Membership Club or Scam? The Answer
Corey Blackmur brought up a good point in a comment today about identifying a legitimate membership site as opposed to a scam. I hope you don't mind Corey but I am going to quote your Comment here:
"@Cheryl, just referencing your following statement: "It becomes a Pyramid/Ponzi when the service/product comes with a string attached-namely having to become a part of the corporate structure " So how does a person rate a "membership" situation whereby you become a member of an organization in order to take part in the benefits/information offered by the membership. In these situations you typically pay a yearly or monthly membership fee in order to be part of the "structure" and in some cases a commission is received for "signing up" new members - in this situation I don't believe that there is an issue of a ponzi/pyramid related issue ----- OR is there? Maybe I need to educate myself on the FTC guidelines better?"
That is a gray area Corey. If it is a true organization with some sort of cause, a private organization committed to a goal of providing members with a valuable service for being a member or is the goal of this organization simply to make money for existing members off of new members signing up?
To give you an example, Sam's Club is an exclusive membership club in which you pay dues for the privilege of shopping at Sam's. Sam's offers their members the opportunity to save money by buying in bulk. Sam's is offering a valuable service to it's members that has nothing to do with making money off of other members. Sam's may offer incentives to existing members to bring in new members but the goal of Sam's club is not to generate profit for existing members off of new members. Sam's club offers it's members benefits for their membership.
Another good example is DirectTV. DirectTV will pay up to $1000 a year for you getting your friends to sign up for the service. $100 per friend that signs up. Are you getting Paid? Of course but you are not promoting it as a way to 'make money', you are promoting it as a service and as a service it does have an appreciable value for those who sign up and they never have to bring another person into it to enjoy that value.
In both cases the 'compensation' is secondary to the service provided. They are not means of income, nor do they promote themselves as such.
No lets take the imaginary SCAMS Club. SCAMS Club is promoting itself with "Make hundreds of dollars by referring your friends" And they are putting in front of you some matrix or profit sharing program. They are stressing a compensation plan to you, not the benefits of membership. When you do get to the 'benefits' it usually some e-book or marketing system which has been around since the Stone Age of internet marketing, they simply took the information, shuffled it around repackaged it and slapped the word 'New" (Or some similar adjective) on it. When you bring someone into the program and they get a membership, there is no valuable benefit to them without them having to recruit others. The membership is simply a fig leaf they slap on it to give it the appearance of being legitimate.
So with membership sites the two things to remember are simple. One, where is the focus? Is it on the benefits you get for being a member of is it on a 'compensation plan. If it is on the compensation plan and the benefits are secondary it is a scam. And two, does the membership give value to members without them having to recruit others into it. If they have to recruit others to benefit it is a scam.
"@Cheryl, just referencing your following statement: "It becomes a Pyramid/Ponzi when the service/product comes with a string attached-namely having to become a part of the corporate structure " So how does a person rate a "membership" situation whereby you become a member of an organization in order to take part in the benefits/information offered by the membership. In these situations you typically pay a yearly or monthly membership fee in order to be part of the "structure" and in some cases a commission is received for "signing up" new members - in this situation I don't believe that there is an issue of a ponzi/pyramid related issue ----- OR is there? Maybe I need to educate myself on the FTC guidelines better?"
That is a gray area Corey. If it is a true organization with some sort of cause, a private organization committed to a goal of providing members with a valuable service for being a member or is the goal of this organization simply to make money for existing members off of new members signing up?
To give you an example, Sam's Club is an exclusive membership club in which you pay dues for the privilege of shopping at Sam's. Sam's offers their members the opportunity to save money by buying in bulk. Sam's is offering a valuable service to it's members that has nothing to do with making money off of other members. Sam's may offer incentives to existing members to bring in new members but the goal of Sam's club is not to generate profit for existing members off of new members. Sam's club offers it's members benefits for their membership.
Another good example is DirectTV. DirectTV will pay up to $1000 a year for you getting your friends to sign up for the service. $100 per friend that signs up. Are you getting Paid? Of course but you are not promoting it as a way to 'make money', you are promoting it as a service and as a service it does have an appreciable value for those who sign up and they never have to bring another person into it to enjoy that value.
In both cases the 'compensation' is secondary to the service provided. They are not means of income, nor do they promote themselves as such.
No lets take the imaginary SCAMS Club. SCAMS Club is promoting itself with "Make hundreds of dollars by referring your friends" And they are putting in front of you some matrix or profit sharing program. They are stressing a compensation plan to you, not the benefits of membership. When you do get to the 'benefits' it usually some e-book or marketing system which has been around since the Stone Age of internet marketing, they simply took the information, shuffled it around repackaged it and slapped the word 'New" (Or some similar adjective) on it. When you bring someone into the program and they get a membership, there is no valuable benefit to them without them having to recruit others. The membership is simply a fig leaf they slap on it to give it the appearance of being legitimate.
So with membership sites the two things to remember are simple. One, where is the focus? Is it on the benefits you get for being a member of is it on a 'compensation plan. If it is on the compensation plan and the benefits are secondary it is a scam. And two, does the membership give value to members without them having to recruit others into it. If they have to recruit others to benefit it is a scam.
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Comments (5)
Philippe Moisan16
Tutorial videos, sci-fi writer
I just bookmarked this article, thanks for the info, Cheryl
Cheryl Baumgartner12
Medical Billing/Coding/Insurance
That may be Corey but when in doubt, err on the side of caution. The FTC is very clear about what they consider a scam as is the FBI and other internet crime watch agencies. The best thing any of us can do to protect ourselves is to follow to the letter the guidelines that they have and that last paragraph boils it down to the least common denominator. Product or service must be the focus and members must be able to take advantage of the benefits without a 'recruiting requirement. Anything e
Corey Blackmur8
Blackmur Global
Reposted with permission of Corey Blackmur - LOL
Thanks Cheryl, in Canada we have Costco which is similar to Sam's Club (I believe Costco is in the US as well??)
I guess our lives are quite often full of those "grey areas", so we then have to refer to the fact we are 100% responsible as individuals for the choices, decisions, actions taken and results received in our life.
Due diligence becomes an important aspect of what we have to do in order to make the correct choices. In saying tha
Cheryl Baumgartner12
Medical Billing/Coding/Insurance
You are welcome.
Roosevelt Evans III10
Home Business Entrepreneur
Very clear and concise information that helps us to decide whether a membership club is legit or a cover for a pyramid scheme. Thanks for sharing.