How you can lose money in Multi Level Marketing by the example of Herbalife

by Rudolf Faix 20. July 2015 10:02

HerbalifeLike others I have calculated that you need to spend at least US$ 370 per month (US$ 4,440 per year) for keeping your membership active at Herbalife. According their own documentation only 1.39% of their members are earning more then they need to spend. Such a system is called "where everybody can succeed"!

At "HERBALIFE Life Changing Products and Business Opportunity" on page 28 we'll find the income disclosure from Herbalife: 

People become Herbalife Members for a number of reasons. A substantial majority (73%) (73%, based on a survey of former U.S. Members by Lieberman Research Worldwide, Inc. (“LRW”) in January 2013, with a margin of error of +/- 3.7%) join us primarily to receive a discounted price on products they and their families enjoy. Others wish to earn part-time money, wanting to give direct sales a try. They are encouraged by Herbalife’s minimal startup cost (at their option, a Mini Herbalife Member Pack [Mini HMP] at (USD) 59.50, or full HMP at (USD) 92.25 (Prices quoted are for the U.S. as of December 2014, and are subject to change. For current prices, see, plus applicable sales tax, shipping and handling) and money-back guarantee (If requested within 90 days for the return of the HMP and one year for the return of resalable inventory, upon leaving the business). There is no need to purchase large amounts of inventory or to purchase other materials. In fact, Herbalife’s corporate policy discourages the purchase of sales aids, especially in the first few months of a Membership.

According to the above arguments is my opinion: You only need the right arguments for whitewashing a negative result and don’t trust any statistics you did not fake by yourself.  The start-up costs are small compared with staying active in the system. True to the motto "Hope dies last" many will pay the contribution and hope that at some point they will make some profit with the system from Herbalife. If someone has the possibility to earn more he will not say no to this possibility.

Let us continue at their income disclaimer:

PROFIT ON YOUR OWN SALES: One element of the income a Member can earn is the profit, after expenses, from the resale of Herbalife® products. Members decide for themselves the way they do the business, the number of days and hours they work, the expenses they incur and the prices they charge.

MULTILEVEL COMPENSATION: Some Members (20.1%) sponsor others to become Herbalife Members. In that way, they may seek to build and maintain their own downline sales organizations. They are not paid anything for sponsoring new Members. They are paid solely based on product sales to their downline Members for their own compensation or to sell to others. This multilevel compensation opportunity is detailed in Herbalife’s Sales & Marketing Plan, which is available to all Members online at
For the 13% of Herbalife Members who are Sales Leaders (Sales Leaders are Members who achieved the level of Supervisor or higher. See details on Herbalife’s Sales & Marketing Plan at 58.2% of Sales Leaders as of February 1, 2014, requalified by January 31, 2015 [including 41.2% of first time Sales Leaders]) with a downline, the average compensation received from the Company in 2014 was (USD) 5,456. These amounts are before expenses incurred in the operation or promotion of their business.

In the chart below, we summarize the economic benefits available to Herbalife Members in 2014. For most people (89%), the economic benefits resulted exclusively from a discounted price on products they purchased for personal and family use or for resale to others, neither of which took the form of a payment from the Company.

Herbalife Member Levels

The majority of those Members who earned in excess of (USD) 100,000 from Herbalife in 2014 had reached the level of Herbalife’s President’s Team. During 2014, 31 U.S. Members achieved the level of President’s Team. They averaged seven years as an Herbalife Member before reaching President’s Team, with the longest duration being 18 years and the shortest being less than three years.

If we take from the above chart the data then we see that from 554,353 members are only 7,695 earning more in the system from Herbalife than they need to spend (US$ 4,440 per year) - that are only 1,39% of all members! The bitter truth is that all others are only paying into the system.

The sentence "58.2% of Sales Leaders as of February 1, 2014, requalified by January 31, 2015 including 41.2% of first time Sales Leaders" shows additional how difficult it is to keep such a system upright and running. 83,6% of the experienced Sales Leaders before the year 2013 and 58.8% of the first time leader of the year 2013 failed to keep their level or reach their level again during the year 2014. That shows us the quality and or pricing problems of their products that they have too less returning customers.


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Affiliates & MLM Marketing

How you can lose money in Multi Level Marketing by the example of Amway

by Rudolf Faix 20. July 2015 06:27

AmwayU.S. MLM companies have to provide an income disclaimer for their promotion. This is forced by law otherwise the participants of their system have the possibility to force the company paying out the promised earnings. In Europe are even not helping such disclaimers. There need to get promises from the promotion fulfilled.

In light of the figures in the Amway pay arrangement, they are letting us know - Less than a large portion of the individuals who join stay "active" and overall, the individuals who stayed "active" and worked the framework, lost cash.

Income disclosure from Amway found on page 11 (IBO = Independent Business Owners):

The average monthly Gross Income for “active” IBOs in the U.S. was $202.

Approximately 46% of all IBOs in the U.S. were “active.”

U.S. IBOs were considered “active” in months in 2010 when they attempted to make a retail sale, or presented the Amway IBO Compensation Plan, or received bonus money, or attended an Amway or IBO meeting. If someone sustained that level of activity every month for a whole year, their annualized income would be $2,424. Of course, not every IBO chooses to be active every month.“Gross Income” means the amount received from retail sales, minus the cost of goods sold, plus monthly bonuses and cash incentives. It excludes all annual bonuses and cash incentives, and all non-cash awards, which may be significant. There may also be significant business expenses, mostly discretionary, that may be greater in relation to income in the first years of operation.

  1. Includes compensation from Amway IBO Compensation Plan and Growth Incentives (GI) Program during 2013.

  2. Approximately 0.31% of IBOs in North America achieved at least Q12 Platinum status (but not Sapphire or higher) in the calendar year ended December 31, 2013.

  3. Approximately 0.09% of IBOs in North America achieved at least Founders Emerald status (but not Founders Diamond or higher) in the calendar year ended December 31, 2013.

  4. Approximately 0.03% of IBOs in North America achieved Founders Diamond or higher in the calendar year ended December 31, 2013.

For average annual compensation and highest annual compensation at all IBO levels, go to and search for: Money and Rewards.

A description of the income sheme from Amway gets found in their Business Reference Guide at page 5:

Immediate Income

Your immediate income is the difference between the cost at which you purchase product inventory from Amway or your sponsoring IBO, and the price at which you sell the products to your own customers. This income is realized immediately upon each sale to a customer. For your convenience, Amway publishes suggested retail prices for all products. However, these are suggested prices only, and you are not obligated to charge these prices. Each IBO is entitled to determine independently the prices at which they sell products to IBOs or other customers.

Performance Bonus

Additional income may be earned through the monthly Performance Bonus. The Performance Bonus is driven by sales volume, which is tracked from two sets of numbers – Point Value (PV) and Business Volume (BV) – that are published in connection with each available product or service.

PV is a unit amount (you can think of it as the number of points) assigned to each product. The total PV associated with your monthly sales volume is tracked to determine your Performance Bonus bracket. The higher your PV total, the higher the percentage (up to 25%) used in calculating your bonus (see the Performance Bonus Schedule below).

BV is a dollar figure assigned to each product. The total BV associated with your monthly sales volume is multiplied by the percent from your PV bracket to determine your gross Performance Bonus. Your sales volume, or your PV/BV as it is generally known, is generated by your own purchases, whether for personal use or resale, and by the purchases made by your registered customers.

To figure your gross Performance Bonus, you add the Pass-up Volume from your frontline IBOs (those you personally registered) – both PV and BV – to your personal PV and BV, then make your calculation according to the Performance Bonus Schedule. However, any Performance Bonuses earned by your frontline IBOs, using the same Schedule, must be subtracted from the gross amount to arrive at your net Performance Bonus. In addition, you will at least be at the same percentage bracket as your downline.

Note: Experience has shown that IBOs who register others generally have higher average volume than those who do not.

I have added to the provided table the average sales volume in US$ and the paid commission from the samples. The result is that 1 Point (PV) has the value of US$ 3. The normal mark-up between wholesaler and retailer for the product assortment is calculated from down to up 50% or calculated from up to down 33.33%. Here you see already how Amway is making some extra money because they are giving in sum a maximum of 25% discount.

Points (PV) US$ sales Comm% Comm US$
100 $300 3% $9
300 $900 6% $54
600 $1,800 9% $162
1000 $3,000 12% $360
1500 $4,500 15% $675
2500 $7,500 18% $1,350
4000 $12,000 21% $2,520
6000 $18,000 23% $4,140
7500 $22,500 25% $5,625

To remain active you have at least to buy for a value of US$ 300 – hopefully you are able to resell it. If you take a look at their income disclaimer you'll see that the average income of the IBO's has been US$ 202. With other words each of their IBO's have lost in average US$ 98 per month!

You may have some major difficulty burning through $22,500 every month on sales, yet this gets to be less demanding once you have a down line. Anybody you by and by backer, will "pass up" volume to you. On the off chance that you are new to the framework and figure out how to create enough volume to meet all requirements for a 3% installment, then your supporter will get 3% from you deals (6%-3%). Their supporter will get 3% from your deals (9% - 6%) thus on until the full 25% has been paid.

This "pass up" framework urges individuals to support whatever number newcomers as would be prudent. However there is no motivator to support enlists and help them succeed. The only thing that is in any way important is that cash is being spent. In the event that an individual is losing cash and winning nothing, the cash they spend is as yet sustaining the framework, and sending 25% commission up through the chain of importance.


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Affiliates & MLM Marketing

Can You Make Money with Network Marketing?

by Rudolf Faix 19. July 2015 12:40

Pyramid SystemIt is conceivable to profit with MLM, in any case we trust it is profoundly unlikely. In his free eBook "Multi-Level Marketing Unmasked", Jon Taylor found that 99.7% of individuals will lose cash in system advertising. So for each 1,000 individuals who join a system showcasing group, 3 will win more cash than they spend. On the off chance to have 5 effective individuals in your first down line you’ll need to select 1,665 new individuals, so that 5 of them will be successful.

This may be a framework that "anybody can do", but at the same time it's a framework in which, just 1 in 333 individuals are effective. To attempt and comprehend why it is so troublesome for system advertisers to turn a benefit, we can take a closer look into the compensation plan of Amway, USANA, Herbalife and Nu Skin. Not surprisingly the framework for winning cash with every, are harmoniously one of a kind and comparable.

Each MLM has their own adaptation of paying commission and they are all offer comparative qualities. Shockingly we accept that they are organized in a manner that makes it exceptionally troublesome for anybody to turn a benefit in system showcasing. Case in point:

  • You need to "qualify" to procure any commission - You are honored "focuses" when you purchase items. This makes what we see as "manufactured interest" for the items. System promoting individuals are requesting item with a specific end goal to stay "dynamic". They arrange in overabundance of what they would by and by utilization or what they can on offer at a retail edge, which makes them stock heap the items.

  • The vast majority of the cash spent is by individuals - Network showcasing organizations recognize that next to no of their deals are because of retail request. The majority of the item being requested is by individuals for individual utilization (or to fulfill volume portions). Deals are not determined by business sector strengths; they are driven by individuals purchasing for volume targets. On the off chance that almost no cash is originating from outside the system, then the main route for individuals to benefit is to the detriment of individuals in their own particular down line.

  • It is a zero sum game - without natural deals, your up-line can just profit, on the off chance that you burn through cash. The stories you find out about the battling single guardian who is presently a mogul may be valid. Be that as it may they forget a critical point of interest, which is: Every one of those million dollars originated from different individuals from the system who are underneath them in the MLM progression (which is not pyramid paying little mind to how nearly it looks like one). Cash made by one individual from a MLM group, has been lost by another.

  • A System Prone to Negative Incentives - As we already noticed, the main way the vast majority makes any salary in system showcasing, is from marking new individuals beneath them in the framework. When you are in the framework, you're up line will get commission on any cash you spend. It is to their greatest advantage to instruct you to "you are ideal for the group" and to "continue spending that month to month amount". The more you spend, the more they win. They may accept that you can succeed in multi-level advertising, yet in all actuality, they require your cash coming into the framework with the end goal themselves should to succeed.

  • Multi-Level Marketing does not evacuate the center man - Direct advertising organizations will let you know that their organizations are "offering straightforwardly to you". Best case scenario, this is a misguided judgment, even under the least favorable conditions it's a deliberate distortion. You can arrange items specifically from the organization, yet they will pay a commission to the individual who enrolled you and a few others above you in the chain. They will let you know that you can possibly "acquire commission" from your down line. In all actuality you are getting to be another center layer in the conveyance chain between the supplier and your down line.


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Affiliates & MLM Marketing

Why Do Multi-Level Marketing Members Want You in Their Team?

by Rudolf Faix 19. July 2015 09:13

RecruitingThe response to this is basic: Multi-Level Marketing organizations have a serious concentrate on selecting new individuals. They will drum it in that you must be fruitful in Network Marketing, on the off chance that you select more individuals and assemble what the greater part of them call a "down line". Fundamentally, it doesn't make a difference who you are or what your experience is. You are completely qualified to be a piece of a system showcasing group. Everybody is a prospect, and you should sign, as much as possible.

Individuals are urged to select everybody they know not their system. The attitude is something along the lines of: MLM is "something that anybody can do". On the off chance that you put stock in the framework, then is there any good reason why you wouldn't welcome everybody you know not a piece of it? The more individuals you sign up, the more you can procure from their movement. You can possibly profit from all the business produced from the individuals you enroll, as well as the individuals that they enlist.

Hypothetically, to construct a system, you should do nothing more than sign 5 individuals (first layer down line), on the off chance that they every sign 5 individuals (25 second layer down line), you have a system of 30 underneath you. In the event that your second line every sign 5 individuals (125 third layers down line), your own system has 150 individuals. When you've got 5 layers in your down line, you'll have a system of 3,905 individuals. Presently suppose you each enlisted 7 individuals rather than 5, then you'd have a system of 19,607! Be that as it may, why stop at 7? There is no restriction to what number of individuals you can enroll! So go out and sign the greatest number of individuals as you can. Sounds really straightforward - isn't it?

If you think so then think about why are getting Multi-Level Marketing Systems wasteful promoted? Let us take a look at the standard recruitment procedure of Multi-Level Marketing Systems:

  1. The first step is a delicate welcome.
    Somebody you know (or host just met at a get-together), welcomes you to “find out around an energizing new open door”. This is typically joined by some sweet talk along the lines of “I am just letting you know on the grounds that I think you'd be stunning at it” and “I just present individuals in the event that I see they can possibly succeed”. These welcomes are normally extremely dubious. On the off chance that you pose any questions, the answer is generally “tag along to the meeting and every one of your inquiries will be replied”.

  2. The second step is the presentation.
    The meeting you are welcome is a presentation of how that specific multi-level promoting organization lives up to expectations. This is normally not keep running by the individual who enlisted you. Right now you meet somebody in the “up line” who is situated as senior individual from the framework and in this manner a power on the subject. These presentations are frequently done in a gathering or even workshop a domain.

    Despite which MLM you are taking a gander at, the presentation, will inescapably take after a comparable configuration and will incorporate high vitality clarifications about:

    • Why Network showcasing is the method for what's to come. It evacuates the go between and gives cash back to you. The reasoning of the organization is to offer straightforwardly and spare cash on dispersion channels

    • How simple it is for individuals to succeed in MLM. This is something “anybody can do”. You don't need to be a sales representative.

    • The items they offer. They are not accessible in general stores in light of the fact that they are “too great”. The vitamins have helped explain a wide range of restorative conditions.

    • Showy graphs demonstrating to you the amount of cash you will make with even an unassuming down line.

    • Examples of overcoming adversity, another person was colossally fruitful, in this manner you can be as well! The stories incorporate clothes to newfound wealth story, and concentrate on the point that "this framework is your key to monetary opportunity".

  3. The third step is the hard sell.
    This is typically not done by the individual who selected you. The last push is keep running by somebody in their up line. It's the part when you are informed that “today is the best time to join”, and reminded that “everything you could ever hope for can work out as expected, in the case that you are a believer”. For the case that you are unwilling to sign on the spot in light of the fact that you are in need of more opportunities to legitimately dissect the open door the promoter will act like you are destroying his world and offended his mom and his religion in at the same time.

Did you get the value which you have for a Multi-Level Marketing system? Don't worry it is not the value of your personality; it is the value of your money and/or the value of your work-force in which they are interested. Don’t forget that you are only getting paid if you sell something and/or recruit new members. Some systems are even so clever built that your percentage are getting computed by using your sales and recruiting data together with the data from your downline. That is done for maximizing the earnings of the MLM company.


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Affiliates & MLM Marketing

Binary Options - a highly risky betting game

by Rudolf Faix 5. July 2015 11:34

Binary OptionsTake the description about binary options from WikiPedia. I'm using here only the example from WikiPedia:

For example, a purchase is made of a binary cash-or-nothing call option on XYZ Corp's stock struck at $100 with a binary payoff of $1,000. Then, if at the future maturity date, often referred to as an expiry date, the stock is trading at above $100, $1,000 is received. If the stock is trading below $100, no money is received. And if the stock is trading at $100, the money is returned to the purchaser.

If the promised earnings from the offers found at the social networks would be true then not one would invite you to earn with the brokers. The binary option brokers would use their own money for doing the job. As this betting game has a very high risk they need your money for influencing the market. All this systems are on autopilot. You have no chance to influence the kind of binary options which are getting bought. With other words the broker are doing all the work and you have to provide them with money.

As higher the promised winnings will be as more unlikely will it be that you win. If you go with your money to a casino you'll have a higher chance to win if you are choosing the simple chances from the roulette game. You only need to bet with the minimum amount at the simple chances like red/black or pair/impair and you should not change your decision the whole day or evening. Every time you lose, you have to double your betting amount and every time you win you'll need to start again with the minimum amount. Be aware even with this system you can lose money because the casinos have an maximum betting amount too. The risk is not so high as with binary options.

Don't forget the golden rule in business: As higher the promises winnings are as higher is the risk to lose everything.



Affiliates & MLM Marketing

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I'm since more then 35 years in the computer business (programming and technical support) and using the Internet since it has started. Since 2002 I'm programming solutions for Asterisk and since 2004 I'm in the call center industry.


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