A PROJECT REPORT ON

ORIGIN OF MULTI LEVEL MARKETING : HERBALIFE

SUBMITTED IN PARTIAL FULFILLMENT OF THE DEGREE OF

BACHELOR OF BUSINESS ADMINISTRATION

AFFILIATED TO:
M.J.P ROHILKHAND UNIVERSITY, BAREILLY

DEPARTMENT OF MANAGEMENT STUDIES

TEERTHANKAR MAHAVEER INSTITUTE OF MANAGEMENT
& TECHNOLOGY, MORADABAD (U.P.)
PROJECT GUIDE: PROJECT INCHARGE:
Mr. Mohit Rastogi Dr. Mayank Sharma

SUBMITTED BY:
Sagar Mehra
 PREFACE

To start any business the success entirely depends on the marketing

research done about the particular and the consumer attitude towards the
product.

Marketing research plays a vital role in a business to make it success.We

have tried to put our best effort to complete this task on the basis of skill
thatwe have achieved during our studies in the institute.

We have tried to put our maximum effort to get the accurate statistical
data.However we would appreciate if any mistakes are brought to us by the
reader
 TABLE OF CONTENTS

MULTI LEVEL MARKETING- AN INTRODUCTION

Multi level Marketing

Network Marketing

Consumer direct Marketing

Seller Assisted Marketing

SETUP

BENEFITS OF MULTI LEVEL MARKETING

Benefits to Customers

Benefits to Sellers

Benefits to Companies

LEGALITY AND LEGITIMACY

COMPENSATION PLANS

Unilevel Plan

Stairstep Breakway Plan

Matrix Plan

Binary Plan

Hybrid Plan

INCOME LEVELS

CRITICISM OF MULTI LEVEL MARKETING

PYRAMID SCHEME

THE EIGHT BALL MODEL

CONNECTION TO MULTI LEVEL MARKETING

DIRECT SELLING
WFDSA (WORLD FEDERATION OF DIRECT SELLING ASSOCATIONS)

IDSA ( INDIAN DIRECT SELLING ASSOCIATION)

WAYS TO GENERATE THE BEST MLM

THE HUGE ROLE OF MLM PRODUCT

MULTI LEVEL MARKETING HARASSMENT

THE MIRAGE OF MLM

MULTI LEVEL MARKETING WITH SOCIAL MEDIA

THE TRUTH BEHIND THE CLAIMS IN MLM

THE 10 BIG LIES OF MLM

A BEGINNING OF HERBAL LIFE

RESEARCH METHODOLOGY

COMPETITION

AVON

AMWAY

ORIFLAME

TUPPERWARE

MODICARE

REFERENCES

WEBLIOGRAPHY

BIBLIOGRAPHY
MULTI LEVEL MARKETING – AN INTRODUCTION

Multi-level marketing (MLM), (also called network marketing, direct

selling, referral marketing, and pyramid selling) is a term that describes
a marketing structure used by some companies as part of their overall
marketing strategy.The structure is designed to create a marketing and
sales force by compensating promoters of company products not only for
sales they personally generate, but also for the sales of other promoters
they introduce to the company, creating a downline of distributors and
a hierarchy of multiple levels of compensation in the form of a pyramid.

The products and company are usually marketed directly consumers and
potential business partners by means of relationship referrals and word of
mouth marketing. MLM companies have been a frequent subject of
controversy as well as the target of lawsuits. Criticisms have focused on
their similarity to illegal pyramid schemes, price-fixing of products, high
initial start-up costs, emphasis on recruitment of lower-tiered salespeople
over actual sales, encouraging if not requiring salespeople to purchase and
use the company's products, potential exploitation of personal relationships
which are used as new sales and recruiting targets, complex and
sometimes exaggerated compensation schemes, and cult-like techniques
which some groups use to enhance their members enthusiasm and
devotion. Not all MLM companies operate the same way, and MLM groups
have persistently denied that their techniques are anything but legitimate
business practices.

Multi-level marketing (a.k.a. network marketing & referral

marketing)

The idea behind multi-level marketing (MLM) is simple. Imagine you have a
product to sell. A common MLM product is some sort of panacea, such as a
vitamin or mineral supplement. You could do what most businesses do:
either sell it directly to consumers or find others who will buy your product
from you and sell it to other people. MLM schemes require that you recruit
people not only to buy and sell your product, but who will also recruit
people who will not only buy and sell your product but also recruit
people....ad infinitum. Only there never is an infinitum to move towards.
This may seem unusual to traditional business people. Why, you might
wonder would you recruit people to compete with you? For, isn't that what
you are doing when you recruit people to sell the same products you are
selling? MLM magic will convince you that it is reasonable to recruit
competitors because they won't really be competitors since you will get a
cut of their profits. This will take your mind off the fact that no matter how
big your town or market, it is finite. The well will go dry soon enough. There
will always be some distributors who will make money in an MLM scheme.
The majority, however, must fail due to the intrinsic nature of all pyramid
schemes.
Multi-level marketing is system of marketing which puts more emphasis
upon the recruiting of distributors than on the selling of products. As such, it
is intrinsically flawed. MLM is very attractive, however, because it sells
hope and appears to be outside the mainstream of business as usual. It
promises wealth and independence to all. Unfortunately, no matter what
the product, MLM is doomed to produce more failures than successes. For
every MLM distributor who makes a decent living or even a decent
supplemental income, there are at least ten who do little more than buy
products and promotional materials, costing them much more than they will
ever earn as an MLM agent. The most successful MLM scheme is Amway.
It has millions of distributors worldwide with sales in the billions. At the turn
of the century, the average Amway distributor earned about $700 a year in
sales, but spent about $1,000 a year on Amway products. Distributors also
have other expenses related to the business, e.g., telephone, gas,
motivational meetings, and publicity material (Amway.com; Klebniov 1991).
The reason MLM schemes cannot succeed is because MLM marketing is,
in essence, a legal pyramid scheme. The basic idea is for a sales person
to recruit more sales persons. This is very advantageous to those who own
the company and supply the products, especially since the sales persons in
MLMs are also customers. But it is puzzling why a sales person would think
it is to his or her advantage to increase the number of competing sales
persons.
This is not to say there is no benefit to MLM membership. You get certain
tax write-offs. You get to buy products, some of which you will be happy
with. You get to go to inspirational meetings, some of which will make you
feel good. You may meet new friends and you may even make a few
bucks. But more than likely you will end up alienating some family and
friends. You will probably end up buying more stuff than you sell. And you
will learn a lot about deceiving yourself and others. You won't be allowed to
tell anyone how you are really doing, for example. You will always have to
think positive, even if that means lying. You will have to tell anyone who
asks that you are doing great, that business is wonderful, that you've never
seen anything go so fast and bring you income so quickly, even if it isn't
true.
Definitions:

Multilevel Marketing, or MLM, is a system for selling goods or services

through a network of distributors.

The typical Multilevel Marketing program works through recruitment. You

are invited to become a distributor, sometimes through another distributor
of the Multilevel Marketing company's products and sometimes through a
generally advertised meeting.

If you choose to become a distributor with the Multilevel Marketing

company, you'll earn money both through the sales of the MLM's products
and through recruiting other distributors, by receiving a portion of the
income these distributors generate.

The distributors that you sign up with your Multilevel Marketing plan are
called your Downline. The distributor that originally recruited you is called
your Upline. Often he or she will give you some help getting started,
including training.

Successful well-known MLM businesses include Mary Kay Cosmetics,

Avon, and Tupperware.

Multilevel marketing (MLM) is a business structure in which products are

marketed directly to consumers (which is known as direct selling) by sales
representatives who are compensated for not only selling product but also
for recruiting other sales people to the multilevel marketing company. MLM
sales people, who do not receive a salary, earn commissions not only for
their own sales but also receive a commission based on the sales of the
sales reps they have recruited.
While many multi-level marketing companies like Mary Kay or Avon are
legitimate, MLMs' emphasis on recruitment is similar to how a pyramid
scheme works, which is why multilevel marketing is on this list of typical
work-at-home scams.
Also Known As: MLM, direct sales, network marketing, direct selling,
referral marketing pyramid selling.
Multi level marketing is known as network marketing. This is a kind of
business where franchising and direct selling are combined. This business
makes a person associated to a company in an independent transaction
approach. It is an approach where the
company creates a contactor
relationship to the person who wants to
expand his business.

The members make their earnings

based on the sales they have reached
in that particular product or service. It
also includes the sales of the person
that they have recruited to join the
business. Most of the time the individual
who has recruited more members and
provided a good sales output on the
product compensate higher because of
the effort to transact in two different
fields.

There are “pyramid schemes” or Ponzi

schemes, which are considered illegal. Most people associate multi level
marketing to these kind of schemes because they also recognize
themselves to be a legitimate networking business. Because of the bad
image brought up by these schemes, many prefer to use their names for
their businesses as “home based business franchising” or “affiliate
marketing”.

Commissions are earned in the process of selling a particular product or

service in a legitimate network marketing. There can be no earnings in
what they call as a “sign up fee” or for just recruiting yourself alone. This
kind of marketing is always criticized because of the questionable
recruitment process where they get their revenue and profit. They get their
sales from members and new members, which are considered the end
users of the product and as the distributors.

These criticisms led to the major changes in the multi level marketing in the
early 1980s when many companies have started to allow their members to
concentrate only on marketing and not on distributing or stocking the
product. Most multi level marketing firms nowadays perform as fulfillment
firms by taking the tasks of shipping the product, paying the commissions
and taking orders from their clients.
Many people who are victims of the illegal schemes in multi level marketing
are required to buy expensive products, but most of these schemes do not
last long because most of the sales are not easily resold.

Multi Level Marketing (MLM)

What is Multi Level Marketing (MLM) ?

Multi Level Marketing ( MLM ) is an important component of the direct
selling industry. These plans typically promise that if you sign up as a
distributor, you will receive commissions -- from both your sales of the
plan's goods or services and those of other people you recruit to join the
distributors.

MLM is short for Multi-Level Marketing, a hierarchical marketing

system in which the goal of salespersons is not only to buy and sell the
product , but also to recruit others to buy and sell the product , who will in
turn recruit others. Each salesperson receives a portion of the entrance fee
paid by his/her recruits, and a portion of the profits earned by all
salespersons below him/her in the sales chain.This is also called
as multilevel marketing, multi-level marketing, matrix marketing,
network marketing etc.

SB Global Infosoft's MLM scrip has features to define products from

whom the marketing Firm is doing business for MLM software facilitates
to define user commission and generate commission reports . Complete
downline can be seen in a tree view by our Online MLM Portal by the
members. All users can have access in to a system and they can view /
modify only their downline. Every member will receive their own
personalized self replicating web page, with a static of their
plan, Downline, Payment Status and Reminders.

Multi-Level Marketing (MLM) opportunities seem to be everywhere you turn

these days, not only online, but in every part of your life including school
and church, where fervid entrepreneurs lobby even their bible study groups
to buy their product or service. Even police departments have been
invaded by MLM schemes. The San Diego police department actually had
an illegal pyramid scheme discovered within one of its departments!

Equally prevalent are the misconceptions of what this business is and

whether it really is a legitimate business or a scam. Trying to find "truth" in
this morass of information is a challenge. The appeal of a business with
minimal investment and a support system in place cannot be denied. But is
this for real? Let's take a look.

One of the most confusing aspects of assessing the viability of many of the
business "opportunities" being hyped is the variety of terms used to
describe them. MLM is also frequently called network marketing, consumer
direct marketing, or seller assisted marketing and other terms continue to
surface.

Multi-Level Marketing

MLM is essentially any business where payouts occur at two or more

levels. For instance, if you make a sale, both you and the person who
recruited you will get a portion of the proceeds. This is the most commonly
used term partly because its definition fits within the legal restrictions for
this type of business.

Network Marketing

Network Marketing means that a distributor network is needed to build the

business. Usually such businesses are also MLM in nature in that payouts
also occur at more than one level. The term Network Marketing is
sometimes also incorrectly used to indicate that the business uses a
network of product suppliers in order to offer a broader selection of
products. Businesses that describe themselves this way are usually trying
to differentiate themselves, suggesting that their program is superior to
other programs.

Consumer Direct Marketing

Consumer Direct Marketing is a deceptive term that labels the distribution

chain as consumers rather than distributors. In such businesses the
distributor must also buy the product for their personal use.

Seller Assisted Marketing

Seller Assisted Marketing Plans is a term used by California law to describe

a variety of business forms which include MLM. A minimum $500
investment must be involved to qualify as a Seller Assisted Marketing Plan.

SETUP
Independent, unsalaried salespeople of multi-level marketing, referred to as
distributors (or associates, independent business owners, dealers,
franchise owners, sales consultants, consultants, independent agents,
etc.), represent the company that produces the products or provides the
services they sell. They are awarded a commission based upon the volume
of product sold through their own sales efforts as well as that of their
downline organization.
Independent distributors develop their organizations by either building an
active customer base, who buy direct from the company, or by recruiting
a downline of independent distributors who also build a customer base,
thereby expanding the overall organization. Additionally, distributors can
also earn a profit by retailing products they purchased from the company
at wholesale price.
This arrangement of distributors earning a commission based on the sales
of their independent efforts as well as the leveraged sales efforts of their
downline is similar to franchise arrangements where royalties are paid from
the sales of individual franchise operations to the franchiser as well as to
an area or regional manager. Commissions are paid to multi-level
marketing distributors according to the company’s compensation plan.
There can be individuals at multiple levels of the structure receiving
royalties from a single person's sales.

BENEFITS OF MULTI LEVEL MARKETING

Benefits to customers

This form of marketing goods or services directly to consumers takes place

at the customer's convenience often in his/her home either on one to one
basis,or in the context of sales party.Customers value the advantage of
convenience, personalised attention. A good selection of products,ability to
examine the products for a period of time protected by a customer refund
policy.

Benefits to sellers

Many of these people have chosen direct selling because they want to own
their own business, but do not have considerable funds required to buy a
franchise or start a new company. Among the top five reasons people sell
direct are that they like and believe in the product like being their own boss,
and working their own hours like the supplemental family income or like
making extra money for themselves feel that the harder they work,the more
money they can make enjoy selling and meeting people.
Benefits to companies

In today's world of rapid change direct selling offers companies a direct

distribution channel that can be accessed immediately bypassing rigid and
costly traditional distribution channels.

LEGALITY AND LEGITIMACY

MLM businesses operate in the United States in all 50 states and in more
than 100 other countries, and new businesses may use terms like "affiliate
marketing" or "home-based business franchising". However, many pyramid
schemes try to present themselves as legitimate MLM businesses. The
FTC states "Steer clear of multilevel marketing plans that pay commissions
for recruiting new distributors. They're actually illegal pyramid schemes.
Why is pyramiding dangerous? Because plans that pay commissions
for recruiting new distributors inevitably collapse when no new distributors
can be recruited. And when a plan collapses, most people-except perhaps
those at the very top of the pyramid-end up empty-handed." In a 2004
United States Federal Trade Commission (FTC) Staff Advisory letter to
the Direct Selling Association states:
Much has been made of the personal, or internal, consumption issue in
recent years. In fact, the amount of internal consumption in any multi-level
compensation business does not determine whether or not the FTC will
consider the plan a pyramid scheme. The critical question for the FTC is
whether the revenues that primarily support the commissions paid to all
participants are generated from purchases of goods and services that are
not simply incidental to the purchase of the right to participate in a money-
making venture.

The FTC warns "Not all multilevel marketing plans are legitimate. Some are
pyramid schemes. It’s best not to get involved in plans where the money
you make is based primarily on the number of distributors you recruit and
your sales to them, rather than on your sales to people outside the plan
who intend to use the products." and states that research is your best tool
and gives eight steps to follow:

1) Find — and study — the company’s track record.

2) Learn about the product

3) Ask questions

4) Understand any restrictions

5) Talk to other distributors (beware shills)

6) Consider using a friend or adviser as a neutral sounding board or for a

gut check.

7) Take your time.

8) Think about whether this plan suits your talents and goals
However there are people who hold that all MLMs are nothing more than
pyramid schemes even if they are legal rendering the whole issue of a
particular MLM being legal moot.

The Legality of Multilevel Marketing (MLM)

MLM companies operate under their own set of guidelines which come in
every possible variety imaginable. The general looseness of the guidelines
has resulted in a large number of lawsuits from distributors who have lost
substantial sums of money in the programs. The landmark legal case for
the industry is the 1979 Federal Trade Commission ruling on Amway which
found that although Amway engaged in deceptive practices, as long as
profits were made through the sale of product, the company could continue
to operate within the law.

For MLM businesses to operate legally, they must meet the following
criteria:

1. The company brings a product or service to the marketplace that is

(a) retailable and (b) being retailed;

2. The product or service reaches the end user through direct sales
representatives (independent contractors), rather than through traditional
retail establishments;

3. The company's compensation plan

(a) is designed to reward representatives for the sales of the product or

service they make, and
(b) includes a feature that additionally rewards a representative who
introduces an additional representative to the company, based on the sales
volume of the second representative.

If a program compensates representatives, directly or indirectly, simply for

the introduction or enrollment of other participants in the program, it is
considered to be a pyramid scheme which is illegal.

Additionally, recent court decisions have ruled that at least 70% of all
goods sold by the MLM company must be purchased by non-
distributors.Beyond understanding what an MLM is, however, there is still
an incredible controversy raging about whether these companies really do
what they say they do.

COMPENSATION PLANS

Companies have devised a variety of MLM compensation plans over the

decades.

 Unilevel plans This type of plan is often considered the simplest of

compensation plans. As the name suggests, the plan allows a person to
sponsor one line of distributors, called a "frontline." Every distributor the
person sponsors is considered to be on that sponsor's frontline and
there are no width limitations, meaning there is no limit to the amount of
people one can sponsor in the frontline. The common goal of this plan is
to recruit a large number of frontline distributors and then encourage
them to do the same. This is due to the fact that commissions are
normally paid out on a limited depth, which typically means sponsor can
earn commissions on sales between 5 and 7 levels deep.

 Stairstep Breakaway plans This type of plan is characterized as

having representatives who are responsible for both personal and group
sales volumes. Volume is created by recruiting and by retailing product.
Various discounts or rebates may be paid to group leaders and a group
leader can be any representative with one or more downline recruits.
Once predefined personal and/or group volumes are achieved, a
representative moves up a commission level. This continues until the
representative's sales volume reaches the top commission level and
"breaks away" from their upline. From that point on, the new group is no
longer considered part of his upline's group and the multi-level
 compensation aspect ceases. The original upline usually continues to be
compensated through override commissions and other incentives.

 Matrix plans This type of plan is similar to a Uni-Level plan, except

there is also a limited number of representatives who can be placed on
the first level. Recruits beyond the maximum number of first level
positions allowed are automatically placed in other downline (lower
level) positions. Matrix plans often have a maximum width and depth.
When all positions in a representative's downline matrix are filled
(maximum width and depth is reached for all participants in a matrix), a
new matrix may be started. Like Uni-Level plans, representatives in a
matrix earn unlimited commissions on limited levels of volume with
minimal sales quotas.

 Binary plans A binary plan is a multilevel marketing compensation

plan which allows distributors to have only two front-line distributors. If a
distributor sponsors more than two distributors, the excess are placed at
levels below the sponsoring distributor's front-line. This "spillover" is one
of the most attractive features to new distributors since they need only
sponsor two distributors to participate in the compensation plan. The
primary limitation is that distributors must "balance" their two downline
legs to receive commissions. Balancing legs typically requires that the
number of sales from one downline leg constitute no more than a
specified percentage of the distributor's total sales.

 Hybrid plans are compensation plans that are constructed using

elements of more than one type of compensation plan.

INCOME LEVELS

Several sources have commented on the income level of specific MLMs or

MLMs in general:

 The Times: "The Government investigation claims to have revealed

that just 10 per cent of Amway’s agents in Britain make any profit, with
less than one in ten selling a single item of the group’s products."
 Scheibeler, a high level "Emerald" Amway member: "UK Justice
Norris found in 2008 that out of an IBO [Independent Business Owners]
 population of 33,000, 'only about 90 made sufficient incomes to cover
the costs of actively building their business.' That's a 99.7 percent loss
rate for investors."
 Newsweek: based on Mona Vie's own 2007 income disclosure
statement "fewer than 1 percent qualified for commissions and of those,
only 10 percent made more than $100 a week."
 Business Students Focus on Ethics: "In the USA, the average annual
income from MLM for 90% MLM members is no more than US $5,000,
which is far from being a sufficient means of making a living (San Lian
Life Weekly 1998)"
 USA Today: "While earning potential varies by company and sales
ability, DSA says the median annual income for those in direct sales is
$2,400."

CRITICISM OF MLM
The Federal Trade Commission (FTC) issued a decision, In re Amway
Corp., in 1979 in which it indicated that multi-level marketing was
not illegal per se in the United States. However, Amway was found guilty
of price fixing (by requiring "independent" distributors to sell at the low
price) and making exaggerated income claims. The FTC advises that multi-
level marketing organizations with greater incentives for recruitment than
product sales are to be viewed skeptically. The FTC also warns that the
practice of getting commissions from recruiting new members is outlawed
in most states as "pyramiding".In April 2006, it proposed a Business
Opportunity Rule intended to require all sellers of business opportunities—
including MLMs—to provide enough information to enable prospective
buyers to make an informed decision about their probability of earning
money. In March 2008, the FTC removed Network Marketing (MLM)
companies from the proposed Business Opportunity Rule:
The revised proposal, however, would not reach multi-level marketing
companies or certain companies that may have been swept inadvertently
into scope of the April 2006 proposal.

Walter J. Carl stated in a 2004 Western Journal of Communication article

that "MLM organizations have been described by some as cults (Butterfield,
1985), pyramid schemes (Fitzpatrick & Reynolds, 1997), or organizations
rife with misleading, deceptive, and unethical behavior (Carter, 1999), such
as the questionable use of evangelical discourse to promote the business
(Hopfl & Maddrell, 1996), and the exploitation of personal relationships for
financial gain (Fitzpatrick & Reynolds, 1997). Because of encouraging
recruits to further recruit their competitors, some people have even gone so
far as to say at best MLMs are nothing more than legalized pyramid
schemes with one stating "Multi-level marketing companies have become
an accepted and legally sanctioned form of pyramid scheme in the United
States" while another states "Multi-Level Marketing, a form of Pyramid
Scheme, is not necessarily fraudulent."

PYRAMID SCHEME
A pyramid scheme is a non-sustainable business model that involves the
exchange of money primarily for enrolling other people into the scheme,
without any product or service being delivered. Pyramid schemes are a
form of fraud.
Pyramid schemes are illegal in many countries
including Albania, Australia, Brazil, Bulgaria, Canada, China,
Colombia, France, Germany, Hungary, Iceland], Iran, Italy Japan, Malaysia,
Mexico,Nepal, The Netherlands, New Zealand, Norway,
the Philippines, Poland, Portugal, Romania, South Africa, Sri
Lanka, Switzerland, Thailand, the United Kingdom, and the United States.
These types of schemes have existed for at least a century some with
variations to hide their true nature and there are people who hold that
multilevel marketing, even if it is legal, is nothing more than a pyramid
scheme.
A successful pyramid scheme combines a fake yet seemingly credible
business with a simple-to-understand yet sophisticated-sounding money-
making formula which is used for profit. The essential idea is that the mark,
Mr. X, makes only one payment. To start earning, Mr. X has to recruit
others like him who will also make one payment each. Mr. X gets paid out
of receipts from those new recruits. They then go on to recruit others. As
each new recruit makes a payment, Mr. X gets a cut. He is thus promised
exponential benefits as the "business" expands.
Such "businesses" seldom involve sales of real products or services to
which a monetary value might be easily attached. However, sometimes the
"payment" itself may be a non-cash valuable. To enhance credibility, most
such scams are well equipped with fake referrals, testimonials, and
information. The flaw is that there is no end benefit. The money simply
travels up the chain. Only the originator (sometimes called the "pharaoh")
and a very few at the top levels of the pyramid make significant amounts of
money. The amounts dwindle steeply down the pyramid slopes. Individuals
at the bottom of the pyramid (those who subscribed to the plan, but were
not able to recruit any followers themselves) end up with a deficit.

The unsustainable exponential progression of a classic pyramid scheme

A pyramid scheme is a fraudulent system of making money which requires

an endless stream of recruits for success. Recruits
(a) give money to recruiters and
(b) enlist fresh recruits to give them money.

A pyramid scheme is called a pyramid scheme because of the shape of a

pyramid: a three dimensional triangle. If a pyramid were started by a
human being at the top with just 10 people beneath him, and 100 beneath
them, and 1000 beneath them, etc., the pyramid would involve everyone on
earth in just ten layers of people with one con man on top. The human
pyramid would be about 60 feet high and the bottom layer would have more
than 4.5 billion people!

A diagram might help see this:

1
10
100
1,000
10,000
100,000
1,000,000
10,000,000
100,000,000
1,000,000,000
10,000,000,000

Thus, in very short order, 10 recruiting 10 and so on would reach 10 billion,

well in excess of the earth's population. If the entire population of earth
were 5 billion and we all got involved in a pyramid scheme, the bottom
layer would consist of about 90 percent of the planet, i.e., about 4.5 billion
people. Thus, for 500 million people to be WINNERS, 4.5 billion must be
LOSERS.

In a straightforward pyramid scheme, a recruit is asked to give a sum of

money, say $100, to a recruiter. The new recruit then enlists, say, 10 more
recruits, to give up $100 each. In the simplest example, the recruiter keeps
all the money he gets from his recruits. In our example, each recruit gives
up $100 in exchange for $900 ($100 from each of his 10 recruits minus the
$100 he gave his own recruiter). In order for no one to lose money, the
recruiting must go on forever. On a planet with a limited number of people,
even if the planet is as large as Earth and has more than 6 billion potential
recruits, one runs out of new recruits rather quickly.

Thus, the result of all these schemes is inevitable: at best, a few people
walk away with a lot of money, while most recruits lose whatever money
they put into the scheme. In fact, the only way anybody can make money
through a pyramid scheme or chain letter is if other people are defrauded
into giving money upon a promise of getting something in return when it will
be impossible for them to get anything at all in return. That is to say, in
plain English, these schemes always constitute fraud. They use deception
to get money. That is why they are illegal. They are not illegal because they
involve recruiting people to recruit other people to recruit other people. That
is perfectly legal and is done to some degree in many legitimate
businesses. They are not illegal because they involve giving money to
people. It is perfectly legal to give money to people. They are illegal
because they involve deceiving people in order to get money from them:
that is the legal meaning of fraud.
In actual fact, however, no pyramid scheme will ever work this way
because the scheme will never get the number of recruits we've been
speculating about. All pyramid schemes will begin to die when the later
recruits don't sign on in numbers large enough to pay off the earlier
recruits. There will always be enough people who will smell the scheme
out. There will always be too many people who will say "if it sounds too
good to be true that's probably because it is." There may even be a good
number of people who will realize that though one person recruiting ten
doesn't sound like much, it quickly adds up to unrealistic and improbable
numbers. Also, all it takes is one person to stop the whole thing, either by
adamantly persuading recruiters of their indecency, or by reporting them to
the police.

Greed and Wishful Thinking

Pyramid schemes are popular because people are greedy and greed can
do wonders to a person's thinking. For a person desiring to make a lot of
money from a small investment in a short amount of time, wishful
thinking often takes over where critical thinking should step in. Wishes
become facts. Skeptics become idiots for not getting on board. Desires
become reality. Asking questions seems rude and unfriendly. Scam artists
know how greed works and all it takes is one con man to get the thing
started.
With the odds so stacked against a person, why would one gamble on a
pyramid scheme? Greed is only part of the answer. Most pyramid people
don't envision themselves anywhere near the bottom layer of the pyramid.
Even the most greedy person on the planet would probably see that if one
is near the bottom layer of recruits it will be very hard to get new recruits.
They have to see themselves near the top in order to envision the immense
wealth from minimal effort that is going to come their way.
Furthermore, if I hope to get people involved in a pyramid scheme, the first
thing I must do is convince them they are not getting involved in a pyramid
scheme. They may know they are illegal. Or they may realize that pyramid
schemes are a losing proposition for at least 90 percent of those who get
involved. So, I tell them they are joining a club. I give the club a nice name
such as The Friendly Investors Club (FIC). I reassure them that the FIC is
approved by the IRS and run by a CPA with a Ph.D. who is not an ASS. If
I'm really good, my recruits will believe me and the police officers,
secretaries, teachers, ministers, etc. whom I recruit. These well-respected,
intelligent, honest people will pass on this line to others. If I am really, really
good, I will have convinced my recruits not only that they are getting into a
legitimate and lucrative Club, but that any earnings are tax-free. I would
indicate to recruits that as long as their take in the scheme is less than
$10,000, it wouldn't be taxable because gifts aren't taxable until they
exceed $10,000. I would convince the recruits that, for legal purposes, they
would be giving money away and others would be giving money to them.

THE "EIGHT-BALL" MODEL

Many pyramids are more sophisticated than the simple model. These
recognize that recruiting a large number of others into a scheme can be
difficult so a seemingly simpler model is used. In this model each person
must recruit two others, but the ease of achieving this is offset because the
depth required to recoup any money also increases. The scheme requires
a person to recruit two others, who must each recruit two others, who must
each recruit two others.
The "eight-ball" model contains a total of fifteen members. Note that unlike
in the picture, the triangular setup in the cue game of eight-
ball corresponds to anarithmetic progression 1 + 2 + 3 + 4 + 5 = 15. The
pyramid scheme in the picture in contrast is a geometric progression 1 + 2
+ 4 + 8 = 15.

Prior instances of this scam have been called the "Airplane Game" and the
four tiers labelled as "captain," "co-pilot," "crew," and "passenger" to denote
a person's level. Another instance was called the "Original Dinner Party"
which labelled the tiers as "dessert," "main course," "side salad," and
"appetizer." A person on the "dessert" course is the one at the top of the
tree. Another variant, "Treasure Traders," variously used gemology terms
such as "polishers," "stone cutters," etc. or gems like "rubies," "sapphires,"
"diamonds," etc.
Such schemes may try to downplay their pyramid nature by referring to
themselves as "gifting circles" with money being "gifted." Popular scams
such as the "Women Empowering Women" do exactly this. Joiners may
even be told that "gifting" is a way to skirt around tax laws.
Whichever euphemism is used, there are 15 total people in four tiers (1 + 2
+ 4 + 8) in the scheme - with the Airplane Game as the example, the
person at the top of this tree is the "captain," the two below are "co-pilots,"
the four below are "crew," and the bottom eight joiners are the
"passengers."
The eight passengers must each pay (or "gift") a sum (e.g. $1000) to join
the scheme. This sum (e.g. $8000) goes to the captain who leaves, with
everyone remaining moving up one tier. There are now two new captains
so the group splits in two with each group requiring eight new passengers.
A person who joins the scheme as a passenger will not see a return until
they exit the scheme as a captain. This requires that 14 others have been
persuaded to join underneath them.
Therefore, the bottom 3 tiers of the pyramid always lose their money when
the scheme finally collapses. Consider a pyramid consisting of tiers with 1,
2, 4, 8, 16, 32, and 64 members. The highlighted section corresponds to
the previous diagram.
No matter how large the model becomes before collapse, approximately
88% of all people will lose.

If the scheme collapses at this point, only those in the 1, 2, 4, and 8 got out
with a return. The remainder in the 16, 32, and 64 tier lose everything. 112
out of the total 127 members or 88% lost all of their money.
During a wave of pyramid activity, a surge frequently develops once a
significant fraction of people know someone personally who exited with a
$8000 payout for example. This spurs others to seek to get in on one of the
many pyramids before the wave collapses.
The figures also hide the fact that the confidence trickster would make the
lion's share of the money. They would do this by filling in the first 3 tiers
(with 1, 2, and 4 people) with phoney names, ensuring they get the first 7
payouts, at 8 times the buy-in sum, without paying a single penny
themselves. So if the buy-in were $1000, they would receive $56,000, paid
for by the first 56 investors. They would continue to buy in underneath the
real investors, and promote and prolong the scheme for as long as possible
in order to allow them to skim even more from it before the collapse.
Other cons may also be effective. For example, rather than using false
names, a group of seven people may agree to form the top three layers of
a pyramid without investing any money. They then work to recruit eight
paying passengers, and pretend to follow the pyramid payout rules, but in
reality split any money received. Ironically, though they are being conned,
the eight paying passengers are not really getting anything less for their
money than if they were buying into a "legitimate" pyramid which had split
off from a parent pyramid. They truly are now in a valid pyramid, and have
the same opportunity to earn a windfall if they can successfully recruit
enough new members and reach captain. This highlights the fact that by
"buying" in to a pyramid, passengers are not really obtaining anything of
value they could not create themselves other than a vague sense of
"legitimacy" or history of the pyramid, which may make it marginally easier
to sell passenger seats below them.

Matrix scheme
Matrix schemes use the same fraudulent non-sustainable system as a
pyramid; here, the participants pay to join a waiting list for a desirable
product which only a fraction of them can ever receive. Since matrix
schemes follow the same laws of geometric progression as pyramids, they
are subsequently as doomed to collapse. Such schemes operate as a
queue, where the person at head of the queue receives an item such as a
television, games console, digital camcorder, etc. when a certain number of
new people join the end of the queue. For example ten joiners may be
required for the person at the front to receive their item and leave the
queue. Each joiner is required to buy an expensive but potentially worthless
item, such as an e-book, for their position in the queue. The scheme
organizer profits because the income from joiners far exceeds the cost of
sending out the item to the person at the front. Organizers can further profit
by starting a scheme with a queue with shill names that must be cleared
out before genuine people get to the front. The scheme collapses when no
more people are willing to join the queue. Schemes may not reveal, or may
attempt to exaggerate, a prospective joiner's queue position which
essentially means the scheme is a lottery. Some countries have ruled that
matrix schemes are illegal on that basis.

CONNECTION TO MULTI-LEVEL MARKETING

The network marketing or multi-level marketing business has become
associated with pyramid schemes as "Some schemes may purport to sell a
product, but they often simply use the product to hide their pyramid
structure." and the fact while some people call MLMs in general "pyramid
selling" others use the term to denote an illegal pyramid scheme
masquerading as an MLM. The FTC warns "Not all multilevel marketing
plans are legitimate. Some are pyramid schemes. It’s best not to get
involved in plans where the money you make is based primarily on the
number of distributors you recruit and your sales to them, rather than on
your sales to people outside the plan who intend to use the products." and
states that research is your best tool and gives eight steps to follow:

1) Find — and study — the company’s track record.

2) Learn about the product

3) Ask questions

4) Understand any restrictions

5) Talk to other distributors (beware shills)

6) Consider using a friend or adviser as a neutral sounding board or for a

gut check.

7) Take your time.

8) Think about whether this plan suits your talents and goals

Some believe MLMs in general are nothing more than legalized pyramid
schemes making the issue of a particular MLM being legal or not moot.

DIRECT SELLING

Direct selling is a retail channel for the distribution of goods and services.
At a basic level it may be defined as marketing and selling products, direct
to consumers away from a fixed retail location. Sales are typically made
through party plan, one to one demonstrations, and other personal contact
arrangements.
 A text book definition is: "The direct personal presentation, demonstration,
and sale of products and services to consumers, usually in their homes or
at their jobs."
Industry representative, the World Federation of Direct Selling Associations
(WFDSA), reports that its 59 regional member associations accounted for
more than US$114 Billion in retail sales in 2007, through the activities of
more than 62 million independent sales representatives. According to the
WFDSA, consumers benefit from direct selling because of the convenience
and service it provides, including personal demonstration and explanation
of products, home delivery, and generous satisfaction guarantees. In
contrast to franchising, the cost for an individual to start an independent
direct selling business is typically very low with little or no required
inventory or other cash commitments to begin.The United States Direct
Selling Association (DSA) reported that in 2000, 55% of adult Americans
had at some time purchased goods or services from a direct selling
representative and 20% reported that they were currently(6%) or had been
in the past(14%) a direct selling representative. Most direct selling
associations, including the Bundesverband Direktvertrieb Deutschland, the
direct selling association of Germany, and the WFDSA and DSA require
their members to abide by a code of conduct towards a fair partnership
both with customers and salesmen. Most national direct selling
associations are represented in the World Federation of Direct Selling
Associations (WFDSA).

Direct selling is distinct from direct marketing because it is about individual

sales agents reaching and dealing directly with clients. Direct marketing is
about business organizations seeking a relationship with their
customers without going through an agent/consultant or retail outlet.

By far the majority of direct selling companies use a multi

level compensation plan, where the agent is paid not only for their own
sales but also a percentage of the sales of other representatives they
introduce into the organization and help train.

According to Direct Selling News, the largest direct selling companies, by

revenue in 2008, were –
 Company Name Year Founded 2008 Revenues (USD)

Avon Products, Inc. 1886 10.9 billion

Amway Corporation 1959 8.2 billion

Vorwerk & Co. KG 1883 3.15 billion

Herbalife Ltd. 1980 2.4 billion

Mary Kay Inc. 1963 2.4 billion

Primerica Financial Services Inc. 1977 2.3 billion

Tupperware Brands Corp. 1951 2.21 billion

Forever Living Products Intl. Inc. 1978 2.1 billion

Oriflame Cosmetics 1967 1.68 billion

Natura Cosmeticos SA 1969 1.52 billion

Nu Skin Enterprises Inc. 1984 1.23 billion

WFDSA (WORLD FEDERATION OF DIRECT SELLING
ASSOCIATION)

WFDSA is a non governmental voluntary organization , globally

representing the direct selling industry as a federation of national
Direct Selling Association.
HISTORY

Founded in 1978, the WFDSA is a non-governmental, voluntary

organization globally representing the direct selling industry as a
federation of national Direct Selling Associations. The United
States Direct Selling Association serves as the Secretariat for the
Federation and is based in Washington DC.
Direct selling involves the marketing of products and services
directly to consumers in a face-to-face manner, away from
permanent retail locations.
Our membership consists of more than 57 national direct selling
associations and one regional Federation, with one delegate from
each association, as well as a number of regional and global
officers, serving as the Board of Directors.

MISSION

The WFDSA mission is to build understanding and support for

direct selling worldwide. The association supports direct selling
companies and associations by:
Developing, maintaining and promoting the highest global
standards for responsible and ethical conduct.
Advocating the industry's positions and interest with governments,
media and key influencers.
Serving as a trusted global resource for information on direct
selling.
Facilitating interaction among direct selling executives on issues
of importance to the industry.
IDSA (INDIAN DIRECT SELLING ASSOCIATION)

Where,
Incredible Dreams Sure Are true.

The Indian Direct Selling Association IDSA is an autonomous,

self-regulatory body for the direct selling industry in India. The
Association acts as an interface between the industry and policy-
making bodies of the Government facilitating the cause of Direct
Selling Industry in India.
IDSA strives to create and further an environment conducive to
the growth of direct selling industry in India, partnering industry
and government alike through advisory and consultative activities.
IDSA catalyses change by working closely with government on
policy issues, enhancing efficiency and ushering in desired
credibility , clarity & confidence in Direct Selling.
HISTORY
IDSA was formed with five companies including our current
members Amway, Avon and Oriflame to protect the ideals and
opportunities of what was then a sunrise industry. The
Association was incorporated in Mumbai in 1996 and moved its
registered office to New Delhi in 1998, from where it continues to
operate.
Since Inception the Association has grown to several members
representing over a million independent salespeople in India and
still counting.
IDSA's members are leading Indian and international
organizations engaged in the business of direct selling in India.

Vision
To make Direct Selling the most respected industry in India.

Mission
 To enhance lives by sharing and protecting the Direct
Selling opportunity for personal, professional and financial
development.
 To work towards a policy framework for direct selling with
the Government and stakeholders.
 To encourage and maintain an environment where
members can operate independently, ethically and
progressively, where direct selling is regarded with merit by
the entire community.
The Real Problem with Network Marketing and Multi-Level
Marketing (MLM)

It never ceases to amaze me the extreme polar views on the topic of

network marketing and MLM. Some people are passionate about it in the
extreme, and there are even top celebrity authors like Robert Allen, Mark
Victor Hansen, and Robert Kiyosaki doing it and advocating it. Yet, in many
circles, you might as well declare yourself a leper as admit to being in
network marketing.

So, what is the problem with MLM and network marketing?

Maybe it's the pyramid structure? But you can't really take issue with the
tiered compensation structure—almost every large sales organization in the
world has that. Salespeople get commission, and sales managers get
overrides or bonuses on top of that, and sales directors on top of that, and
VPs on top of that.

Or maybe it's the fact that you have to pay to participate in it? But that can't
be it—that's a standard franchising model. And I assure you, the franchise
fee of most traditional franchises dwarf the sign-up cost of any MLM
program by comparison.

Now certainly, there are illegal pyramid, or "Ponzi", schemes. This is where
the money is all being made off of signing up other people, with little or no
real product ever being delivered. But in spite of whatever perceptions
people may have, the fact is that Amway, Excel, Meleleuca, PrePaid Legal,
USANA, and many others have sold millions upon millions of dollars of
products to happy customers, many of whom are NOT also reps. So, there
may be a perception problem here, but if so, the perception is out of line
with the reality.

But surely the bad reputation MLM'ers has some more basis in fact
than the occasional illegal pyramid scheme?

The real problem with MLM is not MLM itself, but some of the people it
attracts. Network marketing is just a business model, and it really amounts
to "micro-franchising". Its upside is that it has a very low cost of entry, with
the potential for exceptional revenue, and there are those who achieve that.

But those same things that make it attractive make it attractive to many
who are NOT really qualified or prepared to become business owners. The
salient characteristics of MLM make it attractive to people who:

• have not done well in their business or profession and have little
money saved up to invest
• have no previous experience owning or running a business
• have no previous experience in sales
• have little or no experience developing business relationships other
than that of employer/employee/co-worker
• are not satisfied with their current level of income
• have unrealistic expectations of the amount of work involved
compared to the revenue realized
Don't get me wrong—I'm not saying that there's anything wrong with any of
these things, or that this describes even a majority of network marketers—
only that it describes a disproportionate number of network marketers, and
that many of them never do anything about it.

As a result, many network marketers end up:

• over-selling the opportunity

• inappropriately discussing business in social situations
• coming across as desperate
• over-focused on new recruits and neglecting existing customers as a
result
• being either inaccurate or deceptive when talking about their
business
Again, I'm certainly not saying that this describes a majority of network
marketers, but it does describe enough of them to tarnish the reputation of
the rest. To pre-judge someone based on the basis of a small minority of
people in that group is horribly unfair, but we must realize that most
prejudices have some basis in reality, even if it has been distorted.

So what's the solution?

There's a first time for everything. And network marketing/MLM is a great

opportunity for people to have their first business, their first sales role, etc.
My point is this—recognize it for what it is: it's a business, and you are a
business owner. And if you've never owned a business before, if you've
never done sales before, if you've never networked before, you need to
learn about how to do so, not just from the network marketing/MLM
experts, but from established experts in those fields.

Network marketers who are serious about building a business should be

reading and learning about business fundamentals, the latest sales and
marketing techniques, strategies for networking and business development,
etc., not just swapping tips at your team's weekly or monthly meeting. Act
like a small business owner, and people will treat you like one.

6 WAYS TO GENERATE THE BEST MLM

Effective Multi Level Marketing Lead Generation

Leads are essential for any successful network marketing business. But
where do you find the best multi-level marketing (MLM) leads? Is it lead
generation, or do you buy leads? What’s the best way? Good question.

You need prospects for your business and customers to purchase

products. Without the two, your business will not exist. So what is the
answer?

Should you generate your own, or should you buy leads from a respectable
leads company?

The answer isn’t as simple as you may think. Generating leads and having
people come to you is the best scenario. And it works. It does take time.
But in the end, it gets results.

Generating the best MLM leads is both a skill and an art that can be
learned. One of the important factors to remember is that you are talking to
real people. It’s not about you. It’s about them. Find out their feelings, their
goals and wants. Then provide a solution. Build a relationship and then a
partnership.

The fact is most people don’t care about your company, pay plan, etc. They
care about finding a solution to their problem.

The good news. You can produce your own MLM leads. Today, the Internet
has allowed us to do just that. There are many different ways to product the
best MLM leads, but here are a few of my favorites:
1. Generate MLM leads with a personal website.

Learn to sell yourself. Why should someone join you? What makes you
unique? And what value and expertise do you bring to the partnership?
Answer these questions on your Website. Sell “you.”

2. Use an auto responder to acknowledge your MLM leads.

As leads visit your website, offer a “free report or newsletter.” This will build
your subscriber list and allow you to communicate with your prospects. Use
it to provide valuable information. Timing is everything. If the timing isn’t
right today, it may be next year. Be that person who has stayed in touch.

3. Have an MLM leads generation plan and goals.

You will need to set goals and stick to them. Be consistent and stay
focused.

4. Write articles to generate MLM leads.

Article writing is a great avenue for building a presence online. Submit

these articles to e-zines and newsletters. Articles are powerful because you
can present yourself as an expert in your industry.

5. Create a blog for MLM leads.

Blogging is fun and it allows you to write freely to your niche. Blog posts
can be various lengths. Blog regularly and watch your traffic grow.

6. Learn to Squidoo for MLM leads.

Anyone can do it. It’s simple, fun and it allows you to monetize your
marketing. I’ve created some of my best MLM leads through Squidoo.
Conclusion: Generating Multi-Level Marketing Leads

Generating the best MLM leads is a process that won’t happen over night.
But it will happen. Pick one or two lead generating avenues and master
those. Then, when you are ready add one more and repeat.

THE MLM/RELATIONSHIP MARKETING AFFAIR

The word, relationship, is thrown out in broad sweeping motions all around
the business community: relationship marketing, business-to-business
relationships, customer relationship management, brand relationship. What
is this relationship thing so many people are attempting to capitalize on in
our lives?

Relationships are what make us human! We need them to survive. Without

them, an infant will wither and die. We are born into a set of relationships,
and we often die surrounded by those relationships. We experience
relationships in our various life scenarios—family, work, business, sports,
church, hobbies, politics, etc. By definition, each relationship is unique.

MLM is touted as being a relationship marketing business. So, what exactly

does that mean?

Relationship businesses are personal and steady:

• The Provider and Customer get to know each other through repeated
interaction; this enhances personalizing the service.

• The Provider is directly dependent on customers for income.

• The Provider may become friends with the Customer. A sense of

personal duty as well as satisfaction from contributing to the quality of
someone else’s life leads that individual to do his/her best for
the Customer.

• The Provider, working in partnership or sole proprietorship, has legal

obligation to deliver the service he/she offered.

• The Customer is attracted to the quality of the services.

In regard to relationship marketing, MLM parallels traditional, professional
services, which specialize in individualized service—personal services as
well as services involving special skills, tools, or equipment. Examples
include doctors, dentists, and hair stylists. These professionals have
specialized knowledge, which is the reason why customers develop a
relationship with them. You see them on every visit and they adapt to you
and your relationship with them.

Gutek and Welsh (2000) conducted a study on business relationships,

which cites four types of business connections people experience:

• Encounter
• Enhanced Encounter
• Pseudo-relationship
• Relationship

Encounter

In an encounter, the customer is dealing with the organization, i.e.,

Walmart. Providers and customers are interchangeable in encounters. It
doesn’t matter who buys or sells. If I always buy a particular brand of
vitamin, my connection is with the company who manufactures it, not with
the cashier who sells me the product. I don't expect Vitamin, Inc. to adapt
to me as one individual. In return for a lower level of connection, I expect
consistency and efficiency. Encounters have the following characteristics:

• Customer deals with the organization.

• Business is divided into detached tasks.
• Offers little self improvement.
• Decreases in efficiency over time.
• Service fits a standard as opposed to the individual.
• Involves higher emotional labor.

Enhanced Encounter

In an enhanced encounter, the company knows me well enough to make

adaptations for me. The Provider with whom I interact has the information
and power to help me with my specific concern. I do not expect to get to
know an individual Provider in a personal relationship manner.
In an MLM scenario, the company tracks my sales and knows that I like
specific products. I expect corporate to know my personal history with the
company and to help me navigate the rules and processes.

Pseudo-Relationship.

A pseudo-relationship is a pretend relationship, when in fact we just met at

the front door over a cleaning product. Few of us are pleased to be treated
as if we have a relationship with a particular airline, credit card company or
network marketer, when we clearly are not being treated uniquely. This
type of superficial relationship develops when we replace real passion
with smile training as we stereotype customers.

In MLM, this means the business relationship is disconnected from the

MLM organization’s intent.

Ironically, the very things that marketers are doing to build

relationships with customers are often the things that are
destroying those relationships. Why? Perhaps we are skimming
over the fundamentals of relationship building in our rush to
cash in on the potential rewards of creating close connections
with our customers. Perhaps we do not understand what creating
a relationship really means; that is, how customers’ trust and
intimacy factor into connections we are trying to forge. Relationship
marketing is powerful in theory but troubled in practice
Relationship

A true relationship involves adaptation, trust by both parties, mutual

knowledge, and an expectation that we will interact in the future.

In general, a relationship takes more time than an encounter. If I always

buy my laundry soap from the same MLM distributor, then she soon learns
where I live and how much soap I buy, and most likely, why I buy this
product plus what other products I might be interested in.

The study found that people prefer business relationships. (The explosive
success of MLM proves this to be true!) However, we also like the
availability and efficiency of encounters. In general, a relationship takes
more time than an encounter. However, relationships typically get more
efficient over time. No business includes just all relationship or all
encounter contacts, but instead, a combination of the two. Whereas,
relationship get more efficient over time, encounters get less efficient.

Generally, an MLM relationship can be defined as an association that

develops when individuals see the same company representative each
time they do business, and both parties expect to continue doing business
together. MLM companies typically function within the framework of a Tight-
Tight-Loose relationship illustrated in the Types of Relationship Model in

Figure 1 from the study. The Organization is the network marketing

company, the Provider includes distributors of that company, and
the Customer refers to individuals who buy a product or service. In this
model, the strong bond is between:
1) the Organization and the Provider, and
2) the Provider and the Customer.

Figure 1

MLM companies work hard to create a strong link between the company
and its distributors, especially top distributors. It relies on top distributors to
create and maintain relationships further away in the downlines. Uplines
work at developing their connections with their downlines. The uplines often
recruit family and friends, so tight relationships exist prior to company
affiliation. Distributors work hard to connect with customers and new
distributors they recruit. They labor to diminish ambiguity, which occurs
when these individuals are new, trying new products, changing levels, etc.
Some companies want to move faster and faster, but still maintain a
relationship. When you treat customers as encounters, it may cause
friction. Essentially, effective follow up is a key to every relationship
(business or social). This is the time when, in a personal relationship, you
send flowers “just because.” Or, in a family or friend relationship, you call a
bit after a crisis is over. Rather than breathe a sigh of relief after a sale or
gaining a new recruit, you should send a coupon for the next sale or call to
see how the product is working. Simply saying, “We have a great customer
relationship program!” is not enough.

Conclusion

One of the crucial keys to success in the MLM industry is effective

relationship marketing—the balancing act involving relationships between
MLM companies, their distributors, and customers. This business is
challenging because relationships are hard work and require money, but
they can be extremely rewarding as has been proven by the spectacular,
record-breaking success of a number of well known MLM companies. The
successful relationship marketer will remember that relationships are
complex and require time and effort. They will remember that keeping in
contact and offering support through all MLM phases--especially uncertain
ones--is crucial for success. The core principle of relationship marketing is
not to ever forget to put therelationship before the marketing.

THE HUGE ROLE OF MLM PRODUCT

Before investing your all in an MLM company, you need to evaluate its
product. The role product plays in MLM is huge! Every company that has
experienced long-term success has been built on great product and
product loyalty. Any success a company has that is not built on product
value and the loyalty of its distributors to its products is fleeting at best. In
the end, a company only survives if it has great products.

The fact is, certain kinds of products are suitable for network marketing
and others are not. Traditionally, network marketing seems to work best for
products that require: 1) some but not extensive education and training,
plus 2) a lot of motivation and/or support.

Teaching consumers how to use products and services typically builds a

cadre of committed consumers. Distributors require some education in
order to, for example, hold a successful home decorating party, but such
training generally requires only a few hours a month.

Often, MLM companies assume the task of education and training

consumers so distributors can concentrate on motivation and support.

Products for which motivation and support are vital are beauty, diet, and
health products. These types of products require this because there are so
many choices available, consumers often have difficulty making selections.
To interest prospects in a product, distributors should make arrangements
to introduce them to someone they can relate to who’s been successfully
changed by the product. So many worthless products in the MLM arena
have come and gone, potential consumers are wary of trying yet another
unless it has the endorsement of someone they trust.

A product is suitable for MLM if it’s a new product or falls into a new
category that people are not yet familiar with. A network marketing
company may build its success on a product/product line because it doesn’t
have general market acceptance. Innovative products have often used the
MLM venue to enter the market. MLM products often represent a great leap
forward in some way that calls for one form or another of consumer
training. Often, prospective customers don’t even know why they need
them! Distributors make people aware of the value of these products and
educate them in correct usage. Often, a recommendation from a friend will
help them make the decision to purchase it.

Obviously, there’s no reason to build an MLM company to distribute a run-

of-the-mill toothbrush. Anyone can walk into a store and purchase one, not
to mention the free one the dentist gives you when you get your teeth
cleaned! Your mother or dentist has already taught you how to use a
toothbrush. You don’t need a distributor to bring one over and demonstrate
it. A product about which the consumer already has all the info he/she
needs is not suitable for network marketing. A product that the consumer
can pick up on any casual trip to the grocery store or to the mall is not

suitable. You need to sell a product with differentiation—something that

makes it stand out from other products.

Most MLM companies market products their people believe in and feel
proud of. When someone says to me, “The product a company sells
doesn’t matter,” I wonder if that individual is pitching a scam because, of
course, the product does matter! Legitimate company founders want to
contribute to the welfare of the society they live in by selling products that
have real value.

Intellectual Distribution of Product

The book, The Next Trillion, by Paul Zane Pilzer provides an overview of
the economic realities responsible for the explosion in product sales via
direct sales during the past thirty years. The book introduces the concept of
intellectual distribution, which is one of two elements of the sales process:

1) physical distribution

2) intellectual distribution

The process of physical distribution is simply getting the product into the
hands of the consumer. On the other hand, intellectual distribution requires
teaching potential consumers what the product does and how it can help
them. In other words,intellectual distribution is education.

This concept is core to understanding why MLM has touted such explosive
growth in the last thirty years. Throughout history almost universally, sellers
educated consumers about products sold. Such is no longer the case.
Beginning in the 1960s, Sam Walton discovered that physical
distribution was a good deal easier and much cheaper than intellectual
distribution. He, therefore, chose to ignore intellectual distribution and
concentrated on lowering the cost of physical distribution.
 As a result, he stopped selling products that required intellectual
distribution, creating Wal-Mart, one of the largest corporations in the world.
This approach gave rise to the “discount superstore,” a concept that
decreased the cost of everyday items, but also decreased the outlets for
innovative, new products that required intellectual distribution.

What about products that require intellectual distribution? Some products

are simply not intuitive, are too new for people to be comfortable using on
their own, or require consumer assistance. Given the ever-growing number
of new products that require motivation, education, training, and support, it
became essential to carve out new channels of distribution or expand old
ones. Network marketing, of course, is one of these channels.

Because intellectual distribution represents the best opportunity for

network marketing companies and their sales forces to succeed, I have
created what I call the METS Formula (Motivate, Educate, Train, Support):

Motivation

For some products, such as diet or health products, distributors may need
to spend time motivating consumers to start using them and to stay with
them.

Education

Why is your product better than competing products? Why should

consumers spend their money on it rather than on the many others out
there? Or, why do your consumers need this product at all? Education
about product is essential to a company’s success.

Training

Some products require training for the consumer to use them effectively.

Support. Some products require ongoing support from the distributor for
the consumer to know how to use it.

In my experience, the products or services that are best suited to network

marketing require one or more aspects of the METS formula.
It is important to understand how much time must be spent on motivation,
education, training, and support (METS) to sell a product to the average
consumer because it affects your earnings. The more time and energy it
takes to make a sale, the more money the salesperson can expect to
make. This means that less money will be available for sales leader
commissions.

Are you wondering what products and services don’t work for network
marketing? Typically, with some notable exceptions, insurance, financial
planning, and computer sales have not worked well. Why? Because the
parts of the METS formula you need most in order to sell these products
are education and training. Markets and products are changing rapidly; a
salesperson has to spend so much time obtaining the knowledge
necessary to provide education and training that it becomes impractical to
have part-time distributors do it. Often, these kinds of products require
licenses for those who sell them, and part-time distributors don’t typically
have time to invest in this kind of intense training.

Over the years it has become increasingly clear to me that it’s important for
distributors to learn the basic concepts of the MLM business because these
individuals invest their heart and soul in building a downline, often working
night and day for years. I believe that if distributors understand these
concepts--like the role of the MLM product--they can make better choices
about the companies in which to invest their lives.

MULTI-LEVEL MARKETING (MLM) HARASSMENT

Multi-level marketing harassment is a form of economic harassment in the
work place whereby a superior uses his or her power to recruit a
subordinate into a multi-level marketing scheme. Like sexual harassment,
MLM harassment can be subtle or blatant. The most blatant form would be
using the direct threat of not hiring or promoting, or even firing someone for
not agreeing to become an "independent" MLM agent. Of course, talented
managers know many subtle ways to suggest to their subordinates that
their success with the company depends upon their saying 'yes' to the
boss.
One of the most successful MLM companies is Amway. The basic formula
is simple. First, there is the "Company", which has a product or array of
products. Second, there are the independent distributors who
(a) sell the Company product and
(b) recruit new distributors who do the same, ad infinitum if possible.

The reason distributors don't just sell the Company product is that they
receive "bonuses" for sales made by their recruits. Theoretically, the richest
independent distributor would have dozens, hundreds, thousands, even
millions of subordinate distributors who would be doing the actual selling,
while the Big One did little or no selling of the Company product at all. That
is, the emphasis of MLM schemes is not selling the Company product but
selling the Company itself.

It should be obvious, then, that the Big Cheese of a non-MLM company

could stand to reap substantial economic rewards from having a little army
of "independent distributors" (read "coerced employees supervisors, etc.)
are really interested in their own extra cash. Superiors who have bought
into the Unimagined Wealth Dream of most MLM schemes will not have
many scruples recruiting their subordinates. It is possible that the superiors
may even deceive themselves into thinking that they are offering bona fide
economic opportunities to their subordinates. It is also quite likely that
many employees will not feel coerced but will buy into the Unimagined
Wealth Dream themselves. (Just as some bosses may delude themselves
into thinking that they are really offering an opportunity to an employee's
sexual happiness when they make sexual advances to a subordinate. And,
just as some people who are seduced by their bosses, end up marrying the
boss.) These facts complicate matters, and may sometimes make it difficult
to prove harassment occurred. After all, if you are agreeable, how can
anyone say you were harassed?

But it is not just large, bureaucratic businesses which may see MLM
harassment. Schools, for example, may also be prone to MLM harassment.
In fact, anywhere there is a person who has power over others, the
opportunity for MLM harassment emerges. Fear of not being hired or re-
hired and fear of not being promoted or of being fired can be powerful
incentives to get on board the MLM bandwagon.

As far as I know, there are no laws prohibiting superiors of non-MLM

organizations from recruiting inferiors into MLM schemes. Nor are there
laws for discriminating against someone solely because they did not want
to join an MLM scheme. Thus, even if you could prove beyond a
reasonable doubt that the only reason you were fired from your last job as
a structural engineer was because you refused to become an Amway agent
when asked to do so by your superior, you may have no recourse in a court
of law.

Because of the potential for abuse of power, one would think that
companies and organizations would as a standard rule prohibit MLM
recruitment. But how many of us have worked at a place which has a policy
against MLM harassment? Very few, I think. The exception, of course,
would be if you work for one of the Armed Services. Our military
organizations know quite well how easy it is for superior officers to take
advantage of those who are their juniors. And they have rules which forbid
such behavior. For example, you will find the following rule in the Code of
Federal Regulations (32 CFR Sec. 721.6)

Standards of conduct governing naval personnel

(c) Using naval position. Naval personnel are prohibited from using their
official positions to improperly induce, coerce, or in any other manner
improperly influence any person to provide any benefit, financial or
otherwise, to themselves or others.

(e) Commercial solicitations by naval personnel. To eliminate the

appearance of coercion, intimidation, or pressure from rank, grade, or
position, all naval personnel are prohibited from making commercial
solicitations or sales to DOD [Department of Defense] personnel who are
junior in pay grade, or position, at any time or place.
Commercial sales, whether or not solicited, are prohibited between officer
and enlisted military personnel.

This prohibition includes, but is not limited to, the solicitation and sale of
insurance, stocks, mutual funds, real estate, and other commodities or
goods.
In fact, naval personnel are forbidden to engage in outside employment,
with or without compensation, if that employment is
inconsistent with the requirements of this instruction, including the
requirement to avoid actions and situations which reasonably can be
expected to create the appearance of a conflict of interest.
How many private corporations include such protection against abuse of
power in their employees' manual?
It should be emphasized that MLM harassment goes way beyond the kind
of intimidation one feels when the boss brings in her kid's school candy
bars and asks you buy them for the Save the World Fund. The one-time
only or the once-in-a-while extortion is small change--however
inconvenient--compared to having to become an MLM agent. The
difference is like the difference between having to go to Church on
Christmas and having to join a cult.
 THE MIRAGE OF MULTILEVEL MARKETING
Don't be surprised if a friend or acquaintance tries to sell you vitamins,
herbs, homeopathic remedies, weight-loss powders, or other health-related
products. Millions of Americans have signed up as distributors for multilevel
companies that market such products from person to person. Often they
have tried the products, concluded that they work, and become suppliers to
support their habit.

Multilevel marketing (also called network marketing) is a form of direct

sales in which independent distributors sell products, usually in their
customers' home or by telephone. In theory, distributors can make money
not only from their own sales but also from those of the people they recruit.

Becoming an MLM distributor is simple and requires no real knowledge of

health or nutrition. Many people do so initially in order to buy their own
products at a discount. For a small sum of money—usually between $35
and $100—these companies sell a distributor kit that includes product
literature, sales aids (such as a videotape or audiotape), price lists, order
forms, and a detailed instructional manual. Most MLM companies publish a
magazine or newsletter containing company news, philosophical essays,
product information, success stories, and photographs of top salespeople.
The application form is usually a single page that asks only for identifying
information. Millions of Americans have signed up, including many
physicians attracted by the idea that selling MLM products can offset losses
attributable to managed care.
Distributors can buy products "wholesale," sell them "retail," and recruit
other distributors who can do the same. When enough distributors have
been enrolled, the recruiter is eligible to collect a percentage of their sales.
Companies suggest that this process provides a great money-making
opportunity. However, it is unlikely that people who don't join during the first
few months of operation or become one of the early distributors in their
community can build enough of a sales pyramid to do well. In July 1999,
the National Association of Attorneys General announced that complaints
about multilevel marketing and pyramid schemes were tenth on their list of
consumer complaints.

A recent analysis of Quixtar's reported income figures indicates how poorly

most MLM distributors do. In a declaration filed in a suit by two former
Quixtar distributors, he concluded:

A statistical sample of distributors revealed that 99.4% of the IBOs

[independent business owners] earned on average just $13.41 per week—
before product purchases, all business expenses, and taxes. This average
income is far less than the costs of the business, resulting in 99% of
victims of Quixtar making no net profit. Fewer than 1 person in 10,000 are
at the "Diamond and above" levels, the upper ranks of the Quixtar chain
that every new recruit is urged to aspire to. . . .

The massive loss rates among Quixtar victims that are revealed in Quixtar's
own data are the inevitable mathematical result of the endless chain
business model. In this model, the success of the IBO is based on
continuous recruiting of additional distributors (IBOs), who are induced to
make monthly purchases for their own consumption, rather than on making
retail sales in the open marketplace. In the recruitment model, only those
participants at the top levels of the pyramid can earn true profits, since the
source of a participant's real income is the expenditures of individuals
below them on the pyramid, and only a small percentage can be in those
top positions. The untenable model result in approximately 70% of IBOs
quitting Quixtar within the first year. The mission of this deceptive business
model is to continuously enroll losing investors (IBOs) and replace them as
they suffer losses and quit the program.

Many distributors who stock up on products to meet sales goals or increase

their hoped-for commissions get stuck with unsold products that cost
thousands of dollars. Some companies permit direct ordering of their
products, which avoids this problem, but the risk of failure is still high.

Dubious Claims

More than a hundred multilevel companies are marketing health-related

products. Most claim that their products are effective for preventing or
treating disease. A few companies merely suggest that people will feel
better, look better, or have more energy if they supplement their diet with
extra nutrients. When clear-cut therapeutic claims are made in product
literature, the company is an easy target for government enforcement
action. Some companies run this risk, hoping that the government won't
take action until their customer base is well established. Other companies
make no claims in their literature but rely on testimonials, encouraging
people to try their products and credit them for any improvement that
occurs.

Every company I have looked at has done at least one of the following.

• Made misleading statements that could frighten people into taking

dietary supplements they do not need.
• Made misleading statements of product superiority that could induce
people to buy products that retail stores sell more cheaply.
• Made unsubstantiated claims that their products would prevent or
remedy health problems
• Uses research findings to promote products without noting that the
findings are not sufficient to substantiate using the products.
• Uses deception by omission by making statements about the
biochemical properties of various substances without placing them in
proper perspective. An example would be stating that a certain
nutrient is important because it does this or that in the body but
omitting that people who eat sensibly have no valid reason to take a
supplement.
• Exaggerated the probability of making significant income.

Most multilevel companies tell distributors not to make claims for the
products except for those found in company literature. (That way the
company can deny responsibility for what distributors do.) However, many
companies hold sales meetings at which people are encouraged to tell their
story to the others in attendance. Some companies sponsor telephone
conference calls during which leading distributors describe their financial
success, give sales tips, and describe their personal experiences with the
products. Testimonials also may be published in company magazines,
audiotapes or videotapes. Testimonial claims can trigger enforcement
action, but since it is time-consuming to collect evidence of their use,
government agencies seldom bother to do so.

Government enforcement action against multilevel companies has not been

vigorous. These companies are usually left alone unless their promotions
become so conspicuous and their sales volume so great that an agency
feels compelled to intervene. Even then, few interventions have substantial
impact once a company is well established.
Motivation: Powerful but Misguided
The "success" of network marketing lies in the enthusiasm of its
participants. Most people who think they have been helped by an
unorthodox method enjoy sharing their success stories with their friends.
People who give such testimonials are usually motivated by a sincere wish
to help their fellow humans. Since people tend to believe what others tell
them about personal experiences, testimonials can be powerful
persuaders.

Perhaps the trickiest misconception about quackery is that personal

experience is the best way to tell whether something works. When
someone feels better after having used a product or procedure, it is natural
to give credit to whatever was done. However, this is unwise. Most ailments
are self-limiting, and even incurable conditions can have sufficient day-to-
day variation to enable bogus methods to gain large followings. In addition,
taking action often produces temporary relief of symptoms (a placebo
effect). For these reasons, scientific experimentation is almost always
necessary to establish whether health methods are really effective. Instead
of testing their products, multilevel companies urge customers to try them
and credit them if they feel better. Some products are popular because they
contain caffeine, ephedrine (a stimulant), valerian (a tranquilizer), or other
substances that produce mood-altering effects.

Another factor in gaining devotees is the emotional impact of group

activities. Imagine, for example, that you have been feeling lonely, bored,
depressed or tired. One day a friend tells you that "improving your nutrition"
can help you feel better. After selling you some products, the friend inquires
regularly to find out how you are doing. You seem to feel somewhat better.
From time to time you are invited to interesting lectures where you meet
people like yourself. Then you are asked to become a distributor. This keep
you busy, raises your income, and provides an easy way to approach old
friends and make new ones—all in an atmosphere of enthusiasm. Some of
your customers express gratitude, giving you a feeling of accomplishment.
People who increase their income, their social horizons, or their self-
esteem can get a psychological boost that not only can improve their mood
but also may alleviate emotionally-based symptoms.

Multilevel companies refer to this process as "sharing" and suggest that

everyone involved is a "winner." That simply isn't true. The entire process is
built on a foundation of deception. The main winners are the company's
owners and the small percentage of distributors who become sales leaders.
The losers are millions of Americans who waste money and absorb the
misinformation.
Do you think multilevel participants are qualified to judge whether
prospective customers need supplements—or medical care? Even though
curative claims are forbidden by the written policies of each company, the
sales process encourages customers to experiment with self-treatment. It
may also promote distrust of legitimate health professionals and their
treatment methods.

Some people would argue that the apparent benefits of "believing" in the
products outweigh the risks involved. Do you think that people need false
beliefs in order to feel healthy or succeed in life? Would you like to believe
that something can help you when in fact it is worthless? Should our
society support an industry that is trying to mislead us? Can't Americans do
something better with the billion or more dollars being wasted each year on
multilevel "health" products?

Physician Involvement

Many physicians are selling health-related multilevel products to patients in

their offices. The companies most involved have included Amway (now
doing business as Quixtar), Body Wise, Nu Skin (Interior Design), Rexall,
and Juice Plus+. Doctors are typically recruited with promises that the extra
income will replace income lost to managed care. In December 1997,
the American Medical Association Council on Ethical and Judicial
Affairs (CEJA) advised against against profiting from the sale of "non-
health-related products" to their patients. Although CEJA's policy statement
does not mention products sold through multilevel marketing, CEJA's
chairman said the statement was triggered by the growing number of
physicians who had added an Amway distributorship to their practice.

Recommendations

Consumers would be wise to avoid health-related multilevel products

altogether. Those that have nutritional value (such as vitamins and low-
cholesterol foods) are invariably overpriced and may be unnecessary as
well. Those promoted as remedies are either unproven, bogus, or intended
for conditions that are unsuitable for self-medication.

Government agencies should police the multilevel marketplace

aggressively, using undercover investigators and filing criminal charges
when wrongdoing is detected. People who feel they have been defrauded
by MLM companies should file complaints with their state attorney general
and with local FDA and FTC offices
 MULTI – LEVEL MARKETING WITH SOCIAL MEDIA

Does Affiliate Marketing Mix Well With Social Media?

I get a phobia everytime people introduce me to multi level marketing (so

don’t try to introduce me with multi level marketing) beside I never make
any money promoting multi level marketing. Then they change the name to
“Network Marketing”.
I think when they change MLM to Network Marketing, they actually become
more human centric because now you have to build a network and a
marketing team.
The important thing with this kind of setup was that you get to build up a
network of “downlines” under your own account, and then a percentage of
the sales and the referrals of members down the line are credited to you.
Some networks over-emphasis the value of earning from directly selling
their products more than building a network, but then actually the bigger
income usually came from the commissions, assuming you’ve built up of a
good network structure under yourself.
How does this apply to affiliate marketing?
This rings true, too, if you monetize your blog through affiliate schemes, or
if you’re selling a product or service through affiliates. To some extent, at
least.
Social media traffic is good if it is relevant. But useless if it is not-relevant. It
is a new trend among online marketers to catch on the social media traffic.
Also social media web2.0 websites brings in tons of traffic. Will it be
helpful? Since the traditional method of getting traffic is through search
engine optimization which takes effort and time or PPC advertisements
which also needs time to optimize your campaign but also need a lot of
money to see the ROI.
This goes to show also that it’s not how many people you know that
counts. It’s who you know that counts. And in many ways, it’s not just who
you know, but how well you know people that will count in the end.

How to use social media to boast affiliate marketing?

Depending on which side of the fence you’re on, whether as the merchant
dependant on affiliates to get your name out there or if you’re the affiliate
trying to market a merchant’s products, there can be many ways to utilize
social media for affiliate marketing.

For either the merchant or the affiliate, you can consider using video content and
create traffic via platforms such as YouTube or iTunes or even your own
website.
In the case of an affiliate, this can be done by procuring content from
merchants and creating your own viral video or having regular specific
podcasts. You can also adapt contents to include affiliate links or
combining videos that ends with an ad for the merchant or their products.
The most important thing here is to spread the content on a platform that
would have the widest reach of audience in the social media landscape.
Certain social media sites like Myspace and Facebook can target certain
demographics and age group. This is quite interesting since no other traffic can
do that.
Now that we’re on the topic of social networks, you need to be social and
market to friends in social networking platforms such as MySpace and
Facebook. Whether you’re the merchant or the affiliate, marketing through
such platforms can be lucrative because of the number of people you’re
able to reach. These platforms have the potential to grab people’s
attention, and you can collect friends (or prospects) and build relationships
with them to encourage their loyalty to you as a merchant.

MULTI-LEVEL MARKETING INDUSTRY WATCHDOGS

The Federal Trade Commission (FTC), Better Business Bureau (BBB), and
the United States Post Office (USPS) have investigated a number of
multilevel marketing businesses.

The Better Business Bureau gives the following advice:

• Before investing, get all the facts about the company, its officers, its
products. Find out the start-up cost, and the company's buy-back
policy.
• Get written copies of the company's marketing plan and sales
literature.
• Check with others who have experience with the company and its
products. Are the products actually being sold to consumers?
• To check on a company, contact your local Better Business Bureau,
district attorney or state attorney general's office.

The United States Postal Inspection Service advises:

"Fraudulent pyramid schemes typically violate the Postal Lottery Statute

(Title 18, United States Code, Section 1302). They contain all three
elements of a lottery: prize (expectation of monetary or other gain from
participation in the pyramid); chance (the monetary return you may receive
from your participation is entirely up to chance, that is, dependent on the
efforts of those below you in the pyramid); and consideration (the fee you
pay to become a distributor). Frequently, the entrance fee into the pyramid
is very high. In many cases, the money spent for such an entrance fee can
often be considered lost the moment you pay.

To protect yourself against falling victim to a multi-level marketing scheme,

note whether the basis of the promotion is the sale of a product at the retail
level, as opposed to an emphasis on recruiting more and more distributors
to help you increase your income. "
Numerous consumer advocacy groups monitor and post information about
scams. Check them out before signing any agreement. If there is high
pressure to sign up, you don't want to be part of this organization. Typical
come-on lines include sales pitches like "new opportunity, only taking the
first 100 applicants" or "this price is good for today only." Walk away from
these "deals." You will not regret it.

THE TRUTH BEHIND THE CLAIMS IN MULTILEVEL

MARKETING (MLM)

Let's look at what an MLM promises and the truth behind those promises.
Some of the claims made are:

1. Network marketing is a way to make tons of money.

2. MLM is the wave of the future. Eventually all products will be sold by
MLM.

3. MLM operations don't have huge advertising and marketing budgets so

they can afford to pump a lot more dollars into developing their products,
resulting in a higher quality product that can still be sold at a lower price
than comparable items sold through conventional means.

4. There are an endless group of recruits available to be down line

distributors.

5. It is easy to sell to your friends and family. They love you and want you
to succeed.

6. MLM can be done in your spare time. You make millions while you sleep.

Many people liken what happens in many MLM companies to being

brainwashed by a cult. Members mouth company mottos with no conscious
awareness of how ludicrous the claims may be. There are families who
feeling they have "lost" a family member to an MLM scheme, have initiated
cult deconditioning to "rescue" their family member from the organization.
While this is not true of most MLM organizations, do question all
exaggerated claims asking for substantiation of facts. In suspect
organizations, instead of facts, a smokescreen of counter challenges will be
the usual response.

Are there good MLMs and is this a viable way to make a living? Of course.
In sense, the success of the good companies is what has attracted so
many scammers. But the scammers are so invasive and overwhelming in
their sales pitches, it is difficult to dig down to the real gems in this field.

How to Find a Good Multilevel Marketing Business

For your initial MLM experience it is usually wise to start with a company
that has been in business at least three years and is a public company.
Eighty-five percent of network companies fail within the first 18 months so
you know it has made it through some major hurdles if it is still around after
three years. And, if it is publicly traded, you have access to information
about its background and the background of the officers. Find out what the
compensation method is for the officers. A percentage of sales in addition
to salary indicates that they have an investment in you doing well, which is
a good sign.

Another good sign is if the MLM is a member of the Direct Selling

Association, a major industry organization which monitors MLM activities
worldwide. Also, check out what your state's laws are on MLM
organizations. The "toughest" states are considered to be Michigan,
Arkansas and Georgia. If an MLM practices in more than one state, it is
meeting more than one set of legal requirements, which may indicate a
solid footing for the company.

After you have investigated the company itself, take a look at the product.

• Why would someone want to buy it from you rather than an

established retail establishment?
• Is it unique?
• Is it something lots of people would use so you have a large number
of potential buyers?
• Is it something people need to buy frequently?
• Is this something that is a fad and will go out of style?

Be truthful with yourself. Just because you think a certain vitamin will save
the world, can you convince others enough to make a decent living at this
business?
What type of bonus or commission plan does the company offer? Most
companies base commission on the sales of you and your "down line".
Bonuses are offered by some companies as are group health insurance
programs, reduced rates for products purchased for your own use, and
other variations on compensation add-ons. Be certain to ask when and how
you get paid. Is it a regular payment plan?

Additional benefits come from support that the company may offer in terms
of literature, audio and video tapes, training, conventions, newsletters,
online access and web pages. Investigate costs for each of these services.
Some companies make the majority of their money from selling you
support, rather than selling products. Your sponsor is part of that support
system and should be accessible and provide you with training and the
information needed for you to be successful.

The internet has become a powerful tool for MLM entrepreneurs. That does
not mean spamming everyone you can get an email address on with your
sales pitch. Sale or valid contacts are rarely made that way. It is an
expensive, nonproductive way to expend your efforts, no matter what
people tell you who are selling mailing lists with "prequalified" buyers.

What does work? Online discussion groups and chat rooms are great
places to network. If you set up a website, you can set up auto responders
to deliver additional information if someone selects the opportunity for more
information on the site or forms can be used to allow the visitor to leave
contact information should they wish to contact you directly. Subscribe to
online newsletters which may allow advertising

It is also wise to contact the Better Business Bureau and the Direct Selling
Association for any complaints about the company.

The 10 Big Lies of Multi-Level Marketing

The multi-level marketing (MLM) field grows and its member companies
multiply. Solicitations to join the movement seem to be everywhere. The
impression accordingly grows that it is indeed the "wave of the future", a
business model that is gaining momentum, growing in acceptance and
legitimacy and, as its promoters claim, will eventually replace most other
forms of marketing and sales. Many are led to believe the assertions that
success can be found by anyone who faithfully believes in the system and
steadfastly adheres to its methods and that, eventually, all of us will
become MLM distributors.
The analysis of the MLM business is based upon fourteen years
experience in corporate consulting specifically in the distribution field and
more than 10 years of research and writing about the MLM model. This has
included serving as expert witness in state and federal court cases,
corresponding directly with more than 1,500 participants, writing a book,
being interviewed for local and national radio, television, newspapers and
magazines, and carefully studying numerous MLM marketing and pay
plans.

This research has shown that the MLM business model, as it is practiced
by most companies, is a marketplace hoax. In those cases, the business is
primarily a scheme to continuously enroll distributors and little product is
ever retailed to consumers who are not also enrolled as distributors.

In general, MLM industry claims of distributor income potential, its

descriptions of the 'network' business model and its prophecies of a
reigning destiny in product distribution have as much validity in business as
UFO sightings do in the realm of science.

Financially, the odds for an individual to achieve financial success under

those circumstances rival the odds of winning at the tables in Las Vegas.

The very legality of the MLM system rests tenuously upon a single 1979
ruling on one company. The guidelines for legality that are set forth in that
ruling are routinely ignored by the industry. Lack of governing legislation or
oversight by any designated authority also enables the industry to endure
despite occasional prosecutions by state Attorneys General or the FTC.

MLM is not defined and regulated like, for instance, franchises are MLMs
can be established without federal or state approval. There is no federal
law specifically against pyramid schemes. Many state anti-pyramid statutes
are vague or weak. State or federal regulation usually involves first proving
that the company is a pyramid scheme. This process can take years and by
then, the damage to consumers is done. Indeed, even when MLM pyramids
are shut down, often the promoters immediately set up new companies
under new names and resume scamming the public.

MLM's economic score card is characterized by massive failure rates and

financial losses for millions of consumers. Its structure in which positions on
an endless sales chain are purchased by selling or buying goods is
mathematically unsustainable and its system of allowing unlimited numbers
of distributors in any market area is inherently unstable.

MLM's espoused core business - personal retailing - is contrary to trends in

communication technology, cost-effective distribution, and consumer
buying preferences. The retailing activity is, in reality, only a pretext for the
actual core business - enrolling investors in pyramid organizations that
promise exponential income growth.

As in all pyramid schemes, the incomes of those distributors at the top and
the profits to the sponsoring corporations come from a continuous influx of
new investors at the bottom. Viewed superficially in terms of company
profits and the wealth of an elite group at the pinnacle of the MLM industry,
the model can appear viable to the uninformed, just as all pyramid
schemes do before they collapse or are exposed by authorities.

Deceptive marketing that ably plays upon treasured cultural beliefs, social
and personal needs, and some economic trends account for MLM's growth,
rather than its ability to meet any consumer needs. The deceptive
marketing is nurtured by a general lack of professional evaluation or
investigation by reputable business media. Consequently, a popular
delusion is supported that MLM is a viable business investment or career
choice for nearly everyone and the odds of financial success in the venture
are comparable or better than other trades, professions, employment or
business ventures.

MLM's true constituency is not the consuming public but rather

hopeful investors. The market for these investors grows significantly in
times of economic transition, globalization and employee displacement.
Promises of quick and easy financial deliverance and the beguiling
association of wealth with ultimate happiness also play well in this market
setting. The marketing thrust of MLM is accordingly directed to prospective
distributors, rather than product promotions to purchasers. Its true products
are not long distance phone services, vitamin pills, health potions or skin
lotions, but rather the investment propositions for distributorships, which
are deceptively portrayed with images of high income, minimal time
requirements, small capital investments and early success.

The word, lie, is provoking and it is used here for provocative purposes. At
some level, everyone who participates in MLM in which little retailing is
occurring is unconsciously lying to himself or herself. Many at the top of
these organizations are consciously lying to everyone else. Deception is
inherent in this type of MLM scheme and is pervasive in its marketing. Here
are 10 of the biggest lies I have found to be present in almost every MLM I
have encountered.

Lie #1:
MLM is a business offering better opportunities for making large sums of
money than all other conventional business and professional models.
Truth:
For almost everyone who invests MLM turns out to be a losing financial
proposition. This is not an opinion, but a historical fact. Consider some
notable examples from among the largest MLMs.

In the largest of all MLMs, Amway, only 1/2 of one percent of all distributors
make it to the basic level of "direct" distributor, and the average income of
all Amway distributors is about $40 a month. That is gross income before
taxes and expenses. When costs are factored, it is obvious that nearly all
suffer a loss. Making it to "direct", however, is not a ticket to profitability, but
to greater losses. When the Wisconsin Attorney General filed charges
against Amway, tax returns from all distributors in the state revealed an
average net loss of $918 for that state's "direct" distributors.

Extraordinary sales and marketing obstacles account for much of this

failure, but even if the business were more feasible, sheer mathematics
would severely limit the opportunity. The MLM type of business structure
can support only a small number of financial winners. If a 1,000-person
downline is needed to earn a sustainable income, those 1,000 will need
one million more to duplicate the success. How many people can
realistically be enrolled? Much of what appears as growth is in fact only the
continuous churning of new enrollees. The money for the rare winners
comes from the constant enrollment of armies of losers.

The vast majority of the losers in MLM drop out within a year. In a 1999
court case brought against Melaleuca, one of the country's largest MLMs,
the company claimed it has the highest "retention" rate among distributors
in the entire MLM industry. Melaleuca boasted a drop-out rate is 5.5% per
month. This equates to about 60% per year, if the dropouts are replaced
each month.

In its annual report to the SEC, Pre-Paid Legal, another large MLM,
revealed that more than 1/2 of all its customers and distributors quit each
year and are replaced by another group of hopeful investors.

This pattern of 50-70% of all distributors quitting within one year holds true
also for NuSkin, the industry's second largest MLM. NuSkin also
exemplifies the accompanying pattern in which a tiny percent of the
distributors gain the majority of all company rebates. In 1998, NuSkin paid
out 2/3rds of its entire rebates to just 200 upliners out of more than 63,000
"active" distributors. The money they received came directly from the
unprofitably investments of the 99.7% of the others.
In 1995, Excel Communications, another "fast growing" MLM, reported to
regulators an 86% turnover rate of distributors and 48% drop-out rate
among all customers.

To obscure their dismal numbers, some MLMs classify their distributors as

"active" and "inactive." The Active group includes only recent participants
and those still buying products or receiving rebates. Payout and retention
statistics are then disclosed only on the "active" group.

If ALL distributors who participate are included the losses and the average
incomes are exposed as much worse. And, if all the distributors who enroll
and quit over several years are included, the odds of success for a new
distributor/investor are shown to be absurdly low. Yet, these companies
typically advertise their business as "an opportunity of a life time" with
"unlimited potential."

Lie #2:
Network marketing is the most popular and effective new way to bring
products to market. Consumers like to buy products on a one-to-one basis
in the MLM model.

Truth:
If you strip MLM of its hallmark activity of continuously reselling
distributorships and examine its foundation, the one-to-one retailing of
products to customers, you encounter an unproductive and impractical
system of sales upon which the entire structure is supposed to rest.
Personal retailing is a thing of the past, not the wave of the future. Retailing
directly to friends on a one-to-one basis requires people to drastically
change their buying habits. They must restrict their choices, often pay more
for goods, buy inconveniently, and awkwardly engage in business
transactions with close friends and relatives. The unfeasibility of door-to-
door retailing is why MLM is, in reality, a business that just keeps reselling
the opportunity to sign up more distributors.

Lie #3:
Eventually all products will be sold by MLM, a new form of marketing.
Retail stores, shopping malls, catalogues and most forms of advertising will
soon be rendered obsolete by MLM.

Truth:
MLM is not new. It has been around since the late 1960's. Yet, today it still
represents less than one percent of US retail sales. In year 2000, total US
retail sales were $3.232 trillion, according to the Dept. of Commerce.
MLM's total sales are about $10 billion. That is about 1/3rd of one percent
and most of this sales volume is accounted for by the purchases of hopeful
new distributors who are actually paying the price of admission to a
business they will soon abandon. Not only are MLM sales insignificant in
the marketplace, but MLM fails as a sales model also on the other key
factor maintaining customers. Most MLM customers quit buying the goods
as soon as they quit seeking the "business opportunity." There is no brand
loyalty.

These basic facts show that, as a marketing model, MLM is not replacing
existing forms of marketing. It does not legitimately compete with other
marketing approaches at all. Rather, MLM represents a new
investment scheme that uses the language of marketing and sales of
products. Its real products are distributorships which are sold with
misrepresentation and exaggerated promises of income. People are buying
products in order to secure positions on the sales pyramid. The possibility
is always held out that you may become rich if not from your own efforts
then from some unknown person who might join your 'downline,' the 'big
fish' as they are called.

MLM's growth is a manifestation not of its value to the economy, customers

or distributors but of the recently high levels of economic fear and insecurity
and rising expectations of quick and easy wealth. It is growing in the same
way day trading on the stock market, legalized gambling and lotteries are.

Lie #4:
MLM is a new way of life that offers happiness and fulfillment. It is a means
to attain all the good things in life.

Truth:
The most prominent motivating appeal of the MLM industry as shown in
industry literature and presented at recruitment meetings is the crassest
form of materialism. Fortune 100 companies would blush at the excess of
promises of wealth and luxury put forth by MLM solicitors. These promises
are presented as the ticket to personal fulfillment. MLM's overreaching
appeal to wealth and luxury conflicts with most people's true desire for
meaningful and fulfilling work in something in which they have special talent
or interest. In short, the culture of this business side tracks many people
from their personal values and desires to express their unique talents and
aspirations.

Lie #5:
MLM is a spiritual movement.

Truth:
The use of spiritual concepts like prosperity consciousness and creative
visualization to promote MLM enrollment, the use of words like
'communion' to describe a sales organization, and claims that MLM is a
fulfillment of Christian principles or Scriptural prophecies are great
distortions of these spiritual practices. Those who focus their hopes and
dreams upon wealth as the answer to their prayers lose sight of genuine
spirituality as taught by all the great religions and faiths of humankind. The
misuse of these spiritual principles should be a signal that the investment
opportunity is deceptive. When a product is wrapped in the flag or in
religion, buyer beware! The 'community' and 'support' offered by MLM
organizations to new recruits are based entirely upon their purchases. If the
purchases and enrollment decline, so does the 'communion.'

Lie #6:
Success in MLM is easy. Friends and relatives are the natural prospects.
Those who love and support you will become your lifetime customers.

Truth:
The commercialization of family and friendship relations or the use of 'warm
leads' which is required in the MLM marketing program is a destructive
element in the community and very unhealthy for individuals involved.
Capitalizing upon family ties and loyalties of friendships in order to build a
business can destroy ones social foundation. It places stress on
relationships that may never return to their original bases of love, loyalty
and support. Beyond its destructive social aspects, experience shows that
few people enjoy or appreciate being solicited by friends and relatives to
buy products.
Lie #7:
You can do MLM in your spare time. As a business, it offers the greatest
flexibility and personal freedom of time. A few hours a week can earn a
significant supplemental income and may grow to a very large income
making other work unnecessary

Truth:
Decades of experience involving millions of people have proven that
making money in MLM requires extraordinary time commitment as well as
considerable personal wiliness, persistence and deception. Beyond the
sheer hard work and special aptitude required, the business model
inherently consumes more areas of ones life and greater segments of time.
In MLM, everyone is a prospect. Every waking moment is a potential time
for marketing. There are no off-limit places, people or times for selling.
Consequently, there is no free space or free time once a person enrolls in
MLM system.

Under the guise of creating money independently and in your free time, the
system gains control and dominance over people's entire lives and requires
rigid conformity to the program. This accounts for why so many people who
become deeply involved end up needing and relying upon MLM
desperately. They alienate or abandon other sustaining relationships.

Lie #8
MLM is a positive, supportive new business that affirms the human spirit
and personal freedom.

Truth:
MLM marketing materials reveal that much of the message is fear-driven
and based upon deception about income potential. Solicitations frequently
include dire predictions about the impending collapse of other forms of
distribution, the disintegration or insensitivity of corporate America, and the
lack of opportunity in other professions or services. Conventional
professions, trades and business are routinely demeaned and ridiculed for
not offering 'unlimited income.' Employment is cast as wage enslavement
for 'losers.' MLM is presented as the last best hope for many people. This
approach, in addition to being deceptive, frequently has a discouraging
effect on people who otherwise would pursue their own unique visions of
success and happiness. A sound business opportunity does not have to
base its worth on negative predictions and warnings.

Lie #9
MLM is the best option for owning your own business and attaining real
economic independence.

Truth:
MLM is not true self-employment. 'Owning' an MLM distributorship is an
illusion. Some MLM companies forbid distributors from carrying additional
lines. Most MLM contracts make termination of the distributorship easy and
immediate for the company. Short of termination, downlines can be taken
away with a variety of means. Participation requires rigid adherence to the
'duplication' model, not independence and individuality. MLM distributors
are not entrepreneurs but joiners in a complex hierarchical system over
which they have little control.

Lie #10
MLM is not a pyramid scheme because products are sold.

Truth:
The sale of products is in no way a protection from anti-pyramid scheme
statutes or unfair trade practices set forth in federal and state law. MLMs
that sell useful, quality products have been successfully prosecuted under
anti-pyramid scheme laws by state and federal officials. MLM is a legal
form of business only under certain rigid conditions set forth by the FTC
and state Attorneys General. Many MLMs are currently in gross violation of
these guidelines and operate only because they have not been prosecuted.
Recent court rulings are using a 70% rule to determine an MLM's legality.
At least 70% of all goods sold by the MLM company must be purchased by
non-distributors. This standard would place most MLM companies outside
the law. The largest of all MLMs acknowledges that only 18% of its sales
are made to non-distributors.

THE BEGINNING OF HERBALIFE

ABOUT HERBALIFE

Herbalife began in 1980, and we’ve been changing people’s lives ever
since. We offer nutrition, weight-management and personal care products
exclusively through a network of approximately 1.9 million Distributors in
72 countries.

We support Herbalife Family Foundation (HFF) and its Casa Herbalife

program to help bring good nutrition to children; and we sponsor sports,
fitness and community activities around the world to help promote a
healthy, active lifestyle.

Herbalife founder Mark Hughes dreamed of “a future brilliant beyond

compare” by helping people improve their lives through better nutrition and
an unparalleledbusiness opportunity.

Herbalife International is a global nutrition, weight-loss and skin-care

company. The company was founded in 1980 and it employs around 4,000
people worldwide. Herbalife reported global sales of USD 2.3 billion in
2009 and its corporate headquarters are in Los Angeles, USA. The
company distributes its products in 72 countries through a network of
approximately two million independent distributors, some of whom earn
profit on product sales and additional commission from a multi-level
marketing (MLM) compensation structure. Herbalife has faced occasional
legal challenges over the safety of its products

HOW IT ALL STARTED

Herbalife was born from the personal tragedy of Mark Hughes. When Mark
was eighteen years old his mother died of an accidental overdose of
prescription diet pills.
Since that day, Mark has dedicated his life to helping people lose weight
and improve their health safely and effectively. In February 1980, Mark
Hughes launched Herbalife International!
Sales the first month were $23,000. Then due to the perseverance of Mark
Hughes, first year sales skyrocketed to $2 MILLION! Herbalife is now a
multi-national nutrition company with sales over $1.7 BILLION a year!
Mark has set the sails of Herbalife to achieve $5 BILLION a year within the
next few years, and with Mark's outstanding record of achievements, it is a
goal that can be reached!
Herbalife is bringing the world together through good nutrition. Mark's
dream is to take Herbalife products to every corner of the planet and
provide people with the opportunity his mother did not have.

HISTORY
In February 1980, Mark Hughes began selling the original Herbalife weight
loss product from the trunk of his car. Hughes often stated that the genesis
of his product and program stemmed from the weight loss concerns of his
mother, whose death he attributed to an eating disorder and an unhealthy
approach to weight loss. Adopting the multi-level marketing system for
distribution and growth, the company attracted thousands of distributors
who sold its products door-to-door or through word-of-mouth, shunning
commercial distribution in retail stores.
The company's slogan, "Lose Weight Now, Ask Me How", became a
marketing theme for distributors, featuring heavily on badges, flyers and
posters. Early methods to recruit distributors included seminars, which
would feature distributors giving health and weight loss testimonials on the
Herbalife products and a keynote address by Hughes. By 1982 Herbalife
had reached USD 2 million in sales and had expanded into Canada.
In 1985, the California Attorney General sued the company for making
inflated claims about the efficacy of its products. The company settled the
suit for USD 850,000 without admitting wrongdoing. In 1986 Herbalife
became a publicly traded company on the NASDAQ, and in 1996 Herbalife
reached USD 1 billion in annual sales.
Mark Hughes died at age 44. The Los Angeles County Coroner autopsy
results ruled that the entrepreneur had died of an accidental overdose of
large quantities of alcohol and theprescription anti-
depressant Doxepin.The company continued to grow after his death and in
2002 was acquired by Whitney and Co LLC and Golden Gate Capital for
USD 685 million, who took the company private again.
In April 2003, Michael O. Johnson joined Herbalife as CEO following a 17-
year career with The Walt Disney Company, most recently as president of
Walt Disney International. On December 16, 2004, the company had an
initial public offering on the NYSE of 14,500,000 common shares at
$14/share. 2004 net sales were reported as USD 1.3 billion. In April 2005,
the company celebrated its 25th anniversary with a four-day event
attended by 35,000 Herbalife Independent Distributors from around the
world. In August 2005, Dr. Steve Henig joined the company as Chief
Scientific Officer, responsible for product research and development. In
2008, President and COO Greg Probert resigned after it was reported that
he had not completed the degree requirements for the MBA he claimed on
his resume.

BUSINESS
Herbalife is a multi-level marketing (sometimes called MLM or network
marketing) company. In addition to profits from product sales, Herbalife
distributors can earn additional commissions from sales by their 'downline'
distributors. Supporters of MLM contend this is a fair compensation
system, whilst critics of MLM contend that it is similar to a pyramid
scheme. Critics also argue that the company does not make enough effort
to curb abuses by individual distributors, though Herbalife has consistently
denied such allegations. Herbalife is a member of the Direct Selling
Association in most countries in which it operates.
In its filings with the U.S. Securities and Exchange Commission (SEC),
company management note problems with inappropriate business
practices in the past, their subsequent long-lasting effects and the need to
avoid any repetition. Company management considers the number and
retention of distributors a key parameter and tracks it closely in financial
reports. By January of each year, sales leaders are required to requalify.
In February of each year, they remove from the rank of sales leaders
those individuals who did not satisfy the sales leader qualification
requirements during the preceding 12 months. For the latest 12-month
requalification period ending January 2010, approximately 43.0 percent of
the eligible sales leaders requalified, reflecting an improvement from 40.3
percent in 2008.

HERE WE GROW!
Herbalife started in Beverly Hills, California, where we now have our world
headquarters. With an aggressive expansion attitude, Herbalife currently
operates in 72 countries, and we welcome new countries every year!
In addition to our international expansion efforts, Herbalife is a company
for the future. With major involvement in D.A.R.E. and the creation of the
Herbalife Family Foundation Herbalife is dedicated to improving the lives
of all people!
HOW WE DO IT
Herbalife is a member of the Direct Selling Association (DSA) of Australia
& New Zealand and is a member of the Direct Selling Association in most
of the countries where it operates. Herbalife has more than 1,900,000
independent Distributors worldwide. Each Distributor enjoys the freedom
that comes from being your own boss.
Herbalife emphasizes herbs and other natural ingredients in our weight
loss, nutritional and personal care product lines. Our exclusive
formulations appeal to the growing consumer interest in herbal and natural
products.

Our Mission is to change people’s lives by providing the best nutrition and
weight management products in the world and the best business
opportunity in direct selling.

HERBALIFE FAMILY FOUNDATION

In 1994 company founder Mark Hughes started the Herbalife Family
Foundation, a 501(c)(3), non-profit corporation, to improve children’s lives
by helping organizations provide healthy nutrition to children at risk.
Additionally, HFF often supports relief efforts in response to natural
disasters.
In 2005, HFF introduced its Casa Herbalife program to help provide healthy
and nutritious meals by partnering with existing charities serving children.
This program for children-at-risk is named after Casa Herbalife, an
orphanage the foundation built in Brazil in 1998 and continues to support
today. Today, 50 programs have been established on six continents.
HFF is supported by the Herbalife, its independent Distributors, employees,
and friends. After the initial grant, the company promotes the involvement
of local independent distributors and employees to directly support their
local Casa Herbalife program through financial donations and volunteer
activities.

Sports sponsorships

Herbalife sponsors a number of athletes, sports teams and sporting events

around the world, including:

 Sergey Konyushok (Broke 7 Guinness Records at weight lifting)

 The LA Triathlon
 AYSO (the American Youth Soccer Organisation)
 The LA Galaxy soccer team
 IndyCar drivers Townsend Bell and E.J. Viso in the 2009 Indy 500
 Valencia CF football club

Product range
Herbalife's product range includes protein shakes, protein snacks, nutrition,
energy and fitness supplements and personal care products. The Formula
1 protein shake, a soy-based meal-replacement shake, is the company's
number one product and was one of the first products sold by the company.
The range also includes targeted products for heart, health, digestive
health and skin care. Some products are vegetarian, kosher or halal, and
Herbalife provides testimonials and advice from health professionals as
part of their product marketing.
According to the 2009 10K, many of its weight management, nutritional and
personal care products are manufactured for by third party manufacturing
companies, with the exception of products distributed in and sourced from
China, where they have their own manufacturing facility and several
products are manufactured in its recently acquired manufacturing facility in
Lake Forest, California. Herbalife is currently making modifications to its
recently acquired manufacturing facility in order to increase capability and
capacity, and upon completion of these modifications, expect to increase
self manufacturing.

Clinical studies
Three clinical studies have been completed on different formulations of
Herbalife's Formula 1 protein shake product. The results of the studies
support the claims made by Herbalife advocates.

Scientific advisory board

Herbalife's Scientific Advisory Board is chaired by David Heber, M.D. Ph.D,
F.A.C.P., F.A.C.N., who is professor of medicine and public health and the
founding director of the Center for Human Nutrition in the Department of
Medicine at UCLA. According to a 2004 Forbes article, Dr. Heber joined the
board at roughly the same time Herbalife made a $3 million donation to
establish the Mark Hughes Cellular & Molecular Nutrition Laboratory at his
Center for Human Nutrition, leading to criticism of Heber's actions as an
inappropriate conflict of interest.
Louis J. Ignarro, Ph.D., a Nobel Laureate in Medicine and Distinguished
Professor of Pharmacology at the UCLA School of Medicine, is also a
member of Herbalife's Scientific Advisory Board. Ignarro worked with
Herbalife to develop Niteworks, a dietary supplement designed to boost the
body's own production of nitric oxide, and later became a member of the
company's Scientific Advisory Board. Ignarro endorsed this product in
exchange for a royalty agreement reported to have earned his consulting
firm over $1 million in the first 12 months. Ignarro also promoted Niteworks'
ingredients in the prestigious Proceedings of the National Academy of
Sciences, without disclosing his financial interest to the publication. After
Ignarro's ties to Herbalife were revealed, the journal issued a correction to
the article, citing Ignarro's undisclosed "conflict of interest". UCLA
conducted its own investigation and determined that Ignarro did not act
improperly as all the research was done in Italy and no research funds
came from UCLA.Therefore, it was not legally necessary for him to disclose
anything. Ignarro presents a one-hour Herbalife promotional video for
Niteworks.
HERBALIFE EXECUTIVE BIOGRAPHIES
Welcome to the Herbalife executive biographies Web site. Here you will be
able to learn more about our industry-leading executive team. They lead
Herbalife's commitment to changing people's lives in 72 countries around
the world.

Michael O. Johnson, Chairman and Chief Executive Officer

He is the voice of the company to our Distributors, sets the vision and
strategy, and ensures that the company has the resources necessary to
meet its goals.

Brett R. Chapman, General Counsel

As general counsel for Herbalife, Brett Chapman has responsibility for all
legal matters relating to our business around the world.

Des Walsh, President

Des Walsh is responsible for the growth of our business by working closely
with distributors to achieve greater access to and deeper penetration of
Herbalife products throughout the world.

Richard P. Goudis, Chief Operating Officer

As chief operating officer, Rich Goudis is responsible for building and

sustaining an infrastructure that allows the company to achieve its growth
goals.

John DeSimone, Chief Financial Officer

John DeSimone has global responsibility for all financial, accounting,

strategic planning, and investor relations for the company's business
operations around the world.
Y. Steve Henig, Ph.D., Chief Scientific Officer

Dr. Henig is Herbalife's chief scientific officer with responsibility for the
company's product development, and research and quality functions,
including licensing, safety, and R&D. He also leads Herbalife's Scientific
Advisory Board.

HERBALIFE BUSINESS OPPORTUNITY

As a full or part-time Herbalife Independent

Distributor, you can:

• Earn what you’re worth

• Spend more time with family and friends
• Work from home, the beach…wherever
• Help people live healthier, active lives

Herbalife offers:

• A generous compensation plan

• Impressive training
• Science-based products
• A proven business model

Industry-leading Compensation Plan

• A lucrative compensation plan, paying out up to 73 percent of product

revenues to Distributors. In 2007, Herbalife Supervisors received $2.4
billion in commissions, discounts, royalties and bonuses.
• Earn retail and wholesale profits, plus income through royalties and
bonuses.
• Repeat orders from satisfied customers experiencing ongoing success with
the products leads to higher Distributor incomes.
• Herbalife pays Supervisors and above directly. The money you receive
from royalties and bonuses is all yours – there’s no need to cut checks
back to people in your organization.
Highly Effective, Science-based Products Developed to Meet Consumer
Needs

• Exclusive, high-demand products that have helped millions of people in

70 countries.
• Satisfied customers provide referrals for results-based weight-
management, nutrition and skincare products.
• Herbalife is dedicated to developing innovative, effective products with
leading scientists on our Nutrition and Scientific Advisory Boards,
including Nobel* Laureate in Medicine Dr. Lou Ignarro, and with
groundbreaking research at the Mark Hughes Cellular and Molecular
Nutrition Laboratory at UCLA†.

A World-class Company with Visionary Leadership to Support Your

Business

• Herbalife has grown consistently since 1980, and is still expanding.

• Executives, Distributor leadership and employees are working to further
the company’s mission, vision and values, positioning the company for
future growth.
• Herbalife’s mission for good nutrition, a healthy, active lifestyle and
financial well-being helps millions of people reach their ideal weight, look
and feel healthier, and earn what they’re worth.
• We are listed on the prestigious New York Stock Exchange, are
members of Direct Selling Associations around the world, and have
brand visibility through sports sponsorships.
• We care: More than 50 Casa Herbalife programs on six continents
provide better nutrition for children in need.

Step-by-step Training Programs that Assist You in Starting Your Own

Business and Expanding Locally,Nationally and Internationally

• Training that supports growing your business through Distributor calls

and events, along with advanced marketing materials and tools, including
a helpful, easy-to-use Distributor website.
• An opportunity to take charge of your life by learning the skills that can
help you run a successful and profitable business.
• Simple, easy-to-duplicate business programs that are continually
redeveloped and refined.
• Support that requires the application of the highest standards of business
 ethics, conduct and accountability to all Herbalife Independent
Distributors.

Why Herbalife?

Because we are committed to empowering you to live a healthier, financially

prosperous life.

INVESTOR RELATIONS
Corporate Profile
Herbalife International is a global network marketing company that sells weight
management, nutritional supplement and personal-care products. We pursue our
mission of "changing people's lives" by providing a financially rewarding business
opportunity to Distributors and customers who seek a healthy lifestyle.

• We are one of the largest network marketing companies in the world, with
retail sales of $3.8 billion in 2008.
• We sell our products in 70 countries through a network of 1.9 million
independent Distributors.
• We believe the quality of our products and the effectiveness of our
distribution network, coupled with geographic expansion, have been the
primary reasons for our success throughout our 29-year operating history.

• We pursue profitability and growth to increase shareholder value.

SOCIAL RESPONSIBILITY
From how we do business to the commitment we make to our communities
to how we treat our employees and independent Distributors, our Corporate
Social Responsibility program is best summed up by our value, ‘We do the
right, honest and ethical thing.

Corporate Governance
The methods and policies that relate to directing and administering
our short-term and long-term goals as a company are in place to
ensure accountability and economic efficiency for our stakeholders.
With consistent focus in these areas, we met independence criteria
almost one year early, and we meet all NYSE-listed public company
requirements for transparency.

To ensure continuing gains in this area, we created the independent

post, director-in-charge of executive sessions, which will be held on a
rotating, annual basis by an independent director, and will facilitate
executive meetings of the board’s independent directors.

Business Ethics
We uphold the highest ethical standards in the operation of our
company. We do the right, honest and ethical thing, always taking the
high road. We strive for consistent enforcement of compliance
regulations and are committed to providing a level playing field for all
our independent Distributors. Those who do not comply are
disciplined, suspended or terminated. We require annual ethics
training for all employees, worldwide.

Live Green
Through environmentally conscious initiatives, Live Green and the
3Rs – reduce, reuse and recycle – Herbalife focuses on ways to
protect our environment. We believe in taking personal responsibility
and in making decisions based not only on financial factors but also
on the social and environmental consequences of our activities.

Herbalife’s downtown Los Angeles office was created using recycled,

rapidly-renewable materials and has earned its Leadership in Energy
and Environmental Design (LEED®) certification for its
environmentally-friendly design. We earned credits for efforts in
Sustainable Sites, Water Efficiency, Energy and Atmosphere,
Materials and Resources and Indoor Environmental Quality.

Herbalife works on an ongoing basis to encourage its employees and

independent Distributors to ‘Live Green’ through a variety of
programs and education. These include car and vanpools, using
biodegradable and recycled materials, conservation, and reusing and
eliminating hazardous materials such as plastic bags and Styrofoam
cups.

Herbalife Family Foundation

We support the Herbalife Family Foundation (HFF) and its Casa
Herbalife program, which provides funding to improve nutrition to
charitable organizations taking care of children-at-risk around the
world. HFF also supports disaster relief efforts around the globe,
including raising funds to reconstruct damaged areas of communities
and help evacuate survivors.

Employee Wellness
We walk the talk – Herbalife® Inner Nutrition and Outer Nutrition
support a healthy, active lifestyle, and we strive to help our
employees get healthy and fit. From complimentary products to
lowering individual health insurance costs, we support and
encourage their efforts. Herbalife has been recognize
by Men’sFitness magazine as ‘One of the 15 Fittest Companies in
America.'
Controversies
In a West Virginia class action suit, Mey v. Herbalife International,
Inc., et al., the plaintiffs allege that some "telemarketing practices of
certain Herbalife International distributors violate the Telephone
Consumer Protection Act, or TCPA, and seeks to hold Herbalife
International vicariously liable for the practices of these distributors.
More specifically, the plaintiffs' complaint alleges that several of
Herbalife International's distributors used pre-recorded telephone
messages and autodialers to contact prospective customers in
violation of the TCPA's prohibition of such practices". Herbalife
managements insisted they have meritorious defences in both cases
and that in the West Virginia case, any such distributor actions also
went against Herbalife's own policies. Management also contends
that any adverse legal outcomes Herbalife might suffer would not
significantly affect their financial condition, particularly since they
have already set aside an amount that they "believe represents the
likely outcome of the resolution of these disputes".The case was
resolved with Herbalife and its distributors paying $7 million into a
fund for class members part of the suit. Herbalife International did not
acknowledge wrongdoing, or admit culpability for the actions of its
distributors.

Product controversies
Some of the original Herbalife weight loss products contained the
active ingredient Ma Huang or Sida cordifolia, two herbs
containing ephedrine alkaloids. Herbalife stopped using ephedrine in
its products in 2002 after several U.S. states banned supplements
containing botanical sources of ephedrine alkaloids. The U.S. Food
and Drug Administration banned supplements containing ephedra in
2004.
Scientific studies in 2007 by doctors at the University Hospital of Bern
in Switzerland and the Liver Unit of the Hadassah-Hebrew University
Medical Center in Israel found an association between consumption
of Herbalife products and hepatitis. In response, the Spanish Ministry
of Health issued an alert asking for caution in consuming Herbalife
products.Herbalife has stated they are cooperating fully with Spanish
authorities. In May 2008 the Fraud Discovery Institute, which claims
to be a consumer watchdog organisation, reported that laboratory
test results of Herbalife products showed lead levels in excess of
limits established by law in California under Proposition 65. The
Fraud Discovery Institute was founded by fraudulent
entrepreneur Barry Minkow, who served seven years in jail for stock
fraud, and since disclosed that his company was profiting from the
allegations by shorting Herbalife stock. Herbalife responded stating
its products met federal FDA requirements and released independent
lab tests proving the products did not exceed Proposition 65 limits.
On 10 May 2008 a suit was filed on behalf of a woman who
developed lead-related liver complaints that she claimed were a
reaction to a combination of Herbalife products. The suit was filed by
lawyer Christopher Grell, cofounder of the Dietary Supplement Safety
Committee and an associate of Barry Minkow. On 17 June 2008, the
suit was expanded to add distributors who had supplied the woman
with the Herbalife products, with Grell launching a website to offer
persons who believe they were harmed by Herbalife products the
chance of redress. In August 2008, Minkow retracted all accusations
against Herbalife and removed any mention of the company from his
web site.

Crazy Fox commercials

As of April 2008, a series of commercials featuring a large red
animated fox advertising home-based business opportunities have
been running on US television. The advertisements typically feature a
series of testimonials from actors playing individuals who have made
sums of money between $5,000 USD and $15,000 USD per month
as a result of participating in an undescribed business program. The
adverts direct viewers to a website that allows them to purchase a
"success kit". The kit also provides no information about how the
business opportunity works.
These adverts have been found to be run by independent Herbalife
distributors, as a method of recruiting new 'downline' distributors.
While it is not illegal, critics of this type of advertising prefer
advertisers to be up front about their company associations.
DISTRIBUTOR’S KIT
 •

Herbalife Formula 1 Shake Large 750g

Herbalife Formula 1

Herbalife's best selling weight management

shake, Herbalife formula one shake healthy
meal with up to 19 essential vitamins, minerals
and nutrients in Herbalife's shake powder. Five
delicious flavors that can help support weight
management.

Herbalife Instant Shake

• Herbalife formula 1 Herbalife instant

shake just add water Herbalife Another
example of Herbalife's diet shakes.
Just add water Herbalife shake with
great protein.

•
Herbalife Bulk & Muscle

• Herbalife Bulk & Muscle, increase

muscle mass with Herbalife weight
gain product.
Gain weight correctly with Herbalife's
Bulk & Muscle formula.

Herbalife Protein Powder

A fat-free protein supplement for hunger control

and healthy weight management with 5g of soy
and whey protein, and all 9 essential amino
acids. Herbalife protein effective diet protein
allows safe protein intake.

Herbalife Activated Fiber

Herbalife Activated Fiber absorb less fat and

promote healthy digestion with fiber
supplement dietary fibers, L-carnitine, sodium
choleate, citrus and oat. Herbalife Activated
Fiber quality fiber tablets.

Protein Bar Deluxe

Raise the Bar with this Protein-packed,

Indulgent and Guilt-Free Snack

Herbalife Multivitamin Formula 2

Herbalife multivitamin minerals cold

compressed with over 20 essential nutrients
and antioxidants, including folic acid, calcium
and iron. Herbalife cold compressed complex
multivitamin.
Herbalife Aloe Vera Concentrate

Herbal Aloe Vera drink delivers enzymes,

vitamins, minerals and amino acids in a
delicious citrus-flavored drink. Herbalife aloe
vera, Herbalife aloe drink helps support
Digestion and weight loss. Herbalife aloe
concentrate just add water for aloe
digestion support.

Herbalife 21 Day Colon Cleansing

Herbalife 21 day helps to support healthy

gastrointestinal function.

Herbalife Shaker Cup

Herbalife shaker cup when you order Herbalife,
don't forget to add the shaker to your order
make taking the shakes much easier.

Herbalife Womens Choice

Herbalife Womens Choice product helps

reduce the severity of perimenopausal
symptoms, such as hot flashes, moodiness,
irritability and sleepless nights. The natural
womens choice when dealing
with women perimenopausal symptoms.
Herbalife Body Contouring Creme

Herbalife has created a body contouring cream

that really works! After Using Herbalife body
buffing cream apply Herbalife body contouring
cream to help tighten and tone for an extra
boost while the inner nutrition goes to work on
weight loss and inch loss.

Herbalife Skin Activator

Herbalife Skin Activator cream is Herbalife's

premiere skin care product. Herbalife Skin
Activator helps to minimize the appearance of
fine lines. Using Herbalife Skin Activator along
with an Herbalife inner-nutrition plan
helpsboost your skin care results from the
inside..

Herbalife Day Lotion

An age-defying lotion with SPF 15 to protect

and moisturize skin.
Herbalife Eye Cream
Herbalife produced a luxurious, age-defying
lotion that smooths the skin and minimizes
neck, chest and cleavage wrinkles. Herbalife
Decolletage cream is a critical addition to your
over all ACE skin care system.

Herbalife Nourifusion Normal to Dry System

Herbalifes new nourifusion is outer nutrition just

like your body, your skin needs nourishment to
look its best and be healthy. MultiVitamin
Skincare keeps moisture in the skin, while
keeping out unhealthy toxins. Botanicals and
antioxidant vitamins A, C and E nourish skin for
good health.

Herbalife Skin Care System Normal to Oily

Herbalife's new Nourifusion is outer nutrition

just like your body, your skin needs
nourishment to look its best and be healthy.
MultiVitamin Skincare keeps moisture in the
skin, while keeping out unhealthy toxins. This
normal to oily system is loaded with Botanicals
and antioxidant vitamins A, C and E nourish
skin for good health.

Herbalife Toner Normal to Dry

Helps improve texture, tone and firmness,

Herbalife toner is designed to leave the skin
feeling clean, revitalized and non-greasy.

Herbalife Cleanser Normal to Dry

Helps improve texture, tone and firmness,

Herbalife toner is designed to leave the
skinfeeling clean, revitalized and non-greasy.

Herbalife Nourifusion Cleanser Normal to

Oily

Helps improve texture, tone and firmness,

Herbalife toner is designed to leave the skin
feeling clean, revitalized and non-greasy.
Herbalife Radiant C

Get adequate amounts of this super antioxidant

with this gentle scrub. Jojoba and beeswax
beads help smooth and polish.

Herbalife Radiant C Booster

Herbalife has harnessed the power of

antioxidant vitamin C to seal in skin’s moisture
with Herbalife Radiant C skin booster. This
emollient-rich gel feels silky as you apply.

Herbalife Body Lotion

Herbalife has harnessed the power of
antioxidant vitamin C to seal in skin’s moisture
with Herbalife Radiant C skin booster. This
emollient-rich gel feels silky as you apply.

Herbalife Body Buffing Scrub

Herbalife helps you reveal healthier-looking

skin, thighs, hips with jojoba beads, Herbalife
Body Buffing scrub and naturally exfoliate to
minimize dimpled skin
Herbalife Variety Pack

Herbalife helps you reveal healthier-looking

skin, thighs, hips with jojoba beads, Herbalife
Body Buffing scrub and naturally exfoliate to
minimize dimpled skin

Herbalife Aloe Body Wash

Herbalife helps you feel fresh and clean, reval
a freash aloe scent after showering.

Herbalife Soothing Spray

Herbalife helps you sooth your skin with a
Herbal aloe soothing spray, great for sun burn
and minor irritations.

Herbalife Herbal Aloe Bath Body Bar

Herbalife helps you reveal healthier-looking

skin, thighs, hips with jojoba beads, Herbalife
Body Buffing scrub and naturally exfoliate to
minimize dimpled skin

Herbalife Assorted Shakes

Take an Herbalife shake on the go with these

easy to carry travel shakes. Herbalife assorted
shakes flavors in packet form allows you to
sample different flavors of Herbalife number
one selling meal replacement shake.
Herbalife Shampoo

Help repair damage from the daily stresses

your hair is exposed to with an aloe-based
shampoo for normal to dry hair.

Herbalife Aloe Hand Lotion

Herbalife helps you reveal healthier-looking

skin, thighs, hips with jojoba beads, Herbalife
Body Buffing scrub and naturally exfoliate to
minimize dimpled skin

Herbalife Aloe Soothing Gel

Herbalife Aloe Gel helps you releave all sorts of

skin irratations, sun burn, diaper rash, dry body
areas.
 Herbalife Aloe Hand Cream

Herbalife Aloe Hand Cream helps you relieve

dry irritated skin especially after over washing
your hands. Restore with aloe, grapeseed oil
and vegetable glycerin.

Herbalife Aloe Conditioner

Herbalife Aloe Conditioner helps you condition

hair without weighing it down, while
counteracting the environmental stressors hair
is exposed to each day. Safe and gentle for the
whole family. Use with Herbal Aloe Everyday
Shampoo for best results

RESEARCH METHODOLOGY
Research can be defined as the search for knowledge or any systematic
investigation to establish facts. The primary purpose for applied
research (as opposed to basic research) is discovering, interpreting, and
the development of methods and systems for the advancement of
human knowledge on a wide variety of scientific matters of our world and
the universe. Research can use the scientific method, but need not do so.

Research is, thus, an original contribution to the existing stock of

knowledge making for its advancement.

RESEARCH PROCESSES
 Scientific Research
 Historical Research

Scientific Research
Generally, research is understood to follow a certain structural process.
Though step order may vary depending on the subject matter and
researcher, the following steps are usually part of most formal research,
both basic and applied:

 Formation of the topic

 Hypothesis
 Conceptual definitions
 Operational definition
 Gathering of data
 Analysis of data
 Test, revising of hypothesis
 Conclusion, iteration if necessary

A common misunderstanding is that by this method a hypothesis can be

proven or tested. Generally a hypothesis is used to make predictions that
can be tested by observing the outcome of an experiment. If the outcome is
inconsistent with the hypothesis, then the hypothesis is rejected. However,
if the outcome is consistent with the hypothesis, the experiment is said to
support the hypothesis. This careful language is used because researchers
recognize that alternative hypotheses may also be consistent with the
observations. In this sense, a hypothesis can never be proven, but rather
only supported by surviving rounds of scientific testing and, eventually,
becoming widely thought of as true (or better, predictive), but this is not the
same as it having been proven. A useful hypothesis allows prediction and
within the accuracy of observation of the time, the prediction will be verified.
As the accuracy of observation improves with time, the hypothesis may no
longer provide an accurate prediction. In this case a new hypothesis will
arise to challenge the old, and to the extent that the new hypothesis makes
more accurate predictions than the old, the new will supplant it.

Historical Research
The historical method comprises the techniques and guidelines by which
historians use historical sources and other evidence to research and then
to write history. There are various history guidelines commonly used by
historians in their work, under the headings of external criticism, internal
criticism, and synthesis. This includes higher criticism and textual criticism.
Though items may vary depending on the subject matter and researcher,
the following concepts are usually part of most formal historical research:

 Identification of origin date

 Evidence of localization
 Recognition of authorship
 Analysis of data
 Identification of integrity
 Attribution of credibility

to digout something and to unearth something or unveal something

HYPOTHESIS
A hypothesis is a proposed explanation for an observable phenomenon.
The term derives from the Greek, ὑποτιθέναι – hypotithenai meaning "to
put under" or "to suppose." For a hypothesis to be put forward as
a scientific hypothesis, the scientific method requires that one can test it.
Scientists generally base scientific hypotheses on
previous observations that cannot satisfactorily be explained with the
available scientific theories. Even though the words "hypothesis" and
"theory" are often used synonymously in common and informal usage, a
scientific hypothesis is not the same as a scientific theory – although the
difference is sometimes more one of degree than of principle.
A working hypothesis is a provisionally accepted hypothesis.
In a related but distinguishable usage, the term hypothesis is used for
the antecedent of a proposition; thus in proposition "If P,
then Q", P denotes the hypothesis (or antecedent); Q can be called
a consequent. P is the assumption in a (possibly counterfactual) What
If question.
The adjective hypothetical, meaning "having the nature of a hypothesis," or
"being assumed to exist as an immediate consequence of a hypothesis,"
can refer to any of these meanings of the term "hypothesis."

SCIENTIFIC HYPOTHESIS

People refer to a trial solution to a problem as a hypothesis — often called

an "educated guess" because it provides a suggested solution based on
the evidence. Experimenters may test and reject several hypotheses before
solving the problem.
According to Schick and Vaughn, researchers weighing up alternative
hypotheses may take into consideration:

 Testability (compare falsifiability as discussed above)

 Simplicity (as in the application of "Occam's razor", discouraging the
postulation of excessive numbers of entities)
 Scope – the apparent application of the hypothesis to multiple cases
of phenomena
 Fruitfulness – the prospect that a hypothesis may explain further
phenomena in the future
 Conservatism – the degree of "fit" with existing recognized
knowledge-systems
 COMPETITION
 AVON
 AMWAY
 ORIFLAME
 TUPPERWARE
 MODICARE
 AVON

Avon Products is a US cosmetics, perfume and toy seller with markets in

over 140 countries across the world and sales of $9.9 billion worldwide as
of 2007.

Avon Products is a multi-level marketing company. Traditionally a direct

marketing company, Avon's fastest growing markets today are in China and
Russia. The company's chairman and CEO is Andrea Jung, who was
promoted to the position in 1999. Avon's product lines include makeup,
bath and skin lotions, anti-aging cream, perfumes, as well as jewelry and
clothing.
Avon uses both door-to-door sales people ("Avon ladies," primarily and a
growing number of men) and catalogs to advertise its products. In some
markets, Avon products are sold primarily in retail stores (most notably
China, which had banned all door-to-door selling before mid-December
2006).

AMWAY

Amway is a direct selling company and manufacturer that uses multi-level

marketing to sell a variety of products, primarily in the health, beauty, and
home care markets. Amway was founded in 1959 by Jay Van
Andel and Richard DeVos. Based in Ada, Michigan, the company and
family of companies under Alticor reported sales growth of 2.3%,
reaching US$8.4 billion for the year ending December 31, 2009. Its product
lines include home care products, personal care products, jewelry,
electronics, Nutrilite dietary supplements, water purifiers, air purifiers,
insurance and cosmetics. In 2004, Health & Beauty products accounted for
nearly 60% of worldwide sales. Amway conducts business through a
number of affiliated companies in more than ninety countries and territories
around the world. It is ranked by Forbes as one of the largest private
companies in the United States and by Deloitte as one of the largest
retailers in the world
 ORIFLAME

Oriflame Cosmetics S.A. (Luxembourg) (OMX: ORI SDB) is

a cosmetics group, founded in 1967 in Sweden by the brothers Jonas af
Jochnick and Robert af Jochnick. The company sells skin care, cosmetic
products and other related products through an independent sales force of
over 2.2 million people. In the year 2006, the company
reached revenues of € 918 million, and reported it had approximately 5,610
employees, 600 products sold in 59 countries, and production facilities
in Poland, India, Sweden, China, and Russia. In 2007, Oriflame relocated
its largest global support office from Waterloo, Belgium, to Stockholm,
Sweden. The Oriflame Group's global headquarter is located in
Luxembourg with a trading branch in Fribourg, Switzerland. Oriflame is
publicly traded and listed on the Nordic Exchange.

Oriflame is today one of the fastest growing beauty companies selling

direct. We are present in 62 countries, of which we are the market leader in
more than half.We offer a wide range of high-quality beauty products as
well as a unique opportunity to join our sales force and start your own
business.
 TUPPERWARE

Tupperware is the name of a home products line that includes preparation,

storage, and serving products for the kitchen and home, which were first
introduced to the public in 1946.
Tupperware develops, manufactures, and internationally distributes its
products by its parent company Tupperware Brands Corporation and it is
marketed by means of direct sales through an independent sales force of
approximately 1.9 million consultants. Tupperware is a wholly
owned subsidiary of Tupperware Brands Corporation.

MODICARE
Modicare, the homespun direct-selling company, has expanded its
cosmetic, personal, home and automobile care range with 30 new
products. It has re-entered the food and beverages category with a new tea
brand called Fruit of the Earth.

The new range includes lipsticks, nail enamels, eyeliners, toothpaste, hair
oil, razors, home and kitchen cleaners, dish- and car-washing liquids,
laundry powder and so on. The company now has over 200 products to
offer.

The launch is being backed up by an aggressive ‘product introduction’

campaign in major cities. Modicare Chairman KK Modi claims that over
16,000 people (mostly its network members) have paid Rs 100 each to
participate. The biggest rush is in Bangalore where 12,000 people have
signed up, followed by Kolkata where 3,000 will be in attendance. At each
of the two cities, the company has hired a stadium to accommodate the
crowd.

Direct selling has taken deep roots in the country. The market leader is
Amway with a wide range of personal care products. Others in the business
include Mary Kay and Avon. Though it was one of the first to enter the
business, Modicare lost market share to new players.

Most of today’s biggest MLM companies in the world are from the West.
Modicare, founded in 1932 by Rai Bahadur Gujarmal Modi of India has a
network of over 150,000 active members today, and has a monthly growth
of 20%.
.

SUGGESTIONS

As a student of Bachelor in Management Studies, here I wanted to express

some suggestions,which I think if implemented will result in the benefit of
the company.

 Amway, Avon, Oriflame and other top multi level companies has won
various awards till the date, but these awards would not have been
possible without its consultants.Therefore, companies should conduct
periodic award functions and recognition programs for its consultants
in order to motivate them. Such programs can be very useful to
 encourage the consultants for making more and more customers and
consultants for the company.

 The consultants share an emotional bond with the company and the
staff. The company should communicate to the consultants about the
genuine reasons behind company decisions and policies affecting the
consultants in any manner. This would build confidence among the
consultants on the part of companies, ultimately resulting in increased
retention and more active consultants. It would give way to new
standards of corporate transparency.

 The company should start a Consultant Suggestion Scheme (CSS),

apart from its usual feedback boxes placed at the company’s offices.
The CSS should invite suggestions as well as their implementation
procedures from the consultants with regards to improving any of the
company activities. The entries should be sincerely analysed once a
month or as per convenience and rewards should be declared for
those consultants giving innovative and productive ideas.This would
make the consultants feel that the company listens to them and
strengthen their bonds and respect towards the company.

 The attendance for the New Consultant Orientation (NCO) program

should be made mandatory. This would motivate the newly
sponsored person to attend NCO. Attending NCO would give them a
clear picture of the opportunity and increase the retention rate of the
company and more of active consultants.

 The companies should conduct a well designed, nation wide PR

campaign of how the business of the company is growing. This would
help in making new consultants and also in bringing the inactive
consultants back to business.
 REFERENCES

WEBLIOGRAPHY

http://www.pyramidschemealert.org

http://www.falseprofits.com

http://www.skepdic.com/mlm.html

http://www.mlm.com/

www.mlm-thetruth.com/

www.networkmarketingnow.com/

www.mlmknowhow.com/

www.amway.com/

www.oriflame.co.in/

www.in.avon.com/

www.hotfrog.in

www.avonindia.com/

www.antya.com/detail/AVON-India/1722
www.modicare.com/

www.antya.com/detail/Modicare/17215

www.tradeindia.com/Seller-2645717...458.../MODICARE.html

www.olx.in/q/modicare/c-227

www.business-standard.com/india/news/modicare.../371513

www.herbalife.com

www.healthylifenow.com/

www.myherbalife.com

www.tupperware.com

www.tupperwareindia.com

www.olx.in

www.amazon.com/books-

www.consumerLab.com:.

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