What Is a Reverse Funnel System?

The Reverse Funnel System began advertising in the fall of 2007. Inner Circle promoted the system extensively by radio, Internet advertising and "review sites" created by its own associates. The marketing of the system emphasizes ease of use and potential profits. Promoters claim to have fully automated the sales process, which in effect allows associates to earn commissions without any customer contact.

The radio spots draw on the friendly, casual voice and manners of "Ty Coughlin," who poses as a simple "beach bum" who struck it rich through an Internet sales and marketing system. Without mentioning the necessary start-up capital or ongoing expenses, Ty promises potential associates an income of up to $30,000 per month, in return for very little work.

Prospects pay a initial or application fee of $50 to gain an overview of the system and basic information on how to get started. The user is then asked to join the travel network, which costs up to $2,995 more, and is then obligated to pay monthly fees and the ongoing costs of paid advertising and sales leads that the company provides. Information, advice and coaching are provided by other sales associates, who are rewarded with commissions for each new associate they can bring into the system.

Having joined the RFS, new associates learn how to create their own websites, drawing on text and templates provided by the company. The system instructs users on the best means of advertising on the Internet. This includes the creating and posting of banner ads, the use of spam e-mail and the construction of review sites that claim to offer neutral information and opinion on the system.

Once they have joined, members essentially become sales associates for the RFS, bringing others into the system and thus creating a commission-paying "downline." Members reach new prospects through blogs, informational websites, spam emails, search engine placement (particularly Google) and social networking sites such as Facebook and MySpace.

A classic pyramid scheme promises unreasonably high return on initial investment for newcomers. The system funnels commission money upward to the originators of the scheme and eventually leaves the vast majority with a dead loss of most or all of the money they originally invested. In its pure form, the pyramid scheme is illegal; however, hundreds of similar "multilevel marketing" (MLM) operations have set up on the Internet promising new "members" significant profit by selling a variety of products and services. Through sales literature, phone calls, sales meetings and other methods, the operation pressures associates to recruit new members and new money into the system, which is essential to keeping it afloat.

The Reverse Funnel system fits the mold of many Internet multilevel marketing programs. Although some are legitimate business opportunities, others are not. On its website, the Federal Trade Commission advises, "Some multi-level marketing programs are actually illegal pyramid schemes. When products or services are sold only to distributors like yourself, there's no way to make money."