being a Pyramid or Ponzi scheme.
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tausk
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