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Pyramid schemes are a great way to make an unbelievable amount of money at the top, while screwing over the little guys at the bottom, so beware.

At some point in life, you or someone you know may fall victim to a direct marketing company. It doesn’t sound so bad on the surface but hidden behind promises of quick advancement and a hefty salary is the reality of high employee turnover rates and a low return on investment.

While direct marketing seems like a decent way to pay rent, the companies utilizing this tool are doing so to provide an air of legitimacy to their business dealings. The point of direct marketing isn’t to provide great products to customers in a personable manner, it’s to create a system wherein the employees are the customers.

For product-based direct marketing companies, new recruits are often encouraged or required to purchase the products in order to demonstrate it to customers through person-to-person sales pitches. The products can be as cheap as $40, but easily climb to well over $1,000.

Products are sold to the employees as useful aids for generating more sales, but the money they invest will likely take weeks or even months to earn back. While the company is making a killing on the sales these employees generate, the workers in question only earn a fraction of those sale’s profits while trying to break even.

Companies usually increase the commission percentage after an employee makes a certain number of sales, but these pay scales are carefully constructed to weed out the majority of new employees before they progress too far up the ladder.

How is this done?

Direct marketing companies specifically target students and young graduates by catering their search engine optimization (SEO) towards this demographic. They are sought after because they often have a close network of friends and family. Employees are frequently responsible with generating their own leads so companies encourage them to start with those closest to them and branch out from there. Since families and friends are often supportive, the marketing companies have a good chance of maximizing their profits from these new employees’ close network.

By the time new recruits have worked through their immediate network, they are usually still in one of the bottom tiers of the commission scale and running low on new leads. As a result employees often leave due to a lack of new clients or discouragement with a poor sales track.

The flip side of this is the small percentage of employees that achieve some degree of success. These workers are encouraged to recruit others into the company and are given wage incentives and bonuses to do so. Once a worker has recruited enough people they are promoted to a more managerial- focused position. The new job is to generate as many employees as possible and teach them the sales pitch opposed to selling the actual product. Once they gather enough employees, they move up to manage the people who are managing the employees and so on and so forth. Sounds familiar doesn’t it? Some people might even say it resembles a pyramid scheme.

The bottom line is that none of us want to be a pawn in their games. So how can we avoid them? After speaking with a number of Fanshawe students and graduates the Interrobang has found some red flags that come up during the hiring process.

1. Most of these positions are posted on sites such as Kijiji, Indeed and Careerbuilder, the latter of which is known as a preferred job board for direct marketing companies.

2. The interviews focus more on the credibility of the company and the track for promotion rather than the actual job or product.

3. This isn’t an office job and often you will be going door-to-door or generating your own leads in a geographic area.

4. The training is unpaid or costs you money to attend. There are also frequent pay-to-attend seminars.

5. The interviewer says something like, “Only one in 15 people are hired but we’re going to hire you on the spot”.

Bearing this in mind, get out there and start paving your career path with companies that care about their employees and not just their employee’s money.