Top 3 Reasons Why MLM Products Are Expensive
In addition to complaining about never making any money in mlm, people often question why the products are so expensive, even at “wholesale”.
Because the products are expensive, it raises an automatic barrier to retail sales and people get the idea that the company is a pyramid because very few people are selling retail. That’s a whole other subject!
Here are the top 3 reasons (in my experience of over 40 years in MLM) why the products are expensive.
- Customer Base
Small Customer Base
Being honest, every distributor in an MLM is a customer of the MLM company. Let’s have a look at some companies and their distributor bases:
Amway 3 million
Herbalife 3 million
Mary Kay 2.4 million
Young Living 1.5 million
This covers the top 5 or so MLM’s in the USA. You may say there are millions in Amway, but compared to the population, it is a small fraction. This is the number of distributors and not necessarily the amount of distributors that buy on a regular basis.
Just for comparison, in 2014-2015, 40 million USA households used Tide Detergent. Even if all 3 million Amway people purchased detergent you cannot compete with the scale of 40 million. This leaves over 260 million for the other detergent makers!
I don’t think anyone could argue the point if I sold 40 million of anything vs 3 million, I could make it cheaper, sell it cheaper, and still make profit.
This is always an interesting subject as quality is in the eye of the beholder. In recent years, environmentally friendly products have hit the market and they are usually priced higher. Amway had that going on long before the rest of the world! Their SA-8 laundry detergent had no phosphates long before the rest decided it was cool.
The essential oil companies use quality the most. Young Living has their own farms and their own processes for making their oils. I’ve been using oils for many years and use Young Living, Doterra, and Melaleuca. I won’t get into all the crap between those three, but I can tell you they are all far superior to generic brands
Quality is a personal thing for sure. Some people love the $1 coffee at the 7-11 but others will pay $5.50 for a Starbucks. Go figure!
Here is the dirty word. You have to pay all those commission in the pyramid! I get a kick out of some bloggers and Youtubers that say the people at the top are making money off the “backs” of the people at the bottom!
Personal story time. I was in court for a child support matter long time ago. I asked several friends who happened to be in Amway with me to testify. My ex’s lawyer got my one friend on the stand and painted a picture of how he would be not telling the truth because he was my “upline” in Amway. He went through this whole scenario and finally asked how much money he made “off of me” last year. My friend’s response was “about $3 bucks”. The lawyers face was priceless.
You see, it’s not like they make hundreds of dollars from one person. The distributor that has a large group started that group and helped attract customers that buy product. Why shouldn’t they get paid?
The company that sells Tide spend millions on advertising to get their customers. If I use Tide and tell my friend, I get nothing. I did their advertising for them.
The MLM company chooses to spend their advertising dollars on the people doing the work. I don’t see how that is wrong.
To this day, I still use Amway SA-8. Why? Because I like it and I hate the smell of other detergents. Personal preference and I am willing to pay the price.
The Unattainable Triangle
In marketing, there is a concept called the unattainable triangle. Picture below
The triangle has three points. Quality, Service, and price.
The idea is that you can only pick 2.
If you want high quality and good service, you cannot have low price
If you want low price and good service, you cannot have high quality
And so on. You get the point. Everything comes at a cost.
The MLM truth:
If you think the products are expensive – don’t buy them
If you think it’s a scam – don’t join
Is Avon a Pyramid Scheme?
Avon is a multi-level marketing company (MLM). Basically, independent sellers can sell Avon’s beauty products as well as bring on new sellers for a profit. Because of that, Avon has been accused of being a pyramid scheme.
However, is Avon a pyramid scheme? Well, to answer that question, it is important to first understand what a pyramid scheme is.
A pyramid scheme is all about recruiting. The more people you recruit, the more money you make. Recruits have to pay an upfront fee which then goes into the pockets of the recruiter and the person who recruited the recruiter and so on.
You eventually end up with a pyramid-looking structure where the people on the top will always make more money than those below them.
An MLM, on the other hand, does have a similar pyramid-like structure, but the profits are not primarily made through recruitment. Instead, there is an emphasis on actually selling the products.
As a result, it is possible to make more money than the person who recruited you. Regarding the question “Is Avon an MLM?” it is safe to say that it is. Avon puts an emphasis on selling products rather than just recruiting other sellers.
How to Join Avon
If you are passionate about beauty products and want to make some money on the side, then you can join Avon by signing on to be one of their representatives.
Avon claims that there are no hidden fees, but that does not mean that there are not any fees. In order to start selling, you will have to pay $35 for an “optional” starter kit. Once you get the kit, you can start selling.
It’s a very simple process to join Avon, and just requires you to enter some personal information, such as your name and number, and then you’ll have to buy your starter kit.
How You Make Money on Avon
The primary way to make money on Avon is by selling their products. You can earn from 30% to 50% on the sales you make depending on the tier that you are in. There are seven tiers:
- New Rep—Makes 30% on beauty product sales.
- Premier—After selling $5,000 worth of products, you can make 30% on both beauty and jewelry product sales.
- President’s Club—After selling $10,000 worth of products, you can make 40% on beauty and jewelry products and 25% on fashion and home products.
- Rose Circle—After selling $35,000 worth of products, you can make 45% on beauty and jewelry products.
- David H McConnell Club—After selling $65,000 worth of products, you will still make 45% on beauty and jewelry products but you will regain your 25% on fashion and home products.
- President’s Council—After selling $110,000 worth of products, you can make 45% on beauty products and 25% on home and jewelry products.
- Inner Circle—After selling $220,000 worth of products, you can make 50% on beauty and jewelry products and 25% on home and fashion products.
All in all, Avon is an MLM company where individuals can make money by selling Avon’s products. It is simple to join, and, unlike a pyramid scheme, it is possible to surpass your recruiter’s income simply by selling more products.
In this post, you will learn more about Melaleuca, the wellness company. Is it a pyramid scheme? Can you make money from it? What do customers think about it? All of this will be answered in this MLM Review.
Is Melaleuca a Pyramid Scheme?
Melaleuca is not a pyramid scheme because you can make money without recruiting resellers. Since Melaleuca offers user subscriptions, you can generate recurring revenue from introducing genuine product users to the brand.
This is different from what I call “grift MLMs.”
MLM grifters are technically not pyramid schemes. They, too, allow you to make money from direct sales. However, the money you make from recruiting resellers is higher than what you make from direct sales, which incentivizes recruitment over sales.
In other words, many MLMs are not pyramid schemes technically but might as well be from a practical perspective because they disproportionately incentivize recruitment. Sellers buy products to sell at increasingly higher prices which they sell to other sellers who further mark them up.
Most MLMs are unsustainable.
In contrast, Melaleuca allows you to recruit customers who can make recurring purchases to resell and use personally.
The following table will help you tell the difference between multilevel marketing (which Melaleuca does) and pyramid schemes (which this company is technically not).
|Pyramid Scheme||Multilevel Marketing (MLM)|
|Is short-lived.||MLMs can have longevity. Melaleuca has been in business since 1985, and Forever Living has been operating since 1978.|
|Recruitment is its only (or main) income source.||Recruitment can be an element, but sales are its main income source.|
|Doesn’t offer value to the end consumers.||Offers tangible products and services to the end consumers.|
A pyramid scheme requires one to invite others into the scheme to make money. That’s the main way to make money, and each individual’s subscription bankrolls the upper tiers of recruiters. In contrast, a multilevel marketing opportunity allows you to recruit others to amplify your cash flow, but you can sell products or services to make money.
Melaleuca is in the latter category. But most people who make significant money are ones who have recruited a large volume of dedicated workers.
Let’s take a deeper look at Melaleuca, the wellness company, so we can unpack the pros and cons of working for it.
Melaleuca, Sales, and Executives
Melaleuca has branded itself as a wellness company and primarily sells products and services to a market of resellers. The end consumer almost always gets his products through a Melaleuca executive.
Earners in this opportunity get money from selling to users of the products or to other sellers. Either type of customer is referred to as a “customer” by Melaleuca. The official term used for a seller in this MLM is “executive,” but the end duty is the same. It seems like a derivative of “sales executive.”
Melaleuca Compensation Plan
One of the best things about Melaleuca is that it can help you earn recurring revenue even if you don’t recruit other sellers.
Most MLMs help you make money off one-off purchases but keep most of their compensation tied to reseller recruitment. (And that’s why they might as well be pyramid schemes.)
Melaleuca offers up to 50% product points for the products bought by the customers you enroll. If these customers turn into subscribers who buy products in the second month, you can start making an actual commission.
Here is how Melaleuca rewards are distributed:
- Those who enroll 1 to 7 active customers start earning a 7% commission on each purchase made by said customers from the second month onward.
- Those who enroll 8 to 19 active customers earn a 14% commission on each purchase from the second month onward.
- Those who enroll 20+ customers actively purchasing products each month can earn a 20% commission from the second month onward.
A bulk of the money you make is reliant on customer dedication. Given that this is a multilevel marketing company, it is easy to see why recruiting resellers could be an easy way to maximize commissions. But people generally like to buy wellness products from the same brands over and over. And you can technically make money selling to genuine users.
Melaleuca: The Pros and Cons
Now that you know how Melaleuca compensates its customers and the two paths to making money with its commission-based opportunities, let’s look at the pros and cons of this opportunity in the context of MLMs.
The Pros of Melaleuca
- Offers product variety – Melaleuca has a decent inventory of products that fits online demography. This means you have a higher potential for closing the sale.
- Incentivizes subscriptions – Discounts are given to regular customers, which allows you to make recurring revenue. You don’t have to close sales repeatedly to keep earning commissions.
- It is a reliable company – MLMs that focus on recruitment without offering value to an actual consumer base eventually need to rebrand or go out of business. Melaleuca has been in business since 1985. And it won’t risk its reputation to scam you out of a few hundred dollars.
- Has positive reviews – Melaleuca products and services are genuinely good. Many MLMs try to maximize their margins by cutting costs on the production side. Melaleuca offers premium products that have earned it thousands of positive reviews across multiple forums and platforms.
The Cons of Melaleuca
- Costs up to $739 – If you can’t recruit enough customers to 50 product points every month (customers buying at least $100 worth of items), you will need to purchase $60 worth of products yourself to stay in the program. That can add up to $739 if you factor in the annual $19 program fee. I believe they have enough products to choose from so it really isn’t a “cost” but just replacing alot of what you buy from the grocery store already.
- Products are comparatively overpriced – While Melaleuca products are premium by market standards, they are also seriously overpriced. This makes selling to genuine buyers quite difficult.
- Initial earnings are quite low – Melaleuca offers opportunities to earn tens of thousands of dollars, but very few people go that far up the ladder. Most customers end up making a few sales and never get to see anything beyond product points.
Reviews for Melaleuca
Let’s look at the pros and cons of Melaleuca from the reviews it has received across multiple forums. From each review, we will try to glean a tangible takeaway.
“Strange company. A friend referred me, but this company could not get it together. Insisted on referral paperwork, but it was unclear what to send. Worst customer service because they would rather lose a customer instead of taking the steps to land a new customer.”
The onboarding process isn’t customer-friendly. If you refer someone, make sure they have all the materials.
“I cancelled my membership within a week after signing up in January 2022. I did not like the product. I had to pay $10 to return which was fine I guess. Just 2 months later in March the company charged me for product I didn’t order and now they want me to pay $10 to ship it back when I was told my account was cancelled.”
If you refer a friend instead of a stranger, make sure you help them with the cancellation process if they need to cancel.
“I really like the Melaleuca products. The vitamins are amazing, and I can’t keep the healthy snack foods in my cabinets because my kids eat them so fast. The customer service has always been fantastic. I have never had a problem with any of their products or services. I now recommend Melaleuca to others.”
When you introduce the right people to the company, they love it. Don’t introduce customers who don’t match the user demography.
“I signed up a year ago for the Melaleuca service and have had no problems with the products or customer service. In fact, their customer service is beyond good. I decided to cancel my membership in March simply because we had a surplus of products and won’t need any for a while.”
More tech-savvy customers are likely to be satisfied with this company. Customers who do not look at the fine print might feel scammed.
Melaleuca is a company that has been in business since the 80s. It is impossible to sustain a pyramid scheme that long.
The company offers straightforward MLM combined with premium products and optional subscriptions.
Some people make a lot of money with Melaleuca. Others don’t.
Amway. Not A Pyramid, But What About The Tools
At the very first Amway presentation I attended, the speaker talked about the tools. The tools are books, tapes, and events.
These were all designed to motivate and educate you so you will have a successful Amway business. I was in around 1989. At that time, the tape of the week was $5 and all I knew was they came from my sponsor. I picked it up along with my product pick up each week. Even the weekly product pick up was a chance to get together and motivate each other.
I remember the big earners saying from stage how rough it was driving to product pick up every week due to kids, snow, sleet, etc. Was paying your dues!
Once the FTC lawsuit was settled with Amway NOT being a pyramid scheme, the focus moved onto the tools business.
To summarize, the tools (tapes, books, rallies) were manufactured by and promoted by the highest level distributors. Famous names are Dexter Yeager & Bill Britt. These tools were sold to certain distributors of lesser, but very high rank in Amway. They were then sold to their respective downlines.
At this point, I se no reason to call it a pyramid. The top guns were just using their downlines as a customer base to sell the tools.
The major problem was the constant pressure on downlines to buy the tools. Get on the tape of the week. Go to all the rallies. Duplication equals success. Each person was pressed (so they say) to get their people on the tools.
I remember when I was in. I enjoyed tape of the week and $5/week was not that bad. I had a bit of trouble swinging the money to the bigger rallies, but the local ones were not that bad. I just stayed within my budget.
After reading a few of the lawsuits, I noticed common threads.
- Claims that only people at the top made all the money! Pyramid!!!!
- The plaintiffs lost a fortune. What is a fortune? That’s a lot of $5 tapes.
- The uplines misrepresented where their incomes actually came from. That is a fine line and can be cut either way.
- Nobody told them, nor did they have any reasonable way to find out, that the average person in Amway makes little or no money.
Value For Money?
What does $5/week get you? It’s a motivational/educational tape. Now this was way before the internet so you couldn’t listen to Youtubes for free. How much did a music album cost in 1989? According to Mr Google, it was between $8 and $10.
How much did record producers make? Millions
How much did the artist get? Millions
What was the value of a music album? Up to the user.
What was the value of tape of the week? Up to the user.
What were the costs of rallies in the 80’s/90’s? Anywhere between $50 and $300 depending on who you talk to or which lawsuit you read. $300 probably was the weekend long seminar.
I’ve paid $2500 for personal development seminars.
What’s the value? Up to the user. What they get out of it.
What was my value? I met Charlie Tremendous Jones and we ended up doing business together outside of the seminar.
I got saved. What’s that worth?
How Much Does It Cost To Run A Business?
Let’s look at Amway. Based on the business model in the 80’s/90’s, here is a rundown of what I think the maximum would be;
Sign up fee $100 (vague on that one)
Tape of the week $260
Quarterly Rallies $400
One Big Rally $300
Promotional Lit $100
I did not count the 100pv you have to do as you will be consuming those products yourself.
Did not count the excess fuel to run your car as that would certainly be recaptured if you had the correct CPA to do your taxes!
SO, let’s round up and say $2,000 / year to run a business.
That’s a drop in the bucket for a business. And Amway IS a business. You can make money in it. Is it for everybody? No. Do you have to hustle. Yes.
People generally hate to be deceived. It really is not good.
People hate to be taken advantage of. Not good either.
I have no idea why the population does not sue big corporations for these things. Listen to the ads on TV. 30 second bull.
I didn’t make much in Amway. I didn’t cry that I “lost” some money. I did not let people strong arm me into running up my credit card or buy a garage full of vitamins to get qualified for one month.
I did my research on Amway before I got in. I spoke to other people.
I took things at face value. Yes, I did buy about 300 tapes. Were they useful, yes.
I listened to them for years after I stopped being a distributor and I did buy products after that. I still use SA-8 and LOC. I drink the energy drinks they have.
If you talk to these people filing lawsuits, they will come off as strong people. So how in the world did they go hook line and sinker into allegedly spending a fortune on Amway?
My take is they are embarrassed. They recruited friends and family (which I found out is a big mistake) and then had a lot of egg on their face so they sued. To me that makes me look even more stupid.
Now, in this woke world we all live in, companies have to remove 100% of the risk just to avoid these lawsuits. It piggybacks on the “participation” generation whereby there are no winners or losers. You get the same rewards for being lazy as you do for hustling.
Is MLM for everyone? No
Is it for some – absolutely.
The world needs all kind of people in it. Diversity, right?
Are you entitled to bash MLM? Sure, it’s your right to have an opinion.
Good luck in all you do
Is Amway A Pyramid Scheme
This is the grand daddy of all mlms. This is where it all started and where most people all go back to when something is wrong in the industry.
Amway was founded in 1959 by Rich Devos and Jay Van Andel. It has ranked #1 in the MLM industry for years and years. In 2021 it had $8.8 Billion in revenue from operations in over 100 countries.
Begs the question….how can this be a pyramid scheme?
Let’s look again at what is a pyramid scheme:
1.) High up front cost and inventory loading
2.) Get paid for recruiting new members
3.) No retailing of goods/services or no product at all
In this article regarding Amway, we will address these quickly so we can get to some other important items.
1.) It costs $100/year to be an Amway IBO (independent Business Owner)
2.) There are no inventory requirements at all
3.) You do not get paid to recruit. You get paid based on volume of activity
4.) You can retail many products/services
Conclusion: Amway is not a pyramid scheme.
The famous Amway lawsuit was brough by the FTC (Federal Trade Commission) in 1979.
I do not think many people really read the actual lawsuit. Maybe just summaries. The understanding that most people have is that the FTC was claiming Amway was a pyramid scheme. It is much more than that. In reading the lawsuit, I came away with these items:
1.) Amway was accused of price fixing and price manipulation
2.) Amway was accused of restraint of trade
3.) Amway was accused of unfair business practices
4.) Amway was accused of operating a business model that would collapse upon saturation (no mention of a pyramid yet)
5.) Amway and it’s members were accused of making false and misleading claims regarding the business
In the whole lawsuit, the word pyramid never appears! Imagine that.
Finally, a mention of the pyramid rules. This is outside of the actual “counts” that they are being accused of.
1.) Amway has had an inventory buy back policy since it’s inception – good thing to have
2.) Amway has a 70% rule to avoid distributors purchasing their ranks. A distributor has to resell at least 70% of what the personally buy.
3.) Amway has a 10 customer rule in place. The suit says that Amway direct distributors enforce it, but I was in Amway for 5 years and I never got asked. Opps!
Well, the bottom line is that Amway was deemed to NOT be a pyramid scheme.
All the other stuff was just that. Stuff. Just like any other frivolous lawsuit. You throw up all you can against a wall and something may stick. Well, not in this case.
Unfortunately for Amway, this lawsuit was just the beginning of many to come. The main reason is just stupid distributors that will say anything to recruit someone. I saw the desperation, the begging, and deception. Does that mean you fall for it?
Do your due diligence!
CLICK HERE for the tools lawsuits!
Young Living Lawsuits
Just like any other mlm out there, Young Living has had it’s share of legal trouble.
In this blog post, I am going to review the Young Living Lawsuits and distill them (ha ha) into everyday language and make some sense of them.
Class Action Lawsuit Filed 1/20/21
This lawsuit alleges that the Young Living Essential Oils provide no health nor medicinal benefit and people purchased the products based on these claims:
- Promote feelings of calm and relaxation;
- Help consumers sleep;
- Reduce anxiety;
- Provide clarity, focus and/or alertness;
- Energize; and
- Improve consumers’ mood and increase their motivation.
The big no no was that the products were labeled “therapeutic grade”. So, sites that are, what I call, bashing sites put all of this out there and are used to collect people into the class action suit. What’s even more interesting is that the person bringing the suit purchased oils for 4 years. I don’t think it would take 4 years to figure out if they did or did not have any benefit.
In the end the suit was dismissed. The judge referred to the labeling as “puffery” and that any reasonable consumer could not rely on the vague advertising.
To me this is a wake up to any Young Living distributor to watch what they say and be very general.
Young Living Pyramid Scheme Lawsuit
Julie O’Shaughnessy, in 2019, brought a lawsuit alleging that Young Living operates a pyramid scheme and she, and others, have lost thousands of dollars.
Just as in other MLM lawsuits, the word pyramid shows up hundreds of times and claims that they were forced, somehow, to keep spending money.
The lawsuit just rambled on about arbitration and really looked like a waste of time. I saw some writings that it was dismissed, but cannot see any court document. On the flipside, if they would have won, Young Living would be out of business.
Young Living Warning Letter June 2022
Young Living received a warning letter from the FDA regarding some of their products, notably the CBD product. The FDA is always on the lookout for people making claims (except for big Pharma) about what supplements can or cannot do.
What’s interesting is they called the YL products unregistered drugs because people on websites and social media were saying that the oils helped with things like sniffles and kidney stones.
I guess I best be careful if I put on my website that Lemonade took away my kidney stones!!!
I believe this type of letter is to just keep a check on supplement companies so that they don’t go too far in their claims.
Of course Young Living replied and the information was taken off the sites.
I did my own snooping around the internet and didn’t really see anything that would make the FDA go crazy. I feel that they are worried people just might take their health into their own hands. Just sayin.
Well that wraps up the Young Living Lawsuits. If you know of any more, just leave a link in the comments.
Is Mary Kay A Pyramid Scheme?
This seem to be the question on everyone’s lipsticks! You can type this into youtube and there are many many videos popping up on Mary Kay Scams and women crying over how they were scammed by Mary Kay being that it’s a pyramid scheme.
Spoiler Alert – Is Mary Kay a Pyramid Scheme? It is not. Is Mary Kay an MLM. Yes, it is. No matter how you want to make it up (ha ha), it is still an MLM.
Here is a quick video on the subject for those of the auditory learning method:
What is a Pyramid Scheme?
1.) A scheme whereby people are paid to recruit people
2.) There is no focus on retail sales
3.) A high price to buy in / start up
How to get started in Mary Kay
Getting started in Mary Kay is easy.
$30 gets you in. This gets you some promotional literature, one year access to a merchant account, and a free retail website. You can set that website up by using Mary Kay Intouch. It is an app used to make retail sales online.
Now I used to build websites, but not for $30.
I have a proper merchant account that costs over $30….per month!
If you want to go to the next level, you can start with $130 and get all that is in the $30 pack plus demos.
So far nothing that says Mary Kay ruined my life.
The problems come in when consultants start “making” people buy inventory. I’m not sure how people force others to do this. I asked the lady who sponsored my ex what kits were available and I made an informed decision.
There is NO requirement to buy inventory so if you do, it’s on you.
The cost to get started in very reasonable and is of high value.
Do I need to Recruit People In Mary Kay?
No, is the simple answer. You can get into Mary Kay for:
1.) Just to buy your own products at a discount or
2.) Make money on retail sales or
3.) Build a team (Recruit) or
4.) All of the above or a combination.
Do I Get Paid To Recruit People?
The answer is no. However, lots of people out there twist this statement around for their own benefit. Either click bait or to justify a bad experience which was mostly their own doing.
When you recruit someone into Mary Kay, you do not get a recruiting bonus. If you did , Mary Kay would have been found out a long time ago just as Pre-paid Legal was.
When you recruit someone into Mary Kay, you get paid on their volume they purchase if you are an active consultant. See below.
This is why Mary Kay is an mlm. You get paid on multiple levels for the volume in your team.
Is there a purchase requirement?
No there is not. You can be successful in Mary Kay by just retailing the product.
If you are not “active”, I believe you just get 40% off retail and you can sell at full retail to make a profit.
If you are active, you get 50% off retail and you also qualify to get paid on your team volume.
To be “active”, you have to purchase $225 worth of wholesale product every 3 months. If you use the products yourself, you can get pretty close to that figure and you can retail the rest. I had about 5 regular customers and my ex used the rest. Everyone is different – disclaimer.
Contrary to popular belief, you can write off 100% of the purchase requirement. See the article here.
Why Do People Push So Hard For Recruits?
In any MLM, there is a focus on recruiting. There is also a focus on retail. It’s a matter of perspective.
A person who is afraid to sell always thinks they are being pressured to sell.
A person who is afraid to talk to other people always perceives a pressure to recruit.
This is why I am astounded at the number of people that say they were “burned” or Mary Kay ruined my life or they write blog posts on the dark side of Mary Kay cosmetics.
They know going in you have to sell and recruit.
The reason (in my opinion AND experience) they push for recruits is purely a numbers game of any sales company.
If you speak to 100 people about the Mary Kay opportunity, this is a sample of what may happen:
83 will tell you to piss off (don’t forget to ask for referrals!)
10 will become a customer – or just buy a once off product
5 will sign up to get the discount
2 will sign up for the discount and to build a team
The problem is always a few people who push and push people knowing that they do not want to build a team.
On the flipside, many people cannot just say no when they are pressured.
At this point, I see no reason why anyone would call Mary Kay a Pyramid scheme unless they just want clicks on the internet or they are bitter about their experience.
Let’s look at a few more things:
Mary Kay Compensation Plan PDF
This one is a tough go. I scoured the internet and the Mary Kay site and found only a small fact sheet.
You can download it here.
In a nutshell, the compensation plan is simple and similar to other MLM’s
Override percentage on your team
Bonuses for reaching certain levels
Mary Kay Car program
I read slot of these negative Mary Kay bashing sites (maybe too much) and a funny thing just keeps popping up.
Many say the car program is not free and many say if the focus is not recruiting, why do they promote the car program?
Answers are pretty simple.
If someone pays for my car payment and insurance, that’s free to me. Did I receive that for doing the work necessary? Yes.
Now, theoretically, I could sign up people that just want to retail the product and qualify for the lowest level free car.
I could also get the number of active people necessary to meet the volume requirements as just customers that choose to buy alot of makeup. I don’t even need to do it in person! Just use the Mary Kay Intouch App.
You see, there are many ways to skin a cat. Sorry cats.
Mary Kay is like every other company out there. They have rules based on their profit motives and you have to decide if playing within those rules will achieve your profit motives.
Similarly, people complain their job does not pay enough. I say, find one that does!
If MLM is not for you, don’t join.
Is Mary Kay a pyramid scheme? No
Is Mary Kay an MLM? Yes
Can you make money in Mary Kay? Yes
Is Optavia A Pyramid Scheme? A Truthful MLM Review
Welcome to Optavia. This is where you start your personal transformation. Otherwise known as weight loss!
The questions are simple?
Is Optavia a pyramid scheme and is Optavia an MLM? The answers are No and yes, respectively. This is from an independent perspective.
Ask someone who lost money or has a complaint against Optavia, then they are automatically a pyramid scheme. I call it the P card. When in doubt, throw the P card.
It is, how a lot of people, try to end an argument or debate about a company in the MLM industry.
In this article, we will dive into what makes Optavia an MLM and why it isn’t a pyramid scheme.
Optavia is no different than any other health and wellness company. They have meals and meal replacements. They call their products a fancy name to differentiate them from other meals and health products.
They call their products fuelings and they are recommended by a health coach – another name for your upline! Fancy.
One of the biggest complains is the cost of mlm products. Let’s see how Optavia Shakes stack up against other brands!
Select Dark Chocolate Covered Cherry Shake – Very Fancy $3.46 per shake
The Man Shake meal replacement shake – Not fancy $2.49 per shake
Rapid Weight Loss Meal Replacement Shake – So So $3.92 per shake
Slim Fast – Been around forever $1.51 per shake
The last three can be found at my local grocery store and/or Walmart.
The cost is not so far out of the range of a normal range as to spark complaints. After all, nobody is forcing people to buy this suff!
Is Optavia an MLM
Yes, it is, by the very definition. An MLM is a business model whereby you, as a distributor, can get paid for the sales of people on multiple levels. If it were just one level, it would be considered affiliate marketing.
Instead of buying pricing TV ads and radio spots, MLM’s pay their advertising budgets to the people spreading the word about their products. This is why mlm’s can pay on several levels down.
To start your Optavia business, it costs $199.00 for a business kit. This has your standard literature and 12 month access to your individual site.
People may complain about that, but it does cost money to get replicated sites and provide materials.
The Optivia Compensation Plan
The Optavia compensation plan is pretty simple….not!
I got lost after the first chart:
You can download the whole “integrated” compensation plan here.
One thing I did note, you have to have 5 customers that make an order to qualify for anything!
That is a switch to most MLM’s where they require zero retail customers.
Plus, your personal orders count for nothing. This is a good thing so that people do not “garage qualify” and then they end up on anti-mlm sites complaining how they were burned.
They continue with the typical ranking systems and incentives like most mlm’s. Look at this craziness!
Is Optivia A Pyramid Scheme?
It is not. In order to be a pyramid scheme:
- You Get paid only for recruiting people
- You have a high start up cost
- There is no retail trade
Based on the facts on their website, it is not a pyramid. They actually make it pretty tough to earn money with the 5 customer rule.
There is no inventory loading and $199 for your kit, which includes a website, is pretty good.
All in all, you have to be pretty switched on to make some decent money in this company. On the flipside, I don’t see where you can lose more than $199 bucks.
Your personal orders are for you so you get the benefit. Stocking up on things does you no good and nobody is forcing you to buy anything.
Is Optavia a pyramid scheme? No
Is Optavia an MLM? Yes
I believe people need to go into these businesses knowing that you have a sales role. Period.
And if you fail, don’t play the P card!
Why Auto-Ships for MLM’s Are Tax Deductible
To deduct or not to deduct, that is the question.
If I lined up 10 tax people in a row, I probably would get 10 different opinions. Mostly not deduct, but for various reasons.
What is an Autoship?
An autoship is a monthly order that comes automatically to you from your company. I use the word autoship as it is very common in the MLM industry.
What we are technically talking about is a minimum purchase requirement to remain active and collect overrides for your team.
The dirty truth behind autoships is that companies use them to keep their cash flow going so they can pay out commissions! Now I got that from some great reliable sources!
The way they get you to get on it is that if you want to get paid, you have to buy. Usually the monthly amount is between $100 and $200.
Most times, people put their own products on autoship and therein lies the rub. Most accountants say its not deductible because you use it personally.
While “personal use” is a buzzword in the accounting community, you have to look further into it to get to the true nature.
Let’s look at what the IRS says a deduction is….
A deduction is any cost that is ordinary and necessary in carrying on a trade or business.
Is a purchase requirement :
Ordinary – Yes, in the MLM/Direct Sales industry – 99.9% of the companies have a purchase requirement
Necessary – Yes, it is. If you want to get paid commissions for your group.
Therefore, it is a deduction! You can flush the stuff down the drain and it would still be a deduction!
And yes, it has stood the dreaded audit test – In my experience!
I put the amount spent each month under “Required Purchases” on Schedule C of 1040.
The Truth About Herbalife MLM
Founded in 1980, Herbalife comes in at #2 for the top 10 MLM’s in the USA- 2022. If this were an illegal pyramid, why then hasn’t it been shut down?
The company was investigated by the FTC in 2016 and all they could get on them was “unfair and deceptive business practices”. If you look at many quote regular companies, you see that all the time. They don’t even try to hide it. Have you ever seen a McDonald’s hamburger that looks like the one on the commercial? Exactly.
Let’s look closely into Herbalife and find out what it’s really all about.
Remember the items that constitute a pyramid scheme:
- You get paid only on the recruitment of others
- You have to pay a high up front fee
- There is no retail trade
All other items that have been thrown around are a pretty gray area and have not proven to be illegal.
How To Get Started
Scouring their website, there are no signs of a requirement of a high up front fee.
To start as a preferred customer in 2022, it costs $34.95 USD and you cannot resell any products. You just get a discount on things you buy.
If you want to become a distributor, it costs $94.10 USD in 2022 for USA. This is for your starter literature. This is contradictory to their main page where it states”
“Low Startup Costs: There are no minimum purchases required or requirements to purchase any sales or business tools to start up or succeed in your Herbalife Nutrition Independent Distributorship.”
That’s a bummer but it is not earth shattering. They kept the start up under $100 so that will not even come up on the FTC radar. There is no mention of these Herbalife cafes on their website. That must be a practice not supported by the company.
How You Get Paid
There is no link on the company website to their compensation plan. Google has it listed under marketing plan.
What I learned later in my career is that compensation is not marketing. I wish they would change their language!
Like 99.9% of the MLM’s out there, Herbalife requires you to personally purchase products to qualify for overrides beyond the retail sales. This again goes against their website statement that you need not purchase anything to succeed. The only way to do that is to just sell retail.
This purchase requirement always is a tax rub for distributors and having tax people not aware of how an MLM works.
As of the date of this article, I cannot figure out how much you have to purchase dollar wise each month. Based on the products and their cost, I can safely say you will have to buy about $200/month. Now you can use them yourself and/or retail them to customers.
I see no customer requirement in Herbalife. Market America has a system whereby you have to submit retail sales every quarter to the company. This proves you are getting customers.
So technically, there is a retail component to this business, but it is largely up to the distributor to do it.
As with others, you earn a % of the volume produced by your downline distributors. Now many people think that this somehow is a bad thing. Why should it be. If you recommend a movie to someone and they go see it, does the movie theatre pay you? Of course not. Should they? Yes! You did their advertising for them! It’s called word of mouth.
If anyone recommends my tax service or my tax savings course, I pay them! They are keeping my advertising budget to a minimum.
I believe the problem comes from rouge distributors telling new recruits to load up on products or start these Herbalife cafes. That is not good practice.
However, the people joining Herbalife should consult with an impartial person about the way to go about business. Most new people do not have any business experience and therefore, it is vital to seek good counsel.
At this stage I see nothing that points to a pyramid scheme with Herbalife. The problem is that distributors that follow bad practices make it easy to call something a pyramid. I guess every industry deals with it in one way or another.