Looks enough like a pyramid for me. Regardless, they will tell you that there is a key difference. They will emphasize the fact that there is a left and right side. What this supposedly does is to prevent someone on top from gaining the most money without doing any work. So what they are saying is that this prevents one person from taking advantage of entire other levels of people, because you wouldn't be able to simply get one person to do all the work for you. You would need to make sure both sides are growing, or else you don't get paid.
What this does, in fact, is it serves to convolute the payment system. The compensation plan is so bizzarely convoluted with points and downlines and bonuses that I was told by a Usana rep that it was impossible to calculate. She said this when I was trying to get answers from her in order to create an example of how much money it was possible or reasonable to make. Well of course it is possible, Usana has to calculate it in order to send out their paychecks. But it is so convoluted that an average person will have a difficult time trying to understand it all. And I believe Usana uses this to veil their truly pyramidal nature.
So there are two sides. This doesn't prevent anything. It actually only makes it harder for new recruits. Well it does prevent someone from getting paid if they just bring in one successful person. But if they bring in two, they get everything. So you can see why this hurts newer members most of all. Because they do not have enough members below them to balance the sides. Simply by having more members below you, this issue becomes irrelevant. If you have a larger number, it is easier to even it out. 100 members on one side and 99 on the other gives you 99% of your potential earnings while 2 on one side and 1 on the other would only give you 50%! So it is quite clear that this helps higher members to take advantage of lower members. And because a majority of members are lower members, it gives more money back to the company than they would normally have to pay out.
Now enough talking about why Usana memers are wrong to say that Usana isn't a pyramid scheme. Let's look at a simple example of why it is a pyramid. At Usana meetings, and among Usana reps, there is a much higher emphasis on recruiting. Which they call building a team, because they hate to admit they are recruiting. That's what they say bad companies would do. They claim not to be a pyramid because they sell a product, however this is very much down-played at the meetings. It's all about recruiting! They will tell you that that is how to reach a higher rank and how to make real money. They only really mention the retailing of products when these doubts are raised.
So where does all this recruiting get you? To recruit is to sell an idea. You sell this idea to someone who trusts you, that they will become a part of this business and be able to make money. Well there is also an emphasis at Usana on duplication, so that means that if you are making money by recruiting, people who you recruit (your downlines) should learn from you, and therefore make money by recruiting. So now we have a situation where you've made money by bringing in a few friends. And your friends have yet to make the money back that they've spent to join Usana. So what do they do? They follow your example, as Usana says they should, and they recruit their friends.
So let's say all of you are buying pro-pack in order to join Usana (you have to buy a "pack" of supplements to join.. and keep buying them to stay in) Pro-pack I believe costs $1400. So you were down by $1400 when you joined, but now you've made it all back and maybe a little extra by recruiting your friends. So now they are all down by $1400. I don't know exactly how many friends you would have to recruit to make back the investment, because of the bizzare compensation plan, but for the sake of simplicity and optimism, let's say 2, which I know to be less than the actual number. So now you have 2 friends who are down $1400 and you are now at 0. The outstanding investment is now totalled at minus $2800. So your friends, as I said, follow your example. They each recruit 2. Now there are 4 friends-of-friends who are out $1400, totalling $5600, while you are starting to see a profit. At each level, the unpaid investment keeps on growing. And when you give up at Usana, you don't get your investment back. So this shows that a larger number must always fail than those who succeed. Because one person's returned investment requires more than one person's new investment. And this is why pyramids fail. Except for those who are on top, who really are crooks. Even if you are a crook and if you want to be the person on top in Usana, I would tend to think it's already too late.
Still not convinced it is a pyramid scheme? Take a look at this excerpt from the Federal Trade Commision's website:
If a plan offers to pay commissions for recruiting new distributors, watch out! Most states outlaw this practice, which is known as "pyramiding." State laws against pyramiding say that a multilevel marketing plan should only pay commissions for retail sales of goods or services, not for recruiting new distributors.
Why is pyramiding prohibited? 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 -- lose their money.
...
consider these seven tips when you make your decision:
1. Avoid any plan that includes commissions for recruiting additional distributors. It may be an illegal pyramid.
2. Beware of plans that ask new distributors to purchase expensive inventory. These plans can collapse quickly -- and also may be thinly-disguised pyramids.
3. Be cautious of plans that claim you will make money through continued growth of your "downline" -- the commissions on sales made by new distributors you recruit -- rather than through sales of products you make yourself.
4. Beware of plans that claim to sell miracle products or promise enormous earnings. Just because a promoter of a plan makes a claim doesn't mean it's true! Ask the promoter of the plan to substantiate claims with hard evidence.
5. Beware of shills -- "decoy" references paid by a plan's promoter to describe their fictional success in earning money through the plan.
6. Don't pay or sign any contracts in an "opportunity meeting" or any other high-pressure situation. Insist on taking your time to think over a decision to join. Talk it over with your spouse, a knowledgeable friend, an accountant or lawyer.
7. Do your homework! Check with your local Better Business Bureau and state Attorney General about any plan you're considering -- especially when the claims about the product or your potential earnings seem too good to be true.
Usana is a great candidate for 1, 2, 3 and 6. Also note how much emphasis is placed against MLM's that pay commission on recruiting. You've been warned!
18 comments:
Pyramid Schemes Vs. Legitimate Network Marketing
By Rosie Spiegel
When first approached about network marketing, many people erroneously associate this professional form of business development with the illegal pyramid schemes. The similarities and differences between the two must be understood before any skeptic can open his or her mind to this viable method for building a lucrative asset that is attainable by the serious entrepreneur.
In all business and government structures, the pyramid is the foundation. It contains the hierarchy of and indeed shapes the role of all who participate in the organization. Whether it is the president of the United States and his vice president, Congress, and all the way down to the local government employees, or Microsoft, where one guy sits on the top, followed by his vice presidents, all the way down to the mail clerks, the pyramid structure is ubiquitous. The first thing we should agree on is that there is no inherent problem with the structure of a pyramid.
In government and in business there are several features of the pyramid that are found consistently:
1. The further away from the pinnacle, the less power an individual has, and the less money he or she makes.
2. There is usually one person on the top and that position is typically unattainable to others in the organization. If someone lower down in the structure does assume that top position, it is still reserved for one person at a time.
3. Normally those at the top like to stay at the top. Those at the top may have incentives to move up higher in the organization, but there is typically no incentive for those higher up to help advance those who are lower down to surpass them. The order of the hierarchy is somewhat sacred.
4. At each level in the organization job titles go along with salaries. Normally a person cannot assume more money or more power without the “permission” of someone above granting those advancements. Normally, people have little control over advancing. One cannot typically “self-advance.”
Getting back to pyramid schemes versus legitimate network marketing, the contrasts and similarities need to be examined. One of the bad images of pyramid schemes stems from the fact that if there is no viable product, or just money is being moved around, the people at the bottom really do get a raw deal. If only money is being passed around, by the time an individual rises to the top, the money may simply have run out. This is bogus, illegal and frowned upon by the Direct Sellers Association, and the Federal Trade Commission. (Both the DSA and the FTC oversee and ordain legitimate network marketing companies.)
In a good network marketing company, like Usana Health Sciences, the products are of such high quality, they stand on their own. In other words, the company makes significant revenue from non-Associate product consumption. Said another way, the product is so good that people who aren't making money sharing the products with other people are consuming them for their own benefit.
Dr. Charles King, MBA from Harvard, economics instructor, teaching Network Marketing at the University of Illinois has said that network marketing is the fairest form of all business models. Although the structure is similar to what is commonly found in business and government, the business model of network marketing is opposite in many ways to a typical corporation. In the Usana binary compensation plan, for example, the following features distinguish it from a traditional corporation as we know it:
Each associate can surpass the level of anybody who came into the organization before him or her, if the new associate's performance is greater than the one already in the business.
1. Each new associate is encouraged to become a CEO, or the top of his pyramid, by the encouragement, leadership, and training of those in his support team. Those above the new associate in the organization are motivated to elevate the level of everyone who is newer in the business.
2. There is no glass ceiling, no job title with a fixed and limited salary attached to it. The system does represent financial freedom because the model for business growth and the ability to generate income are inherently limitless. The rewards, incentives, acknowledgments, etc. at every level above the new associate, all the way to Usana corporate, are authentic, on-going, effective, and inspiring.
3. There are no barriers such as race, education, gender, previous experience, etc. Anyone who does the work gets to the top. (Robert Kiyosaki, author of Rich Dad, Poor Dad, and of The Business School for Helping Other People has been a strong advocate of network marketing.He tells a story of being the top salesman at Xerox, but was not promoted because he lacked a college degree.)
4. There is no single top position. There is unlimited room for these so-called top positions.
5. People can “self-advance.” We give ourselves a raise based on performance, not on politics, nepotism, returning favors, or anything else.
6. No one's earnings are limited to his or her own efforts. Through the process of leveraging ourselves, the bulk of our commissions comes from other people like you and me, who want a better life. It is a business of teaching other people to teach other people, to teach other people, etc. It is an ethical, high-spirited, method of distribution and compensation.
Network marketing represents what we all crave: financial freedom, time freedom, and particularly with a company like Usana, optimal health to enjoy the other two. The opportunities for leadership and self-development are as great as the chance to make a lot of money. Whether or not you decide that this is for you, it is hard to beat this model for building an asset that will pay you over and over. Network marketing makes sense; it is the only viable model for creating financial freedom for the average person.
Michael Ricketts
michaelricketts@bigpond.com
www.usana_vitamins.usana.com
"In a good network marketing company, like Usana Health Sciences, the products are of such high quality, they stand on their own. In other words, the company makes significant revenue from non-Associate product consumption. Said another way, the product is so good that people who aren't making money sharing the products with other people are consuming them for their own benefit."
Unfortunately, a majority of the products are bought by Usana reps. In addition, the quality of Usana's products does not justify its high price. Competing products of a similar caliber go for much lower prices.
Here is an example of conflicting statements coming from Usana. When accused of being a pyramid scam, Usana members may refute by mentioning that a significant profit comes from pure sales. However, members are advised to focus on recruiting rather than sales during training.
I think it's necessary to mention that pyramid schemes are not always easily distinguished from legit network marketing companies under the law. What is happening at Usana is a de facto pyramid. The business is not set up in such a way that it has to be a pyramid to survive. But it functions as one. Usana doesn't employ safeguards to prevent itself from functioning as a pyramid. In short, Usana itself is not sponsoring a pyramid, but rather condoning and profiting from it. So it is easy for a Usana rep to demonstrate that Usana isn't set up to be a pyramid, but don't be fooled. That doesn't mean it doesn't function as one.
A significant profit comes from USANAs sales to Distributors. In order to remain commission qualified Distributors are required to make a minimum monthly purchase (MMP). Distributors are not awarded commissions for this MMP which means its all profit for USANA. The laughable thing is that Distributors will tell you that there's no MMP to be a Distributor, but they neglect to mention that there is a MMP to make commissions.
So are you saying then that a person could stop buying from Usana but continue their membership? But only by buying the MMP can they receive payment? That's pretty tricky. Chalk one more deceptive technique up then.
You know, at all the meetings I went to, I didn't hear anything about the fact that you're supposed to purchase over $100 worth of Usana stuff monthly. They made it sound like you only had to buy once. It wasn't until the word "autoship" came up at a training (which I believe was meant for people who already joined) and then I grew suspicious. Later I found out from a friend exactly what it was. And I know that at any moment they would've gladly taken my money to join Usana, knowing I was unaware of this. The nerve!
Unless you're paying for the required MMP somehow you will receive no commissions from USANA. You can take it yourself or re-sell it but you'll make no commission off of it. This is a good way for USANA to get around one of the Pyramid Scheme warnings. One of the warning is that if you're required to pay to play it could be a Pyramid Scheme. With USANA you don't have to pay to play because you can still be a Distributor without making any purchases yourself but without your MMP you'll make no commissions no matter how large your down-line is. If you're only recruiting for your down-line and not retailing any product then you're purchasing it yourself because everyone in your down-line is going to have to make the same MMP if they're hoping to make commissions themselves. Think about how fast this could add profit to USANA. Every time a distributor is added to their scheme who's hoping to make money they're getting somewhere around $100 every 28 days from that person.
And that must be where the idea of residual income comes from. As I recall, I was told that you make $40 for signing up two people. So Usana makes $200 and pays you back $40. Now it gets a bit confusing trying to figure out how much Usana gets and how much they pay out to each level in your upline. But Usana is making quite a profit while its customer-distributors only get Usana products in return, regardless of whether they want it. In other words it is an involuntary purchase. That must be bought in order to participate in the business.. So what you are really buying is the right to participate. And that is the essence of a pyramid scheme.
Felt like responding to one of the comments from the article Michael Ricketts posted
"In a good network marketing company, like Usana Health Sciences, the products are of such high quality, they stand on their own. In other words, the company makes significant revenue from non-Associate product consumption. Said another way, the product is so good that people who aren't making money sharing the products with other people are consuming them for their own benefit."
Almost 90% of USANAs revenue is from Distributor purchases not retail sales. Their product is also lacking in any verified proof that it is of superior quality to cheaper brands available on the market.
I knew it! Well I noticed most of the fliers and magazines that said they were "the best" of nutritional supplements were editorial reviews by individual authors. They didn't seem to be too well established. Which means Usana could've picked somebody off the street and gave them 50 bucks to write something saying they're cool for 10 years in a row.
That seems to be what happened. Read the comment posted here at the Scam.com forum on October 9th, 2008.
https://me.yahoo.com/a/UaJ3gUczzIw849Sn73mDe_8_Hivsm.87YVIVPxB0n_X8DPesa6E-
Do you have an e-mail address where you can be contacted? Even if its just one you created for this blog. I'd like to hear more about the meetings you've gone too.
Yes I do actually. I can be contacted at usanareport@yahoo.com. Where can I find the forum post?
You can find the post in this forum
http://www.scam.com/showthread.php?t=144&page=9
It is a very recent post - this past October 9th - and it is quite long covering a number of issues.
So according to that post, they paid for their inclusion to the PDR and they are not certified by the USP. They're unsurprisingly number 1 in a book written partly by members of their own corporation. Motive for making them #1 in the book to other members could possibly be to profit from Usana distributers buying the book to substantiate their claims about Usana. Wow. So much for Usana's claims of superiority, and their justification of their higher prices.
Sounds like someone likes their 9-5 job.. good for you. Let other people venture into the avenues of their choice. This has been a blessing in many people's lives.
Looks like someone has done a lot of research into Illegal Pyramid Scheme and very less on USANA company itself.
USANA product had saved many lives and reliefs much pain from the people I know.
The leaders in USANA has changed my life completely in many different aspect.
If you have the time to post this blog on the net, why not spend 5 minutes with any of the USANA reps who actually know everything (talk to a Gold Director and above); you'd appreciate what they have to share and they'll answer all of your questions/objections.
And I agree with you, Illegal Pyramid Scheme companies should be terminated, they're ruining the image of USANA and Network Marketing Industry as the whole.
But please, if you love your 9-5 job, let others dream and grow after their initial education. Just because you stop learning, you dont have to drag others with you.
There is no such thing as "Pyramid Scheme"! It is your lack of knowledge on the subject! Your misunderstanding of the terminology is what has you confused!
See: Pyramid Structure ( The World Over)
President - CEO (Top of the pyramid)
Executives - Executives (Second level of pyramid)
Managers - managers (Third Level of the pyramid)
Employees - Employees (Fourth Level of the pyramid)
Every government, business, or other entities has this structure!
People who fall for nonsense are typically those who are conditioned
not to think for themselves.
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