Pyramid Selling

Posted in Marketing and Strategy Terms, Total Reads: 463

Definition: Pyramid Selling

Pyramid selling generally refers to an illegal investment scheme whereby new recruits are lured into a scheme at the promise of high returns. A pyramid scheme is started by an individual or a company that recruits gullible investors with guaranteed high returns. As the scheme begins, the first investors get a high return on their investment, but these gains are paid for by new recruits and are not a return on any investment of the collected money. There is no real investment as the money is provided for by the new recruits at the base of the pyramid. In other words, this kind of scheme has only liabilities which are transferred from one owner to another and no real assets. The money taken from newer recruits are merely transferred to those at the top of the pyramid.

Also known as get-rich-quick scheme, the pyramid model is an unsustainable business model and no actual extraordinary return is made.


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