Pyramid Scheme? (N/A in the least)

[ausrere]

This has absolutely nothing to do with aviation, but you are a very smart group of people, so I thought I'd ask.

Has anyone here ever heard of or had and dealings with one of the new "resellers" of electricity here in Texas? One based in Dallas. My mother attended one of their "Seminars" and was roped into forking over $329.00 to become a "Sales Associate". From what she tells me, there are two ways she can make money, one is a very small percent of the total sales of electric service to customers she recruits, and larger "bonuses" for every 3 other sales associate she recruits. The more sales associates she recruits, the more money she makes. Sounds like a good old fashion pyramid scheme to me, but she's adamant that it's not. Me thinks they took advantage of a old woman on a fixed income, but I'm 200 miles away from her and having a hard time convincing her that it's is scam. Anyone else ever heard their sales pitch?

I do know they hold a license from the PUC here as a reseller for electricity, but in digging through the PUC site, it looks like they are in some hot water over some issues. My web searches so far have only turned up web forums arguing over if they are/aren't a pyramid scheme.

 

[jesse]

If you draw it on paper and it forms a pyramid...Guess what it is?

I find it funny how you can draw it out and the people say "No! It's not!" ..Talk to them six months later and they admit it.

 

[wsuffa]

Sounds like a classic pyramid scheme, but what I can't tell is whether she gets a percentage of the billings of her recruits. I think that would clearly distinguish it as a pyramid or not.

Energy aggregation is a relatively new business, especially to consumers. The question she needs to ask herself is this: if the company that the aggregator buys from doesn't perform, how would that affect the relationships she has with her friends (the sales pitch is based on your personal network)? And what happens if an unhappy customer switches away?

Most aggregation contracts contain a "collar" on number of participants & total energy load. By that I mean: the aggregator and supplier agree on a certain amount of electricity purchased at a certain price. The amount varies by month (in Texas, consumption is less in winter), and the aggregator is allowed to exceed or fall short by a certain amount (5-10% is typical). If the collar is exceeded, some kind of penalty rate applies. How is that handled? Oh, and all areas of Texas are not included. Folks on municipal systems (like CPS in San Antonio) are exempted for now.

My $0.02.

 

[Skip Miller]

don't confuse a pyramid scheme with Multi-Level marketing, or MLM. In a true pyramid scheme, the only way a member gets paid out is by the fees from new members. The "business" model is not sustainable

In a true MLM, the member gets paid from a slice of the revenue for a genuine product. The business model is sustainable.

Of course there can be combinations.

Look here....

http://en.wikipedia.org/wiki/Pyramid_scheme


-Skip

 

[AdamZ]

Skip beat me to it. I agree with what he said. IMHO any "opportunity" that involves a seminarto take advantage of the "opportunity" makes me suspicious

 

[ausrere]

Sounds like a classic pyramid scheme, but what I can't tell is whether she gets a percentage of the billings of her recruits. I think that would clearly distinguish it as a pyramid or not.

Apparently. She gets a "bonus" for every three recruits, then a percentage of their sales. But, it's kind of hard to get information out of her over the phone. She doesn't understand enough to be informed about what she just signed up for. All she knows is that for $329.00, she was promised to make about 2 grand a month AFTER she signs up 3 more sales recruits and 10 sales customers. Then of course...all she has to do is sit back and watch the money roll in. Sheesh.

 

[mikea]

If you draw it on paper and it forms a pyramid...Guess what it is?

I find it funny how you can draw it out and the people say "No! It's not!" ..Talk to them six months later and they admit it.

You cannot talk them into looking at the pyramid the way it really is, where they are a mere one of thousands at the base. They only see the pyramid that has them at the top.

I have wasted my breath telling them that in order to see the big payoff it requires the participation of every citizen of the U.S., Canada, India, and China....

Just ask them to circle a date on the calendar about 6-8 weeks out when they MUST tell you how many riches they got. If you'll ask then they deny they know what you're talking about.

The sad thing is there are many who are convinced that it's the scheme that is flawed, just the product. They'll go from one to another.

 

[gkainz]

I don't know about this particular business, but to broad brush Multilevel Marketing or Network Marketing as pyramid schemes is a bit harsh. You just cast a loop around a lot of good, fair, solid and legitimate businesses, including Mary Kay, Tupperware, Avon, Amway, just to name a few.

 

[Greebo]

I have to agree with Greg and Skip - the MLM model is a very successful business model, and those individuals with the talent and dedication to work at the business can make quite good money - far better than those in their "upline" (ie: the line of people who led to their recruiting). Pyramid schemes do not allow those who entered later to make as much as those who entered earlier.

Hmm - reminds me of my job...my boss makes more than me, and his boss makes more than him, and the CEO is making a MINT!!!

 

[Henning]

This has absolutely nothing to do with aviation, but you are a very smart group of people, so I thought I'd ask.

Has anyone here ever heard of or had and dealings with one of the new "resellers" of electricity here in Texas? One based in Dallas. My mother attended one of their "Seminars" and was roped into forking over $329.00 to become a "Sales Associate". From what she tells me, there are two ways she can make money, one is a very small percent of the total sales of electric service to customers she recruits, and larger "bonuses" for every 3 other sales associate she recruits. The more sales associates she recruits, the more money she makes. Sounds like a good old fashion pyramid scheme to me, but she's adamant that it's not. Me thinks they took advantage of a old woman on a fixed income, but I'm 200 miles away from her and having a hard time convincing her that it's is scam. Anyone else ever heard their sales pitch?

I do know they hold a license from the PUC here as a reseller for electricity, but in digging through the PUC site, it looks like they are in some hot water over some issues. My web searches so far have only turned up web forums arguing over if they are/aren't a pyramid scheme.

It's called MLM (Multi Level Marketing) and as they say, if it quacks like a duck.... Yep, it's a pyramid scam same as the old days, but they add the twist of having a real product so it passes as legal. Legal or not, it's still immoral and a rip off.

 

[Greebo]

It's called MLM (Multi Level Marketing) and as they say, if it quacks like a duck.... Yep, it's a pyramid scam same as the old days, but they add the twist of having a real product so it passes as legal. Legal or not, it's still immoral and a rip off.

Once again, having a product isn't the test for legality, the test is whether those who join later can make as much or more than those who join earlier.

 

[Henning]

Once again, having a product isn't the test for legality, the test is whether those who join later can make as much or more than those who join earlier.

Yep, and not many can. There a few exceptions to the rule (and this sure doesn't sound like one), but the rule is when they suck old ladies into a seminar, bamboozle them with charts and graphs and collect their money at the end of the seminar, it's a rip off. The ratio of honest MLM to scam is probably a couple hundred to one.

 

[Greebo]

I do agree with you there - there's far too many dishonest programs out there, and worse, dishonest people who do dishonest things with honest programs to give them a bad name.

 

[ausrere]

Once again, having a product isn't the test for legality, the test is whether those who join later can make as much or more than those who join earlier.

In this instance, no. They kept telling her "Get in on the ground floor and be one of the ones who can sit back and let other people work for you." So by that statment one could assume that if you join later, you can't make that kind of money. And I know my mother, a salesperson she's not.

The whole thing makes me see red. She can't understand why I'd think it's a scam since "everyone" is doing it. Really, I'd have no problem if all she was expected to do is to show people how much money they can save by switching to this engery company as opposed to the big companies. And then receive a percentage off every account she got to switch. It's the "recruitment" of other "sales associates" to be able to move up to the next "level", (which you have to pay new fees to move up to) that has me angry.

 

[Greebo]

Lisa: Then that definitely sounds like a scam, and you should consider contacting the state about it.

 

[ausrere]

Lisa: Then that definitely sounds like a scam, and you should consider contacting the state about it.

Oh trust me, I've been burning up the phone lines and email servers this morning. The company may regret the day they ever let her into the seminar.

 

[Henning]

In this instance, no. They kept telling her "Get in on the ground floor and be one of the ones who can sit back and let other people work for you." So by that statment one could assume that if you join later, you can't make that kind of money. And I know my mother, a salesperson she's not.

The whole thing makes me see red. She can't understand why I'd think it's a scam since "everyone" is doing it. Really, I'd have no problem if all she was expected to do is to show people how much money they can save by switching to this engery company as opposed to the big companies. And then receive a percentage off every account she got to switch. It's the "recruitment" of other "sales associates" to be able to move up to the next "level", (which you have to pay new fees to move up to) that has me angry.

Consider your mother lucky, if it's a scam, she only got scammed for 300 some dollars. There other old ladies out there who get scammed for twenty grand, sometimes their homes and everything. It'll be a cheap lesson.

 

[Henning]

Oh trust me, I've been burning up the phone lines and email servers this morning. The company may regret the day they ever let her into the seminar.

Have you talked to the TX Railroad Commission yet?

 

[ausrere]

Have you talked to the TX Railroad Commission yet?

No, I've talked to the county DA, the PUC, the AG's office, state reps and senators offices and some fellow investigators at the AG. I've also had words with a company rep..amongst others. I'm a little concerned over a statement she made to me that one of the local ISD's is using this scheme as a fundraising opportunity too. So that's my next phone call.

 

[Henning]

No, I've talked to the county DA, the PUC, the AG's office, state reps and senators offices and some fellow investigators at the AG. I've also had words with a company rep..amongst others. I'm a little concerned over a statement she made to me that one of the local ISD's is using this scheme as a fundraising opportunity too. So that's my next phone call.

Check with the TxRRC, they's a powerful bunch and there isn't an energy company that can operate without their ok. I know people who have sat on that commission, and they brook no s**t. Worth a try.

 

[ausrere]

Well, one of those emails or phone calls must have struck a nerve. I just got an email from the "Director of Marketing and Communications" asking me to please let them refund her money.

 

[Henning]

Well, one of those emails or phone calls must have struck a nerve. I just got an email from the "Director of Marketing and Communications" asking me to please let them refund her money.

Good. I bet at collecting $3xx they are managing to keep out of the feloney arena.

 

[SkyHog]

Well, one of those emails or phone calls must have struck a nerve. I just got an email from the "Director of Marketing and Communications" asking me to please let them refund her money.

Scam the scammers, Lisa. What is your time worth? What about interest? A mouth shutting fee? Also - you used your internet bandwidth, what is that worth to you? And the use of your telephone.

I'd say you might be able to make your mom a cool thousand dollars or more. Make them hurt.

And no, MLMs are pyramid schemes. Please explain to me how Amway is not a pyramid scheme? Is it because they actually sell stuff? What about Avon?

You still stand no chance to make real money in it unless you get a bunch of people to work for you. I'll make it easy:

Pyramid scheme:

/_\
/__\
/___\

Non pyramid scheme:

/_\
/___\
/_\/__\
/_\/_\____\___/\___\

and so on.

 

[Greebo]

And no, MLMs are pyramid schemes. Please explain to me how Amway is not a pyramid scheme? Is it because they actually sell stuff? What about Avon?

So's your job, if you think thats what defines a pyramid scheme.

I've already explained this, but here it goes again:
- A pyramid scheme is one in which you CANT make more than those who came in after you.

I don't know about Avon, but in Amway, if your upline does no volume himself, doesn't build a diverse line of distribution, then he'll get almost nothing and you'll get a much bigger bonus.

Additionally, once your business reaches a certain point, you break away from the upline (for ordering and receiving) and deal directly with Amway.

And your downlines can also break away from you. And they can do better than you.

Example: Bill Britt - who is responsible for an organization that makes up 25% of Amway's total sales - his sponsor never got out, but his sponsor doesn't do enough business to qualify for any bonuses. A few years back, it was determened that if his sponsor just *bought* $4,000 worth a month of products himself (or sold them or moved them to otherdownlines), he'd be entitled to something like $15k a month from Amway as a bonus for Bill Britt's business whcih broke away from him years ago.

Yes, I was in it for years. No, I never did well. I'm not good at the kind of sales and people skills necessary to do well in that kind of business.

Oh, and you don't *have* to have people working for you - you can do a massive retail business if you like - but that's very hard to sustain as an individual.

 

[SkyHog]

So's your job, if you think thats what defines a pyramid scheme.

Disagree. My job is one in which, theoretically, if a position opens, I can move up and take over other positions that are available, with the eventual goal to be running the business.

MLMs and pyramid schemes, you are stuck where you are. I was unaware that you could break off and deal direct with Amway, but either way, the concept remains because you will never be Amway, only dealing with them. You will never be more powerful or as powerful as Amway. Your best goal is to keep selling products, or find other salesmen to "work for you."

There is a difference, and I apologize for oversimplifying it, between a legit MLM and a pyramid scheme, but both are scams, just to different degrees. Chuck, you failed to make money not because you weren't good at what you did (presumably), but because the system is designed to fail. Your little contribution made SOMEONE a lot of money, and that's how it is supposed to work.

Scam.

 

[Greebo]

Nick, I spent years studying the business model. I know why I failed, and I'm sorry, but I think you are speaking about that which you do not understand. Kindly do me the courtesy of NOT assuming you know my history with it better than I do, that's just pure arrogance on your part. I saw plenty of people come in after me and do much better (not as part of my downline, unfortunately) - they had the talents I lacked.

You also misunderstand: Nobody works "for" anybody. Each individual works for themselves, through others. My "contribution" of $100 to get started returned me $50 worth of product - and I know the other $50 didn't make anyone rich.

Everything else I spent I got what I paid for, so I don't a scam there. The wholesale retail difference is only about 10%, and the person who does the retail sales keeps that. The money that comes back as bonuses comes from Amway, to the Direct Distributor, to the downlines.

The more volume your group does, the bigger your bonus, but if you have one downline who does all the volume through a well balanced business, and you don't, that person will get the bonus. Kinda sucks to get a $500 check and write out a $498 check to one person, who in turn only writes out maybe $200 across his own downline - but thats how it works - your reward reflects YOUR ability.

I don't know how you got burned, but it seems like you must have. After 4 years in the business, I left with no hard feelings, and I never felt as if I were cheated in any way. I got a lot out of it other than monetary reward.

 

[ausrere]

Yes, I was in it for years. No, I never did well. I'm not good at the kind of sales and people skills necessary to do well in that kind of business.

Chuck, did Amway charge you a fee to get into sales? And I don't mean charging for some initial product, display/sales kit etc. I mean just a fee up front for the privlege of recruiting other sales people? To me, that's one of the major differences between those MLM's that are legit (Avon, Tupperware, Amway, Mary Kay etc) and are selling product, and this one.

I have never dealt with these companies. I don't really understand them, hence the reason I ask. I've had family members in Tupperware, Mary Kay and Avon. If I recall, none of those charged new sales associates a fee to "join" the company. They did charge for the displays, initial supplies, training etc. Some of the born salesman in the bunch made a little money, but most didn't. None of them got paid money for recruiting new sales associates. If I recall correctly, they got "prizes" in merchandise, product gifts etc for recruiting, but the business model did not require them to recruit sales staff to actually make a profit. I could be mistaken, it's been years since most of them figured out they were never going to make the kind of money they were promised. The closest one did get to drive a pink cadillac around for a month for being top sales person for the quarter once though.. lol

 

[Greebo]

Chuck, did Amway charge you a fee to get into sales? And I don't mean charging for some initial product, display/sales kit etc. I mean just a fee up front for the privlege of recruiting other sales people? To me, that's one of the major differences between those MLM's that are legit (Avon, Tupperware, Amway, Mary Kay etc) and are selling product, and this one.

No - there was a $100 sales kit you purchased, most of which was product (actually now that I think back I think it contained almost if not more than $100 worth of product) plus the paperwork, application, etc. There is an annual renewal of like $25 or something like that...thats it.

That was it. You were in, and you add people to your organization from day one, or you could go strictly sales and make a tidy little profit.

I know a lot of people who stay in just to be wholesale customers, they like the product that well and use enough of it to be worthwhile.

 

[SkyHog]

You are right, I know not of what I speak.

I apologize for making assumtions on your ability to run a business.

 

[ausrere]

No - there was a $100 sales kit you purchased, most of which was product (actually now that I think back I think it contained almost if not more than $100 worth of product) plus the paperwork, application, etc. There is an annual renewal of like $25 or something like that...thats it.

This is where my mothers situation is different I think. And again, I'm going on what she's told me over the phone. She won't share any of the documents with me now because she knows I think it's a scam and she doesn't want to admit she's been taken.

Her initial $329 got her zero product, zero training. It got her some forms and brochures to hand out and that's about it. She says initially she can only make profit off of the first 10 customers she gets for the company..it's a small percentage of their total monthly electric bills. She gets $100 for every sales associate she signs up, plus an even smaller portion of their first 10 sales. To get any more, she has to pay to move up in the ladder of sales teams (she won't tell me how much) and then she can get profit from the next 20 sales..get three more sales reps, pay another fee and move up to the 30 customer profit level, and so on and so on. To keep making more profit off the actual product, you have to keep signing up new sales associates. There is no profit to be made off of just selling electricity contracts..except for that first 10. And that of course goes away if the customer is unhappy and cancels.

As I've said. If all she had to do was sell electric contracts, and could make a profit off of everyone she got, regardless of how many people she talks in to becoming sales associates, I'd have no problem with it. Even with the initial fee if it had something worth $329 dollars that came with it. But so far, what's she's told me, it sounds too much like a scam to me to let it go.

 

[Henning]

That was it. You were in, and you add people to your organization from day one, or you could go strictly sales and make a tidy little profit.

And that to me is the key test. I knew the BMV and the church guys in the seventies well (many of them did time). I've seen the scams sold as MLM come and go. My test is always, "Is the product a real product at a fair value, and can I make my living & way up the ladder by selling product. There was one that I looked into that had great portable alarms that you could carry and activate in a panic moment and even hang over your door knob to alert you and anyone within 250 meters of an intruder. These things were so loud, that you could use them to incapacitate an attacker and run away. I though they were a useful item that I could sell a bunch of. When I would talk to them about product supply & delivery, drop ship ability... they just kind of brought the subject around to bringing in more "sales associates" so I could become a "distributor", that was "where the money was". Don't worry about the product, concern yourself with the expansion of the company. Now, I may not have an MBA, but that does not sound like a sustainable business model to me. Seen scores more just like it. Just look in the classifieds of the newspaper and call the ads that say "Make $5000 wk working from Home". How many of those ads do you see. Now look in the back of the real newspapers like the National Enquirer and The Globe... Behind the latest Batboy story you'll find pages of these ads because those advertisers know the demographics of the readers. Typically less than sophisticted (when it comes to business) old ladys on fixed incomes.

They're Hyenas.

 

[mikea]

..how many of those ads do you see. Now look in the back of the real newspapers like the National Enquirer and The Globe... Behind the latest Batboy story you'll find pages of these ads because those advertisers know the demographics of the readers. Typically less than sophisticted (when it comes to business) old ladys on fixed incomes.
They're Hyenas.

I keep seeing the "Real Estate investor seeks associate. Six figure income." hand lettered in permanent marker on a corrugated plastic signboard.

Cause, ya know, that's how you get a six figure job with Donald Trump and real estate tycoons stick signs on the road when they need help and being millionaires they have no need to like walk into FastSigns to get signs printed up.

It can't just be one guy.

What "Make money in real estate" seminar is behind those?