Ponzi schemes : 2 sides of it and how it applies into marketing

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For the less-informed people, a Ponzi scheme seems like a dream come true to swim in a ton of cash. If you’re not aware of what a Ponzi scheme (often referred to as a pyramid scheme,) is, it is a fraudulent enterprise that promises high returns on investment. They operate by paying early investors by using the money they collect from recent investors.  They call it a pyramid scheme because the recruiters and their  “Passengers” will form a hierarchy that looks like a pyramid.

Key Takeaways
As we dive into the inner workings of Ponzi Schemes, we are going to dive into:

1) What is a Ponzi Scheme?
2) How do you identify a Ponzi Scheme
3) The value derrived from a Ponzi Scheme
4) Utilising the Ponzi Scheme in Digital Marketing

Credit: https://www.luckscout.com//

As you can see, the main aim of a Ponzi scheme is to recruit more people so they can suck them out clean at the end. Although Ponzi schemes are illegal, individuals responsible for it still manage to set them through loopholes in the system. The scheme will operate until it reaches a point where the number of new recruits slows down. Then, in most cases when it happens, the perpetrators will be on the run before authorities start to investigate them. Hence, we need to be extremely cautious to not get caught in these schemes.


How do you identify a Ponzi Scheme

It’s apparent that even the well-informed among us are susceptible to these schemes, let alone people who are not. What makes them as lethal as they are? They offer a combination of a false fallacy that they can get rich quick and often their targets are people who are desperate for money. Often times, people who want to recruit people will flex their earnings by showing off money, their cars, and their houses. They often hold conferences and in them, they will outright tell you that they made X amount of money in a quick duration. They often call themselves “entrepreneurs” for some reason. 

Technological advancements made it really easy for individuals to set up the right resources to disguise their schemes to mock a legitimate business. Their website, their customer support and their branding are often designed to give false reassurance that the business is legal and has been operating for a long time. It can get really tricky to identify them but there are some universal signs that can help us to do so.


Normally they will meet you for a cup of coffee to "catch up"

Have you ever had a “ friend” that calls you out of the blue to talk about a “new business opportunity”? How to tell if they got lured into a Ponzi scheme? Just ask about what are they selling. If they can’t explain it to you, or they are not clear how the company makes its revenue, that’s a major red flag. You should be running by now, but if you truly care about the person, please let them know. They won’t accept it at first and might even get angry at you for pointing it out. In that case, thank them for their time, pay for his/her coffee and leave.


Coming across a fishy website
If you come across a website of the said “business” that you “friend” told you about, how to test their legitimacy? If they have ridiculous claims on their website, take note. Look for the existence of those claims outside the website/ social media pages. If they are none, that’s a red flag. Another indicator that the business is operating a Ponzi Scheme is the structure of the content on the website itself. When you’re on the website, and more than 50% of the content is about their referral program, it’s most probably a Ponzi Scheme. If you see anything that looks like a pyramid and it has people in it, run. A referral program can be a great way to market your business but you need to be sure that it is a legitimate one. If you want to take a look at what a legitimate referral program looks like, take a look at our referral program here.


Exponential impressions as you move down
Although Ponzi schemes are meant to prey upon the desperate, less informed and somewhat pathological to society in general, it does highlight a great concept: That we are all part of a huge network. Statistically, as an individual, you meet and know about a thousand people in your life on average. That puts you a person away from reaching a million people and two persons away from a billion people! In a sea of more than 7 billion people! We often see ourselves as small but the fact is that we are all nodes in a network and that makes us immeasurably significant. Understand that what you do and what happens to you does not only affect just you, rather it affects everyone that is connected to your network. Novelist and historian Aleksandr Solzhenitsyn who observed Socialism in Russia said that living a pathological life will pathologize society and if you have enough of that, the whole society will collapse under its own weight. That signifies how important you are as a sole human being to society. As a business owner, it shifts your perspective on how you see your clients. When you get a client or a customer, your marketing potential went up about a thousand! So as a business you need to make sure that they fall in love with you! Want to know how to build a loyal customer base? Read our article on customer loyalty here.


Applying Ponzi methods in Digital Marketing
Well, implementing a Ponzi Scheme in your marketing is illegal but we can implement the human network model into our marketing activities. The current market strategies that are available out there are designed to target a person at a time. As a digital agency, we are always looking for strategies that go beyond one person. We have to optimize our content to do well and travel smoothly in the human network. That’s where using word of mouth marketing comes in. Word of mouth marketing is when you let your consumers do your marketing for you by talking about your products. By promoting word of mouth of your product or service, you plug in a connection into the network. 

User-generated content for advertising works by letting the users making the content for you instead of you making the content. You can do this by posting things from their social media pages on yours. People love to be in the spotlight and they want to show their friends that they are in the spotlight. It’s free advertising where you don’t even have to spend time to create anything. 

Another direct thing that we can use in digital marketing is affiliate marketing. When you offer a small withing your capabilities to reward customers that push content for you, they are more likely to do it as an incentive is offered. The trick here is that you need to do it far less aggressively than a Ponzi Scheme. 

Another great thing that you can learn from Ponzi Schemes is the power of an image. Ponzi schemes work because the image of “poor guy turned rich guy” is extremely convincing. Your branding needs to represent what it stands for. Your audience must be able to associate what you do with you perfectly. The identity will speak and help your marketing on so many ways. It’s crystal clear that Ponzi Schemes are bad, but we can apply their strategies in our own marketing for better results.  If you like how we approach marketing and love to work with us, contact us to get more information.

If you would love to read more about business and marketing, do browse our knowledge archive here.
Jin Chi

Jin Chi

The founder of Catalyst Digital. Born in year 1995, a huge fan of blue ocean strategy as well as lean startup. You can contact him by email at [email protected]


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