Vivint has been in the market for many years and is not a pyramid scheme company as it offers its services to the public and customers can earn money through selling products and services provided by the company.

Vivint is a Home Security System and automation company with its headquarters in Provo Utah. The business began in 1999, and it offers services such as security systems, doorbell cameras, smart locks, and other home automation services. Vivint has a direct sales approach, and it hires salespeople to promote its products and sell them in people’s residences. Due to this, some have considered Vivint as a pyramid company. However, several features are separating Vivint from an illegal pyramid scheme – the company’s business model.

Pyramid Scheme can be defined as a business model that involves a network of people who are engaged in selling a product or service and in which the success of the business depends on recruiting new members to join the enterprise.

Pyramid selling is an illicit form of marketing that entails individuals paying money for entry, and then making most of their earnings by recruiting new members, not from selling merchandise. Many pyramid schemes involve the use of new participants in the scheme and asking the new participants to surrender some of their money for stock or other products that are difficult to sell. The structure of participants involves reaching a few individuals at the top with most of the participants at the base earning money from the former. Finally, the planned scheme came to an end as the number of people in the fraud cannot be recruited anymore.

Key Characteristics of Pyramid Schemes: 

  • Is set on the recruitment process rather than the number of products to be sold.
  • Fees in the form of paid subscriptions with high initial deposits
  • Money is made not from sales but through a process of getting people on board.
  • The scheme is bound to provoke the collapse

Vivint's Business Model

While Vivint does rely on direct sales representatives, some key aspects of their business model differ from an illegal pyramid scheme: 

  • Purchasing real products or services with actual market demand is a key differentiator of Vivint. They have installed over 1. 5 million home security systems, helping to protect families from break-ins and other invasions of their privacy.
  • The representatives get commissions through the sale, not the recruitment. The primary sources of revenue are the continuation of sales with the existing clients.
  • It has no mandatory charges for products at the initial signing-up process. The sales rep is available for anyone without any charges or inventory to put into it.
  • Products belong to the consumers. The monitoring services are available under the 36-60-month contracts with Vivint.

Checking with the trade organization for the direct selling industry, The Direct Selling Association, it can be verified that Vivint complies with the standards of the company. Despite having reservations about the door-to-door sales approach, Vivint does not fit the criteria of an unlawful pyramid scheme in terms of its compensation model, sales practices, and Clients targeted.

Criticisms of Vivint

While Vivint passes the test of not being a pyramid scheme, its sales techniques and complaints from customers still create controversy.

  • Confrontational sales tactics of their products that involved going from home to home.
  • Long and costly agreements
  • Sales representatives have complained that their customers misrepresented their needs.
  • Some of the restrictions or barriers to canceling the monitoring services include

Some of the complaints involve sales representatives as they are accused of giving out many promises on the available features or sticking the customers into longer and more costly deals than they wanted. Nevertheless, these are complaints about specific employees and personal sales activities, rather than the structural problem with the company.

FTC guides state it only becomes an illegal pyramid scheme when sales of the product are replaced by the chance of earning money from recruiting more people, but Vivint reps do reap more benefits from signing up more reps, most of them still operate in generating sales from servicing customers’ accounts.

Guidelines on how not to be conned by Pyramid Schemes

When evaluating if a company like Vivint is a pyramid scheme or not, focus on these key questions: 

  • Is there a real sale of the actual products/services offered by the business? First, one might ask whether there is a demand outside the members to find information themselves.
  • Is the money generated from the products that are sold or merely through distributing the products to its members?
  • A typical question that may be asked is; is there a one-time membership fee or stock purchase required to access the services?
  • Is there a relationship between the types of compensation plans adopted in the organization and product selling and not recruiting?
  • Is it an instance that can be sustained in the long run?

Although some problems can be mentioned in the sales manner of Vivint, the presented data prove the discrepancies between its structure and an illegal pyramid scheme. Sticking to the above guidelines assists in differentiating between recruitment-based pyramid schemes and direct-selling firms. These customers should always take their time to investigate companies before they can sign contracts with them or become their salespeople Consumers ought to be cautious especially when signing contracts and becoming sales representatives of the companies But given the services offered, its client base, and the compensation model that is inclined towards sales commissions rather than recruitment fees, it can be deduced that Vivint is not a pyramid scheme.

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