Read this paragraph from a page on Usana's website.
The income you receive from USANA will be in direct proportion to your ability to retail USANA's products to your customers, as well as your ability to build an organization of Associates who, like you, retail to their customers and build an organization of Associates.
Now read the definiton of pyramid scheme from about.com.
Typically, new recruits pay a sum of money to join the "program" and become a distributor of a product or service, and are told that they'll make money based on the number of new recruits they in turn bring in. The basic idea is that the higher up on the pyramid you are, the more money you'll make.
You have to buy products to get into Usana, which is the same as paying to get in, because there is no way to guarantee that people are buying products for their own good. If people are told they can make money by buying these products, they will.
Notice where I've added emphasis, in Usana you're paid to recruit, same as in a pyramid scheme. But Usana retails a product, right? Read on.
Now the FTC's
Pyramid schemes now come in so many forms that they may be difficult to recognize immediately. However, they all share one overriding characteristic. They promise consumers or investors large profits based primarily on recruiting others to join their program, not based on profits from any real investment or real sale of goods to the public. Some schemes may purport to sell a product, but they often simply use the product to hide their pyramid structure. There are two tell-tale signs that a product is simply being used to disguise a pyramid scheme: inventory loading and a lack of retail sales. Inventory loading occurs when a company's incentive program forces recruits to buy more products than they could ever sell, often at inflated prices. If this occurs throughout the company's distribution system, the people at the top of the pyramid reap substantial profits, even though little or no product moves to market. The people at the bottom make excessive payments for inventory that simply accumulates in their basements.
Again, Usana's payment for recruiting matches up with the definition of pyramid scheme. And now we've covered pyramid schemes that have a product. The product is a disguise. The way to verify this is that the prices are inflated, and new recruits are forced to buy them. You have to buy 100 pts worth of Usana product every 4 weeks or else you don't get any commision. Usana products are inflated, just check ebay, you will find the same exact products from Usana at a much lower price.
Okay, but MLM's can look a lot like pyramid schemes right? We haven't shown for sure that Usana isn't a legit MLM. Well read the next quote from FTC.
Some people confuse pyramid and Ponzi schemes with legitimate multilevel marketing.... MLM's may pay commissions to a long string of distributors, but these commission are paid for real retail sales, not for new recruits.
Usana claims it's not a pyramid scheme, but they openly admit they pay distributors in proportion to their ability to build an organization. They pay you to recruit, which according to that last sentence from the FTC, is the quality that distringuishes MLM from pyramid schemes.
2 comments:
If this is the extent of your investigative efforts to show some negative side of Usana, then your efforts are quite poor. It’s really a shame that you have enough energy to create a blog and post articles that lack the proper research and analysis to help others form a well rounded opinion of their own.
It’s pretty clear from your post that the person who shared this company with you has not clearly explained Usana. That’s not really your fault though so I can understand where your narrow minded opinion comes from.
As you pointed out in your reference of Usana’s website, the very first line begins with “The income you receive from USANA will be in direct proportion to your ability to retail USANA's products to your customers…” which does absolutely agree with the FTC’s opinion of a legitimate MLM. And using that same FTC statement, they say, “MLM's may pay commissions to a long string of distributors” which should already clue you in that even the FTC understands that a legitimate MLM involves recruiting distributors.
Now, you want people to focus on the idea that Usana pays for recruiting, but that’s not a complete picture. As the Usana statement reads “build an organization of Associates who, like you, retail to their customers”. The emphasis you should place is on the last part that says “like you, retail to their customers”. With Usana, an Independent Associate does not get paid to recruit, they earn commissions on sale volume. The more you sell, the more you earn. Likewise, the more your business team sells, the more your business team earns. Yes, the idea is absolutely to recruit individuals who turn around and not only share this awesome product with their friends, family, and anyone else they come in contact, but also find others who want to create their own businesses. The power of network marketing is exactly that, the network. But again, the money in Usana is made on the sales volume, not the recruiting.
Can a person with little integrity turn a profit by solely focusing on recruiting associates? The answer unfortunately is yes, but not much, and not for long, because one of a few things will eventually happen. The person will ultimately run out of recruits, most likely because all the people they ever recruited left the company because there was no one to support them, show them how to grow a business the right way, or help understand why they would even want to continue. The unethical recruiter would lose credibility, which means they would lose associates, lose customers, and eventually move on to another “opportunity”.
These unethical people exist in any business model, whether MLM, the traditional corporate world (see Enron, WorldCom, and recently mortgage lenders), or even government. So before you go bashing the entire Usana organization because one individual did a crappy job of showing you the right way to build a successful business, try to do a bit more investigative work. At least, go out of your way to highlight their shortcomings and not the entire company which has won awards for the compensation model used.
In fact, if you have the energy to go so far and create this blog, it tells me you at least care to share with the world your perspective. I invite you to put that energy to work and join a team who can support you, teach you how to grow your business, and share the integrity of Usana products with the world. We would welcome you and your passion for doing things the right way. Contact me and we'll get you on the right path.
“MLM's may pay commissions to a long string of distributors” does not imply that MLM's are allowed to pay for recruiting. It only states that for retail sales, a distributer and his/her upline can receive commission. When an MLM pays for recruiting that fits the definition of pyramid scheme.
Secondly, I'm sorry you completely misinterpretted the aim of my blog. I am not "bashing the entire Usana organization," I am attempting to expose why Usana has dropped the ball in preventing unscrupulous individuals, which you admit exist, from turning it into a pyramid scheme. You might lack the vision to see this, but Usana profits from such individuals. And unless awareness is raised and action is taken, they will do nothing to prevent these people from using Usana to run their pyramid scheme. You cannot say that Usana shouldn't be held responsible. They can prevent this, but they allow it because it profits them.
If Usana did not pay for recruiting, it could still function as an MLM and would then have no such qualities of a pyramid scheme. There is no way to justify paying for recruitment, or for that matter to charge for membership. It is solely a tactic to expand their business without concern for sustainability or for Usana business "investors." (Those who put in their "investment" by joining) Usana knows this is what defines a pyramid scheme, that is why they make you buy the product instead of paying a fee for business opp. But that is just a disguise, and everyone knows it. You know very well as I do that "sales volume" includes this recruitment.
I don't need extensive research to know this. It is plain common sense. I find something that is wrong, that doesn't need to be, and I stand my ground on that. Others have done plenty of research, a site I linked to in another blog shows that what I have stated earlier is only the tip of the ice berg. A majority of income in Usana comes from recruitment. This can be seen from the vast ammount of Usana product being sold on ebay, surely because people bought the product only for the business opp, then tried to make up their losses by selling the product over ebay. They certainly aren't retailing it on ebay, because it sells for something like 60% of the distributor price.
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