Pyramid marketing, also known as multi-level marketing (MLM), is a type of marketing where marketers build a network of distributors or other marketers to sell products or services and expand the customer base.
Pyramid marketing is characterized by forming an organizational pyramid consisting of multiple levels, where the distributors at the top of the pyramid (company founders or key marketers) and there are layers below them including distributors who sell the products or services and expand the network.
Through the pyramid structure, distributors earn commissions on their sales as well as commissions on the sales made by the distributors they recruit (direct marketing).
The main goal of pyramid marketing is to build a large network of distributors to increase sales and profits.
Companies relying on the pyramid marketing model have complex compensation plans that include a variety of incentives and rewards to encourage distributors to build and expand their networks.
While some success exists in this model, it raises some criticisms due to market saturation and organizational issues that can arise with network expansion, as well as suspicion that some companies may use the pyramid marketing model for fraudulent purposes.
Pyramid marketing relies on a hierarchical structure where products or services are sold through a network of independent marketers who participate in sales for commissions and bonuses.

Types of pyramid marketing

Horizontal type:

where marketers work together at the same level, and commissions are paid based on personal sales volume only without relying on the marketer’s network.

Vertical type:

where a pyramid is built from the bottom up, encouraging marketers to recruit new marketers beneath them, achieving commissions and bonuses on the sales they bring in.

Advantages of pyramid marketing

1.High-profit opportunities

Pyramid marketing provides marketers with an opportunity to earn extra income based on their personal efforts and the efforts of the team they build.

2.Flexibility

Individuals can work in pyramid marketing flexibly, organizing their work schedules and activities to suit their personal schedules.

3.Personal development

Pyramid marketing allows individuals the opportunity to develop communication, sales, and leadership skills, enabling them to improve their confidence and develop personally and professionally.

4.Partnership and cooperation

Pyramid marketing encourages building cooperative relationships and partnerships with others in the network, promoting mutual support and cooperation in achieving common goals.

5.Reliance on the network

Pyramid marketing relies on network structure and teamwork, encouraging cooperation and mutual support among network members.

6.Entrepreneurial opportunity

Individuals in pyramid marketing can build their own teams and develop entrepreneurial projects, giving them the opportunity to succeed in the business world.

7.Diverse products and services

Pyramid marketing companies can offer a variety of products and services, providing multiple options for marketers and customers.

It should be noted that pyramid marketing can be successful for some individuals and companies, but it requires continuous effort and work to build and expand the network. Caution should be exercised with unethical companies that exploit this model for fraudulent purposes.

Disadvantages of pyramid marketing

Despite some successes in pyramid marketing, it raises many criticisms and includes some drawbacks that should be considered, including:

1.Market saturation

The pyramid marketing model may lead to market saturation where it becomes difficult to market products or services later on, especially when a large number of marketers are recruited.

2.Environmental criticisms

Pyramid marketing is sometimes viewed as a type of fraud or deception, posing a challenge for companies relying on this model.

3.Focus on recruitment

Focusing on attracting new marketers and expanding the network without adequate focus on the quality of products or services may lead to offering low-quality or unreliable products.

4.Hidden costs

There may be hidden costs for marketers in pyramid marketing, such as joining fees, promotional materials, and mandatory training, which may result in financial loss without achieving sufficient profits.

5.Dependency on the network

Marketers may find themselves dependent on their network, needing to maintain their relationships and continually expand their network to ensure a steady income.

6.Loss of trust and reputation

In cases of fraud or failure to provide quality products or services, pyramid marketing can lead to loss of trust and reputation for companies and marketers in the market.

These are some of the key disadvantages of pyramid marketing that should be considered when considering the use of this model in a marketing strategy.