Another so-called pyramid in the making
“Pyramid? What pyramid?” reads the headline of a story in the August issue of NoseWeek. The publication warns the public to treat a new “social loyalty networking programme” with care. According to NoseWeek, BeeAwina (yes that’s the scheme’s name) is the brain child of Stefanus Leroux Pienaar, who owns a private company called Teletainment Interactive (PTY) Limited – and it’s not what it seems.
A closer look at the concept promises reveals a money-making racket that will reward the few who get in early, leaving hundreds wondering why they never get ahead.
Make money fast – really fast!
The BeeAwina concept will launch in October 2008 and promises loads of filthy lucre for those who get in on the act early. If you’ve ever investigated a pyramid or multi-level marketing product before then you’ll be quite familiar with how it works. To succeed you have to introduce people to the programme and build up a network of members below you. All of your members have to make regular ‘payments’ to the network from which you are reimbursed your share of the winnings.
We’re not going to go into too much detail on the scheme. However, the marketing spiel promises an income of R52 000 per month once you have 100 000 members over five levels in your down chain – providing each of these 100 000 members spends R12 per month sending premium service SMSs. Incidentally, there’s place for only 200 such members before every South African cell phone user is sucked into the network… Sound familiar? This start-up might claim to be a social networking company rather than a pyramid scheme; but they cannot market their concept without using the pyramid structure to illustrate an absurd and unattainable profit structure.
Take a second to do the math. Assuming you are the only member in this social network and you manage to sign on 10 members, who each sign on 10 members to five levels... You will end up at the head of a business that generates R1.2m in revenue each month. Of this approximately 50% will go to one of the country’s cellular service providers which typically take in the region of half of the premium rate… The other 50% (R600 000) would go to the BeeAwina holding company which will in turn channel R52 000 to you and around R260 000 to other members in your chain.
Technology makes ‘rapid’ expansion possible
The scheme demonstrates the effectiveness of cellular technology in extracting money from customers. Once you secure a premium service number all you have to do to print money is ensure that enough people send SMSs to the number. And a pyramid (or multi-level) marketing structure is one way to achieve the required critical mass.
This channel is not the most cost-effective micro-payment mechanism due to the ridiculous cost of processing each transaction. We’re talking here about the slice that goes to the cellular service provider... But provided you’re selling a good or service with no fixed-cost component (as BeeAwina is) you don’t care if 50% of each sale is lost to a third party. After all – it has cost you next to nothing to secure each sale.
Is it time for the cellular industry to clamp down?
BeeAwina won’t be the first questionable scheme to make use of premium rate SMS services to fleece the public. Vodacom got in the act late last year with their Win 100 BMW competition. Clients who entered the R10 per entry competition were soon cajoled into making repeated entries. And it cost some Vodacom clients thousands of rand. There are also hundreds of companies that market various competitions and products to the unsuspecting public by way of television adverts. If you have the requisite skill (and telescope) to read the small print you’d know upfront that by responding to these adverts you enter into a contract with the company concerned – which could cost you R60 or more per month until you unsubscribe.
We wonder when the regulators will take action against these ‘fly-by-nights’… Just consider the legal hoops an insurance company has to jump through before selling a R30 per month life insurance policy! These premium SMS services can deduct ten times that amount without fear of repercussion.
It’s time for the premium rate SMS environment to be regulated too. Until this happens, schemes like BeeAwina will prosper. And the public will have to fend of marketing lines that read: Join a “project where there are NO LOSERS – that uplift the Community Organisations with ONGOING funds.”
Editor’s thoughts:
The ‘get rich quick’ concept is an absolute no-brainer. We all know that to make ‘real’ money you have to do the leg work. Yet hundreds of pyramid and direct marketing schemes pop up every year offering huge rewards for an absolute minimum input. We’d love to hear your comments on recent pyramid schemes that have crossed your table. Add your comment below, or send to [email protected]
Comments