The second article in our Cash Gifting Basics series briefly explores the two primary types of cash gifting programs.
Do ads like this look familiar?
“Discover the top cash gifting program– guaranteed and proven results!”
“Automatic cash gifting-let us do all the work. Make money doing nothing!”
“Cash gifting with integrity!”
These are just a few ads typical of cash gifting programs, which are presented as legal money making opportunities based on the IRS Tax Code, which allows anyone to give individual cash gifts of up to $12,000 per calendar year to any number of individuals.
Cash gifting programs promise enormous returns while claiming to operate within the letter of the law. They reach out to potential members in a variety of ways, but all of them have the same goal: to create a pyramid structure of cash giving individuals, with the “gifts” of those joining being funneled directly to the members at the top.
The members at the top of the pyramid, once they have been paid their promised reward, are free to leave the program. If they remain, they must start over at the bottom. The members at the base then move up one level and wait for enough new members to join to push them to the top where they to will receive their promised reward.
Cash gifting programs, in other words, are nothing more than recruitment schemes. Most of them offer no tangible product or service. In order to avoid being tagged as illegal pyramid schemes, many cash gifting program operators have come up with program structures designed to give them an air of legitimacy.
The One-Up Cash Gifting Program
Promoters of one-up cash gifting separate their programs from others by saying that these programs are structured to avoid the pyramid label. These programs rely instead on “receiving lines.”
So, what are receiving lines? Member A gets a phone call from someone who wants to join the program. This person joins as Member B, becoming Member A’s receiving line, and sending Member A the stipulated amount of cash. Member B is then free to start taking phone calls from other potential members.
Member B persuades Member C to join. Member C’s money goes to Member A, and Member B is removed from Member A’s receiving line, and free to start his or her own.
Member C recruits Member D, who sends money to Member A and remains in Member A’s receiving line while Member C is free to start receiving lines.
Each person who joins under Member A’s receiving line must give Member A both his cash gift, and the first cash gift generated by his own receiving line. That’s his own money, and the money from the first person recruited by his each of his recruits.
One of the best-known of these systems allows new members to join at different levels of participation according to what they can afford - $500, $1,500, $2,000, or $3,500 (if they want their receiving lines to cover new members at all levels). What this means is that a person’s receiving line will be limited to members at their level or lower, until that person upgrades by making a bigger “gift.”
That is, of course, unless someone can afford the $3500 up front. Anyone who can is entitled to go after all newcomers, including those who were the only hope members at lower levels had of breaking even or profiting.
The promoters of this system overlook that particular aspect, concentrating instead on the fact that no receiving line ever has more than one new recruit paying one existing member, so there is no resemblance to a pyramid scheme.
Each person Member A directly recruits becomes another potential receiving line. The promoters of one-up cash gifting systems claim that because millions of people are phoning system members each day to find out how to join, existing members will have no difficulty getting their first recruits. The regular spin is that they will usually have multiple recruits within two or three days.
A response in the millions, however, would require a massive promotional effort, which also costs money. So, if the only money going into the program is being passed from member to member, how are the promotions paid for? You guessed it - membership fees.
Or, they’re paid for by the members themselves, who have to do some old-fashioned cold calling, using scripts provided by the program “mentors,” advertising, or list buying in order to generate new leads. One of the more popular of these programs offers its members a daily “training” call, which is often more of a pep talk than an actual learning experience, and weekly “overview” calls.
This program, however, doesn’t allow its members to use the Internet as a promotional medium. That alone sets it apart from many of its competitors.
Once the members have found some genuine leads, they invite those people to participate in the program’s weekly conference calls, during which they’ll be officially invited to participate.
Some one-up systems also offer software tracking systems administered by third parties so that, for a fee, members can keep current on their receiving lines and income. The normal cost of these systems is between $100 and $130 per year.
Another of these programs provides its potential members with a free e-book containing seven of the program’s methods for getting new members (including setting up a website, using Google pay-per-click ads, and buying $625 worth of advertising postcards sent by an automated system to names on a home business prospects list).
Anyone getting money from this system would be smart to set part of it aside to cover the ongoing costs of finding new recruits.
Multi-Level Cash Gifting Programs
The differences between one-up cash gifting and multi-level cash giving programs are more than structural; they have very dissimilar approaches to recruiting. Most multi-level programs have existing members known as “presenters” arrange invitation-only gatherings, at which they make their pitch for new members.
These cash gifting programs operate like traditional MLMs (Tupperware or Oxyfresh, for example) except that they offer neither products nor services. Many of them are gender specific, attracting women by offering them financial empowerment, or men by sales pitches liberally sprinkled with masculine metaphors.
One cash gifting club used an airplane theme, with newly recruited members buying on as passengers at $1,500 per head. When all the “seats” on the plane were full, the passengers were upgraded to “pilots” and only then could they begin recruiting new passengers, with the chance to earn $12,000 if they filled their own planes with the required eight recruits.
Cash gifting “dinner clubs” set up dinner parties for recruits, aiming to get eight new participants (”appetizers”) putting up $5,000 each at a party for the person at the top level (”dessert”) of the club, who will get $40,000. The two levels in between the appetizers and the dessert are called the soup and salad (four members) and entrees (two members).
When the dessert receives her $40,000, which comes via FedEx or UPS, and is often wrapped as a birthday gift, the remaining tiers are split into two new “tables” and the members of each go in search of eight new “appetizers.”
The late-comers to the dinner party, however, are in danger on encountering famine instead of feast. Why? Because any tiered cash gifting club eventually exhausts the available pool of new members. Authorities at all levels estimate that only one in ten participants in a cash gifting club reach the top level and get paid.
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