BY LANJI OUKO
Immediately a salesperson utters the words ‘GNLD’ or ‘Forever Living Products’, unconsciously or consciously the dreaded word ‘pyramid scheme’ simultaneously hoovers.
Not that GNLD and Forever Living Products are pyramid schemes or have been proven to be. They are merely assumed to be. Sadly, these assumptions are purely based on hearsay and not on fact. The duding question one would ask the salesperson is to prove they are not, a debate, which could occasionally take approximately one or more hours.
A pyramid scheme is a type of business model. It is, however, a term that has scarred a number of other honest companies that simply use a similar model, also known as multi-level marketing.
A pyramid scheme is defined as a business model that recruits members via a promise of pay, good or services for enrolling others into the scheme, rather than supplying investments or sale of products or services. Baring this definition in mind, a multi-level marketing business model entails a marketing strategy in which the force is compensated not only for sales they generate, but also for the sales of other salespersons they recruit. A very thin line discerns the difference between pyramid scheme, the controversial business model, and the marketing strategy behind multi level marketing as defined earlier.
Over the years, a number of Kenyans have fallen victim to pyramid scheme scams, which clearly explains the fear among the masses to invest or get involved in any marketing strategy that would entail recruiting down line distributors. Resultantly, number of multi-level marketing firms has suffered losses because of the typical deception of their companies being referred to as “pyramid schemes”. Indeed a number have been caught up in the euphoria of what Robert Fitzpatrick terms as “delusional behaviour”, when the deal is too good and the figures are even better.
The loopholes, in the legal paperwork, regulatory and supervisory framework in safeguarding consumers from schemes have led to the proposal of the enactment of an anti-pyramid scheme. Some of the other issues involved are mistakes made by those investing in the companies such as lack of adequate research and not adequately comprehending the contracts before being legally bound to them.
So what criteria can be used to save investors and help identify a pyramid scheme upon the first pitch? George Kiwanuka, of Ugandan decent, investing in a multi-level marketing company in Kenya for the past eight years says, “The main difference between the two is the provision of a service or good. A number of these schemes do not have an end goal, but funnily enough, a golden promise of profits casually still exists. The starting point would be to do your research, involve lawyers and ask as many questions as possible.”
Mr Kiwanuka says the deceptive perception of these business models has led to collapse of other genuine multi level marketing companies. The multi level marketing model strategy is not only used for profitable businesses but is also used to help pull in funds for charity and development projects. One of the highly recommended is, iCharity club, which is a peer-to-peer donation platform for members to help other members in a systematic way.
By using this platform, members can give and receive donations from each other. A few of the perks of joining this charity club are the absence of administration to manipulate or deceive members as occurs in organizations pulling funds together. The membership is on a number of specific conditions, including that the funds collected must be used for a legitimate investment focusing on development or charitable cause.
First established in India, the organization is dedicated to bringing positive change in the society through transparency and professional standards in the non-profit sector. The members of iCharity carry out a number of noble activities such as visiting hospitals, contributing to rural development projects and cleaning the slums among others.
Similarly, another company using the multi-level marketing strategy and significantly contributing to the welfare of many, especially the unemployed youth in both rural and urban areas is Essential Pesa (EP) Transfer Ltd, a Canadian/Kenya based prepaid payment solution company that allows buyers to access essential services from the convenience of their phone. Essential pesa harnesses the power of mobile and web platforms to distribute prepaid services using a mobile and website application.
The brains behind Essential Pesa believed that there was a market need for a one stop convenient mechanism for Kenyans to use to buy airtime from any carrier as well as other services like KPLC tokens over their phones. With the Essential Pesa wallet, customers can buy any of these services anytime from their own personal float.
Essential Pesa Canada hired talented Kenyan software engineers and designers to create the APPN, Advanced Peer to Peer Network, and all its back office systems and also works with Kenyan companies in order to provide the APP’s services. Strategic alliances with other powerful platform providers allow Essential Pesa to outperform other competitors.
One of the main challenges is that Kenyans are cautious with new products. Additionally, there are many scams out there, which cause potential customers to shy away from trying what they do not know, or what is new to the market.
Pyramid schemes and fraudsters are in abundance these days and Essential Pesa has been a victim of several duping attempts already. Chief Executive Officer, Kim Veness says, “My advice to Kenyans, when a deal is too good to be true, ask where the money goes. Scams want your money to got to a main account or person and there are only empty promises of overflowing profits from their investors and customers.”
Essential Pesa has enjoyed consistent growth since its inception in 2008, and now, with contracts partnering some of the largest telecom and ATMs networks in the world, it has opened up a unique business to Kenyans, including Airtel, Safricom & Orange.
Since the launch of the product, there are over 5000 subscribers countrywide. Several large companies and associations have recently signed corporate contracts to provide the APPn for their customers, members and staff.
With EP, value is distributed. Revenues are generously shared with its network of sales representatives and provide true value to the APP users or customers. EP Kenya’s parent company, EP Canada complies with Canadian laws and rules by special security requirement of the Canadian government .The float and commission money is completely safe in the EP system and that makes EP Kenya to operate at a completely different level compared to groups.
By subscribing to Essential Pesa, users enjoy 4% discount on airtime sales and purchases. Upon inviting other subscribers, a commission of 1% is earned on the airtime used by your team in the 1st and 2nd tiers respectively, all this for a one off registration of Sh750.
The next time you are skeptical to listen to the lady using direct sales to pitch cookware, make-up or jewelry, and before you make assumptions and conclusions based on misconceptions that term the business as a ‘pyramid scheme’, listen first, because most of these are genuine businesses ,which help feed families, educate children and foster development.
