IS QNET A PYRAMID SCHEME?
To start with we will review the similarities and then work to distinguish the two.
Generally, the initial concern for people when introduced to a network marketing opportunity is when they see the compensation plan which resembles a pyramid in shape. Instantly they fear the worst as they draw a resemblance to illegal pyramid schemes. The truth is that this pyramid structure is the same as every other sustainable business model across the world. This is best highlighted in the figure below:
Is it the shape of the business model that dictates whether a business model is illegal?
No, of course not. If this were true every profitable company, government, church and school would be illegal and shut down. It is not so much the shape of the pyramid that people should be concerned about, more the way in which the pyramid is created that distinguishes whether or not it is legal. Lets review.
Pyramid Scheme (illegal scam)
A pyramid scheme can be defined as a fraudulent money-making scheme that is based on a non-sustainable business model that involves the exchange of money primarily for enrolling other people into the scheme without a legitimate product or service being delivered. Eventually the number of new recruits fails to sustain the payment structure and the scheme collapses with most people losing the money they paid in.
In a more practical sense, probably the easiest way to identify pyramid schemes is firstly there is no legitimate product or service involved (ie you do not get a legitimate product in return for your initial investment). The second way to identify pyramid schemes is that you do not get a financial return unless you have successfully introduced a number of new recruits into the pyramid. Basically, pyramid schemes concentrate on the money that you could earn by recruiting new people into the pyramid and generally ignore the marketing and selling of any products or services.
Network Marketing (legitimate, legal business model)
The concept behind network marketing is a distribution model that allows a company to sell their products directly to the consumer. Choosing to use a word of mouth approach (networking) instead of advertising through traditional streams (eg media). Therefore instead of paying the media for advertising, network marketing companies are structured to reward distributors through commission in return for selling their products and finding new customers.
Therefore the main focus of a network marketing company is product distribution. In fact, in a legitimate network marketing company, distributors are not required to recruit new distributors in order to earn a commission, they can earn money purely by selling the companys product.
Although distributors can choose to sell the companys products to earn their commissions, not everybody wants to be a sales person and therefore choose to recruit more distributors into their organisation as a means to build their referral base. Not only does this create a group of loyal customers, it also allows you to leverage the efforts of others to create a residual stream of income.
I would rather earn 1% of 100 peoples efforts than 100% of my own efforts - John Paul Getty (American Billionaire)
Therefore the recruiting element of a network marketing business is merely a way of distributing more products and helping to build a leveraged income.
ADVANTAGE OF QNET: BINARY COMPENSATION PLAN
In QNET, a binary compensation plan is used. A binary plan is a compensation plan which allows distributors to have only two front-line distributors. The people joining such a compensation plan join to market a legitimate product or service, which they bought and own, to the market and not for the purpose of recruiting for payment. If a distributor sponsors more than two distributors, the excess are placed at levels below the sponsoring distributors front-line. This ‘spillover’ is one of the most attractive features to new distributors since they need only sponsor two distributors to participate in the compensation plan. The primary limitation is that distributors must ‘balance’ their two down-line legs to receive commissions as illustrated below.
So now that you know the difference between the two, allow me to share with you the features or what some would call the benefits you gain from the binary compensation plan.
According to widely accepted statistics the average distributor sponsors 2.7 people. Clearly this fact alone has huge significance. In essence; it means the difference between success and failure for the majority of people who venture into this industry! In the Binary, you just build 2 legs or teams as the term “binary” means two. If distributors can just bring in two and teach those two to do the same, they can achieve success.
Another advantage to the Binary plan is the additional placements made by those who sponsor more than 2 distributors. After I’ve sponsored my first 2 distributors – all additional distributors I sponsor fall below my original 2 distributors – which in turn adds to their volume!
In the Binary plan there is a fairer dispersion of income. Since successful up-line distributors place new distributors in their down-line, Sales Volume is distributed to entire lines of people. This means that the commissions being paid on volume end up being spread out more evenly among entire groups of distributors.
A lot of other compensation plans require that you develop up to 5 or more team legs wide in order to earn from sales 5, 6 or 7 levels in depth. Most people would admit that building five teams requires significantly more work because you must splinter your focus, time, & energy among many teams rather than just two teams.
The Binary compensation plan is not Multi-Level Marketing. That's because MLM plans usually pay based on a limited number of levels (typically 5-10). A Binary plan does not pay you on levels; it pays you on total sales volume of everyone in your two teams up to a predetermined cap set by the company. Levels don’t matter, only sales volume does.
Another thing to note about a binary plan is that all the sales volume that is generated through any organization/team remains intact until you qualify to receive it. This is like money in the bank! This is a world different than every Multi-Level company I'm aware of which flushes that volume away at the end of each month.
Binary plans are great for fostering teamwork in an organization. It is beneficial for your up-line to assist your success, their success benefits you, and your down-lines success benefits everyone. This tends to build team unity and cooperative energy.
However some people believe that binary programs are just "money games" that don't last long. Others believe such plans are all about making money fast.
A mistake often made by some distributors is that after signing up, they sit back and expect their down-lines to be built through spillover from up-line. They believe (or have been told) that their down-line will grow by the recruiting efforts of their up-line. If you’re up-line is active, this is possible. But there is a problem...you are not the only person on your up-line's down-line.
As i mentioned above, you are in competition for the spillover with other distributors in your up-line's down-line. You’re up-line has more choices as to where to place new distributors. The tendency is for the up-line to place new distributors where they see some activity as a form of encouragement to the active down-line member.
Also with the binary plan, spillover always flows through to the outside leg - the power leg. Picture a glass full of water. If you keep pouring more water into the glass, any excess water will flow, or spill over to the outside of the glass. It will never flow to the inside. This means that you are 100% responsible for building you’re inside leg.
Binary plans also have an upper limit payout caps called a payout cap. Each business center has a limited earning potential which maxes out to ensure that both distributors and the company earn a profit. Some distributors don’t realize this.
Which perspective is really true about binary compensation plan?
It’s important to note that not all binary plans are created equal. However, all binary compensation plans have all of the above characteristics, good and bad, to some degree. Some of the above characteristics are very desirable. It is also important to note that although there may be disadvantages to this kind of compensation plan, to the right person with the proper mindset, these disadvantages can be viewed as an opportunity. I for one have figured out how to use the same disadvantages to benefit me in my business and if you really want to be successful in your business, I bet you will too. You can't just join, sit back, relax and expect the big buck checks to come rolling in just because of your up-line's efforts because the bottom line is this, you have to work the plan, get people to join with you, place them on the appropriate side of your business organization, and get them recruiting, duplicating, and generating sales volume.
In the end, it’s your business so you have to work to make it successful. QNET has been around for the last fifteen years. So they must have figured out how to make this plan work for their 9 million plus distributors. And if it can work for them, surely it can work for you too.