Thanks for the tip, Walter.
While the "500-page critique" sent to the Securities and Exchange Commission has some questionable statements by the authors, there are three tidbits reported in the Wall St Journal 3.16.07 that are worth noting:
"1. According to The Journal, about 86 percent of USANA's revenue comes from sales to its 153,000 associates. Only 14 percent comes from sales to customers who do not sell it to others. (ital added-kk)As to #1, nothing speaks more clearly to the urgent need for an aggressive CUSTOMER ACQUISITION program than those numbers. AOL/Cable TV type regular customers. If it appears that the only people who think our products are good enough to buy are those who sell them, what does that tell the world?
"2. As of the end of 2005, only 37 percent of USANA's associates had ever earned a commission, according to the company's latest figures.
"3. Among those who had been paid, the figures show, 87 percent didn't earn enough to cover the $116 they have to purchase or refer each month to qualify for commissions."
As to #2, how can we keep selling the business as "easy" and "anyone can do it" when the great majority (63% in the company in this case) have never even earned a commission?
In #3, the lie of the easy money hype stands naked: 87% of those signed up never earn enough to cover the monthly required nut of $116.
Btw, the numbers are similar or worse for all the companies whose stats are public. Yet the hype machine churns on, until the next company's numbers are exposed to the world.
Meanwhile, the great majority who came in with high hopes disappear from the ranks, most never to return because of the realities they experience, exposed above.
My question to you: What would you suggest USANA's president, Dave Wentz, do regarding these three items? (There's other information in the article, but focus your comments on the above three findings, OK?)
P.S. Most people know that USANA's products have helped many people. So it's not the products.
---
Yes, of course I have something to help you amass a customer base.
30 comments :
Scary thought on point #3: What if the company actually needs the revolving 87% who lose money every month in order to be a profitable business? In other words, if they only recruited the 13% who produce, the company could not survive? If so, then the whole company future actually depends on the massive failure rate of associates. Not good.
glennjaffas@prepaidlegal.com
I can't speak for others. I do know that my own checks with Usana run between $400.00 and $2200.00 per week. Our business has 2 times more customers than we do associates, but I consider my associates to be customers as well, because many of them signed on simply by ordering enough as customers to make activating a business center worthwhile.
I do know that Usana makes no secret of the average income earned by associates worldwide - this number is published everywhere in its literature. None of this is done in a corner. I subscribe to the New School of "No Promises, No Problems" and look for people who can love the product and share it with their own hot button. But it saddens me that my own company is not immune to the industry-wide infection.
Chris DeSantis
Utah Weight Loss & Natural Hormone Clinic
On these issues, I tend to think USANA has no serious concerns.
Why?
Because we don't know how many customers sign up as distributors in order to receive products at wholesale.
One of my best customers has just recently become a distributor. But she has no intention of business building. She just wants the products at the lowest price.
My "love-the-products-madly" customer would be counted as a failed associate in the reported statistics.
-- Walter (from Appleton, WI)
Walter@NMC
www.NuOpportunity.com
Walter - I agree that this is a possibility.
I have thought for sometime that companies with lots of wholesale buyers add a category: "wholesale buyers" - so those folks are not counted in with distributors, who ARE looking to make money with the business.
Unfortunately, when you have retail prices that no one would ever pay, you have LOTS of people signing up as business builders just to get the better prices. That skews the numbers. If no one ever buys retail, why bother having retail prices???
In my USANA business, I make more money from customer sales than from distributor purchases.
Among USANA Associates, I've been one of the top 25 in the world for customer acquistion for the three years I've been a USANA Associate.
Thus, I speak from experience that one can build a solid part-time income with USANA by focusing on customer sales.
Now to the specific question that Kim asked: How could Dave Wentz improve the 86% to 14% distributor purchases to customer purchases ratio?
First, I think it's important to note that many of those 86% should probably be classified as customers. One reason for my assertion is that some people sign up to be an Associate because they think that's how they will receive the best prices (even though that's not the case).
A second reason is that many distributors stop promting, i.e., they are no longer seeking a commission from sales or new Associte enrollments but they do not cancel their autoship because they love the products.
Those individuals should be classified as customers but they are also--at least on paper--considered to be distributors. As a result the percentages are skewed in the direction of overstating the percetage of Associates.
Changing how the percentages are calculated in light of the potential for skewed results is one step to take.
A second suggestion I would make to Mr. Wentz is one that I have repeatedly made to USANA: Separate the Associate and Preferred Customer online enrollment processes.
Currently, when a prospective Preferred Customer clicks on a link to enroll, he or she is taken to the same page as a prospective new Associate (distributor). The individual must select one of two classifications as an Associate or the Preferred Customer option.
Unfortunately, the Preferred Customer option appears as the last of the three options and it is often "below the fold," i.e., you have to scroll down to see it. In addition, one of the Associate options is pre-checked.
I have always thought that this confusing enrollment page was a vestige of the "old school" approach in which every customer was a distributor.
I don't think this is actually case for USANA because other than this flawed online enrollment page, USANA does most everything else right:
* USANA encourages customer acquisition in their training programs;
* USANA offers Preferred Customers the same price as Associates. Therefore, one does not need to become a distributor to receive the lowest price.
* Once someone enrolls as a Preferred Customer, they have a separate web site and dedicated Preferred Customer toll free number.
I think the confusing online enrollment procedure remains because of pressure from "old guard" distributors who are threatened by the success of younger distributors with more Internet marketing savvy.
These "old guard" distributors would prefer that the online enrollment be difficult because they want to enroll new customers the good old fashioned way: Try to convince them to join as a distributor and only if they resist the invitation, enroll them as a Preferred Customer.
At least that's my speculation because it has baffled me why USANA doesn't change the antiquated online enrollment procedure when so many of their online services are so sophisticated and advanced, e.g., a built-in web site builder; two (2) customizable web pages for the price most companies charge for a generic page; ability to build a web page of your own with photographs of the products you want to feature with automatic liks to sales pages, etc.
A second piece of advice to David Wentz would be to offer even more training in customer acquisition and retention. The USANA Associates who focus on our Sense' skin care line are, in my opinion, particularly skilled at finding customers--those of us who focus on the nutrtionals can learn a lot from them.
To USANA's credit, many of the modules in our monthly training CD's focus on customer acquisition although more are still about finding new distributors. Perhaps this ratio could be shifted even more to the customer acquisition training.
Finally, perhaps sales to customers could result in a higher commision percentage than purchases by distributors in one's downline.
I can hear the "old school" distributors screaming about that one ... which makes me think it's probably a great way to proceed!
Mark Worthen, Psy.D.
Unfortunately when reports such as these on our industry surface everyone is ready to condemn the industry or company. That being said,of course the hype and smoke and mirrors doesn't help. That is why we must all police our own industry and truly start using professionalism in our dealings with potential reps and customers. Network marketing is in the business category of start-ups and small businesses. In general, both of these categories have a high failure rate among businesses. When the entrepenurial type person decides to strike out on his own in hopes of owning his own business so as to fire his boss, they are more than often very shortsighted as to the capital required to keep the business and themselves going for minimum of a year while building it; and they certainly have no idea of the time commitment and personal sacrifices it will take to grow a successful enterprise.Starting a business is never easy, statistics show that 80% of all start-ups will fail in the first 5 years. I believe that in our industry, most people that don't realize what the commitments are to grow a business will treat it as a spare time project, like restoring a vintage car in your sparetime, and the entry level investments that are typical in network marketing lends itself to fulfill this spare time mentality. For the most part any person can typically join a NWM company for the price of an I-Pod, which when the business doesn't provide them with what they assumed or were promised in the first month, they have no guilt or shame to walk away and blame the industry for not working. As for your 3 points in your post I believe this company as well as the other reputable companies just need to reinforce your NEW SCHOOL policies and platitudes. We need to remember that in all entities whether it be an employee, a business owner or a volunteer fundraiser situation the 80/20 rule always shows it's validity, (20% doing 80%). With this company as you look at the percentages, they actually are doing above average. I also believe that in today's environment of our industry's superior products that companies really need to support their reps with customer acquisition,including marketing help, as well as automatic fulfillment. Our companies minimum recommendation for reps is 3 new customers a week, and they help us in securing and retaining these customers with their company customer reward incentives and their superior fulfillment department as well as their customer service. There is no better industry in this land that has the financial upside potential of network marketing with virtually no downside financially, minus of course their initial investment. And that dear folks, is my thoughts and I'm sticking to them.
It sounds as thought the business model is encouraging the current situation. I think he should restructure his compensation plan.
Without looking at it, it sounds like the products are too high to retail, but those that sign up receive discounts on the products and it probably isn't too hard to reach a high discount level. On the other hand, recruiting business builders is impossible if you have people on every street corner receiving the same discount as you do. They don't want to work the business because everyone they know already gets great products at the same price or close. I think this business sounds like a recruit mentality though. You just have to keep recruiting to replace those who have reached your same level because you are no longer making profit on them.
Significant discounts should be reserved for business builders and the products should be value priced so that they can be retailed to those not interested in joining as a business builder. The company should offer benifits for recruiting and retailing as their compensation package.
Brenda Bunney
405-612-0473
networkmarketingsuccessbunney.blogspot.com
http://BrendaBunneyMLM.com
brendabunney@yahoo.com
While I agree that something needs to be done to obtain customers I wonder sometimes why we are held to such higher standards.
Very few made money. How many tried?
How many people make enough from GNC to cover their money purchases? I spent nearly as much money monthly on bodybuilding supplements prior to joining my company and never got anything for it.
I would say one of the best things would be to create a wholesale customer program where for so much money you can purchase at wholesale which would be 1-2% higher then distributor net so the distributor could make some money. Many of the people who made no money didn't desire to. They just didn't want to pay full price for the product.
Further to Kim and Walter:
Everyone knows statistics can be tweaked to show whatever the tweaker wants them to show!
Where did these numbers come from and how on earth can they possibly reflect 'customers.' For example, I could be a distributor who has ten retail customers. Those customers will never show up in any of my company's statistics! Then I have ten more customers who 'signed' up just to buy their products wholesale. In my company, everybody's in 'one pot' so to speak. And I would guess it's the same for other companies. So ... if every 10 'distributors' have 100 'retail customers' each, that is 1000 customers that don't 'show up' anywhere! Multiply that by the distributors each company has and that will give you a new set of percentages!
WHAT IS MLM? When I'm asked that question I answer, "What do you want it to be" for you? I have some retail customers ... then some people just want to buy quality products wholesale and sign up ... some want to make a little extra cash ... some want to make $1,000 a month ... and then you eventually will find that 'business builder' who wants to make 'gangster' money!
My advise to Mr. Dave Wentz = DON'T BACK DOWN ... get your group of 'number crunchers' to put together an "in your face" package! You are the voice of MLM at the moment and are speaking for all the legitimate MLM companies out there and the millions of distributors who LOVE THIS BUSINESS (even if they're not making 'gangster' money)!
Venetta
venetta5@yahoo.com
It's the compensation plan that needs changing.
High breakage (especially high in binary plans like Usana's) does little to help distributor incomes.
And Kim's right... a "preferred customer" category is the best option for wholesale buyers. (Farmers keep their milk cows in the barn, NOT in the farmhouse, right?)
In my own company, preferred customers sign on as your personal customers. Their monthly purchases -- direct from the company -- are added directly to your personal volume (there's NO group volume requirement, so next-to-no breakage), they buy at wholesale and can qualify for free shipping.
We also have a Personal Productivity Bonus system that creates a "virtual' leg over two levels. The first $100 of personal sales volume (including PCs' purchases) rolls down into the first level. Everything after that rolls down into the second level.
We're then paid 15% of the first level and 55% of the second level of this "virtual" leg. This is apart from any retail mark-ups we add to personal sales. And all this is in addition to any bonuses earned on our downline organisation's sales volume.
None of these customers is part of the distributor network. Everyone wins.
John
Goodness, I took so long to formulate my thoughts, the blog suddenly has lots of responses, including some great clarification that customer gathering is, thankfully, a bigger forcus for Usana than the article would have us believe.
I think that wholesale buyer programs can be a detriment when it comes to substantiating the value of our products. We often hear these plans being compared to warehouse memberships, but even Costco and BJ's don't sell products to members at true wholesale cost.... So why not concentrate on regular customers instead -- customers who may become raving fans and then maybe distributors because they love it madly?
New book, Kim: "If My Product's So Great, How Come I Can't Sell It Retail Like Every Other Business Does?"
Dianne
Why would they want to change anything? THe company is making money is she?
NM companies use Warren Buffett
purchasing Pampered Chefs to
legitimize their business model.
I can assure you that the big WB
did never make a list of his friends
and family and started calling
them or did a home party...
unless someone proves me wrong.
I'm not saying he did a bad move
but the interest of Corporate NM
and the distributor are NOT
100% the same.
A DISTRIBUTOR is A CUSTOMER for
the NM Company. They buy products
sure, but the margins the
distibutor makes ar tiny compared
to what corporate makes.
Plus how many CDs, DVDs, replicated
websites and event tickets have
you bought from your company???
Again, USANA corporate is making
dough, why would they change. They
sell a dream and dreamer come
in droves (?)
And it's the same with most companies.
Ideally there would be only
ONE purchase price for any given
product and a discount for autoship
and one for volume. This way there
would be no incentive for someone
to join as a distributor just to
get cheaper product. Serves the
distributor because he won't be
tempted/trained to pitch the
wholesale price but not the company
because they loose CD/WEB sales...
Warmest love
Yves
www.NoPainMoGain.com
g
Roxanne asks: If no one ever buys retail, why bother having retail prices???
Listing products at an inflated retail price is a very common marketing tactic used to increase perceived customer value.
This is so common, in fact, that no one likes to buy at "full price" any more.
The other point to consider is that even if a company's suggest retail price is reasonable and is the price intended for resale to customers, the company cannot mandate that the products be sold at that price. This would be considered price fixing. So the distributors are free to sell at whatever price they choose.
-- Walter (from Appleton, WI)
Walter@NMC
www.NuOpportunity.com
When I joined USANA a few years ago, I was promised 6 people in my downline in my first week. (didn't happen) I was told the group I was joining had a 90% retention rate. (untrue)
I am articulate and have worked on the phone before (not selling) so they decided I didn't need any coaching. I was told that the 200 people I had called without sponsoring anyone "wasn't that many."
My sponsor talked to me like I was his new best friend for the first few days. Then I never spoke to him personally again despite trying several times, and finally talking extensively with his sponsor. I see now why they did that. I ultimately didn't return the $1300 start-up package, lol!
I was never encouraged to seek out customers. I went along with all of this, so I'm not blaming others for my USANA *failure*. I don't think it was really a failure. I learned what not to do. It ultimately led me here to benefit from and participate in Kim Klaver's community which is like a breath of fresh air to me.
But what the article talks about is really happening, and so needs to be brought out into the open for change to occur.
Walter made a good point about people joining just for wholesale pricing. And I love Kim's idea that mlm companies ought to have a wholesale customer category. That would make stats like this more realistic.
Dr Wentz should defend his company yes, because statistics can be manipulated to *prove* anything. He also needs to look at what is occurring with his top recruiters. I think many mlm companies turn a blind eye when someone is really bringing in lots of people, and for obvious reasons - it makes the *other* statistics look good.
I know there are many USANA reps who are ethical and do not deserve to have to put up with this bad press. I'm glad to see some of them here. This is good in a way because change doesn't just sort of happen. There needs to be impetus.
Tracy
Having studied USANA extensively, I think the heart of the problem is that the company's products are EXCELLENT, but just too expensive for the average person to purchase -- even with a preferred customer discount.
The solution might be for the company to train people to find customers for whom the price is worth the quality, but there are so many restrictions on marketing that this is all but impossible for the average rep to do, unless one already has a network of affluent, health-conscious friends.
IMHO, the people who consistently rise to the high levels of income are those who are there when new markets open (because they are backed by on-site company support overseas) and those who are comfortable with the idea of duplicating the training at hyper-speed, without being affected by rejection. LOTS of hard work to get there with that approach!
As an Associate in USANA (part-time) for the past two plus years, I can say that while our team puts customer acquisition on the same level as building a distributor base, not every team in USANA likely does. (Before we "release" someone to begin fully inviting and building, they are trained on the 5 customer rule and also on tools for sharing health and product information, among other topics of course. After having read Kim's book and listened to the CD's about the 3 Scripts/Hot Button approach, I can't wait to share it with my downline/upline/crossline friends and make it a core part of our training.)
Some points of clarification for those not affiliated with USANA, as we have a different Preferred Customer program than some may think:
1) ZERO cost to join it
2) if you go on autoship, you pay the exact same price as a distributor, the lowest one available; the distributor earns income based on points of the products a customer orders, and where those fall in their downline, but no direct mark-up
So with this kind of system, there is ZERO reason someone who only wants products should be in the business, they get all the same benefits product-wise without it. And as Kim says, any customer can later decide they want to pursue the business since they love the products so much.
Also, the 86% number could be very misleading (I don't know) because it does include all products an Associate buys and then retails. Most Associates I know (including me) have a few customers who simply aren't used to automatic shipment or the Internet, and still want to do each order manually and write me a check. In addition, some Associates do focus on buying at autoship and selling at retail, and those numbers aren't broken out.
Also, after reading most of the 500-page report myself, I thought I saw something that could be part of the numbers. It claimed that in a 2002 10-K report, USANA counts as active Associates, any Associate who has purchased ANY products within the last 3 months.
(Note: I have not checked the latest 10-K to confirm if this is still true).
This is important because there is a minimum sales requirement every 4 weeks (100 pts of product, around $116), and so there are likely Associates who are not building the business but who love the products, but still aren't at that threshold (I have a few in my downline, I doubt I'm alone). There should be a way for these people to change their designation if they wish, back to Preferred Customers or to something different if the company wants to track it. It would make the "Active Associates" number go down, but would be a more accurate indicator of how many people are qualified to earn checks, and I am sure the % of those who are Active, who earn checks, would be much higher.
On a personal note, thanks to Kim for this amazing 3 Scripts/Hot Button system. After digesting the book and CD's, and speaking about it with my downline, I am very excited to try it out. If I can add 100+ loyal customers, and can help multiple people in my downline (on different legs) do it as well... :) :)
John Counsel said:
It's the compensation plan that needs changing.
High breakage (especially high in binary plans like Usana's) does little to help distributor incomes.
Mark Worthen's Reply:
Why do you say USANA's comp plan has "high breakage?" The last time I calculated my percentage of profit on sales it was 12.5%, which is, if I'm not mistaken, above the industry average.
John counsel said:
And Kim's right... a "preferred customer" category is the best option for wholesale buyers. (Farmers keep their milk cows in the barn, NOT in the farmhouse, right?)
Mark Worthen Reply:
USANA has a Preferred Customer program.
John Counsel said:
In my own company, preferred customers sign on as your personal customers. Their monthly purchases -- direct from the company -- are added directly to your personal volume (there's NO group volume requirement, so next-to-no breakage), they buy at wholesale ...
Mark Worthen's Reply:
Same with USANA.
John, with all due respect, your post comes across as a promotion for your company, i.e., "my comp plan is better than yours." If you had checked your facts first, and offered a well-informed critique of USANA's comp plan and Preferred Customer program, I probaby would have formed a different impression.
Mark
P.S. You do have a really cool website--very professional and informative. :o)
As a USANA associate, I am glad to see Dr. Worthen's analysis. In our business, My wife and I currently have 5:1 Preferred Customer to Associate ratio. This has been a critical part of building our business.
Dr. Worthen made a crucial point concerning associates and how they are classified, and I want to expand on it. There is a very low cost of entry to sign up as an associate (less than $20).
In my wife's case, she promotes the skin care line with a "spa party". She encourages her hostesses (but does not pressure or require) to enter as an associate because of the potential benefit. Any new customer is placed in the hostesses business, which may lead to income down the road. She was finding that many hostesses enjoyed the party so much they hold more than one. It is only right that someone who is willing to help our business in that way be offered the opportunity to benefit from it as well. The reason we do it this way is that it protects their time investment. If they were not an Associate at the time the PC signs up, there is no way to go back later and reassign them 'their' customers. My point is that all of these will be classified as associates whether they actively pursue the business or not.
Another point to be emphasized is you DO NOT have to be an associate to get the best prices. Preferred Customers get exactly the same prices as Associates. Do some people sign up as Associates and never work the business? Of course, and thus will never earn any income. This brings us to Kim's second point, to which I fully agree. This business is NOT easy, and should not be represented as such. Does it happen in USANA? Is the sky blue? Unfortunately this is an industry wide challenge.
As an aside, here is an article on this subject from the Salt Lake Tribune that I found interesting.
http://www.sltrib.com/ci_5448688
I have confidence in Dave Wentz and his integrity. I may be proven wrong. Mr. Minkow's motives do not instill great confidence.
As a USANA associate for four years I can only speak from my own experience. I've worked hard to build a business, and my earnings have always reflected my efforts. My business is about 2/3 preferred customers and 1/3 associates and generates a weekly commission check on residuals from those numbers, regardless of what I do now. In fact, I've build a residual monthly income in four years, larger than my father's social security check based on over 40 years of work. Those that I've seen fail over the four years that I have been associated with USANA in most cases never started. They didn't introduce one product to another person or pick up the phone to call a prospect, and unfortunately there is nothing that can be done to force those individuals to do so. It doesn't matter if it is Network Marketing or a brick and mortar business, many fail and it's usually the management of that business that is responsible.
Richard
Walter,
you have a great point when he says "many customers sign up as distributors in order to receive products at wholesale." So the numbers for Usana may not be totally correct.
Kim,
I love your recommendation of companies adding a category for "wholesale buyers".
Our company (Tahitian Noni International) has recently implemented a program called "Rewards Member Program" where those 87% who don't like to sell can still enjoy shopping with us at greatly reduced pricing. So these people are striktly customers. Should they decide later that they want to become distributors they can do so.
Have a nice day!
Ilka ;o)
The business model of MLM is special and can not be compared straight to standard business.
I’ve found interesting report on this case from Len Clements Market Wave Alert. If somebody interesting, let me know and I’ll forward it to you.
I doubt the numbers are as bad as that report makes them out to be, but that doesn't mean there ought not be cause for concern.
The numbers should be broken out more specifically. I would be willing to bet that a good percentage of distributors never intended to build a business and another percentage started out with such intentions but then "dropped out" while continuing to buy the products.
If I was head of USANA here is what I would do:
1. Break down the numbers as mentioned above. I would aggressively work to set my company apart from the old school mentality of being a big buyers club.
2. As others have mentioned, I would make sure everyone understands that someone who just wants the products signs up as preferred associate, not as a distributor. There should be a real emphasis on not recruiting as distributors those who have clearly stated they only want products.
In the four companies that I have worked with over the years we sold services where there was no wholesale/retail dichotomy. Everyone paid the same price regardless of their status. So we never had any incentive to sign anyone up on that basis.
3. Rollback all inactive distributors to preferred customer status after 12 months of inactivity other than personal purchases.
Think about it, if someone has announced by their behavior that they are functionally customers rather than distributors, then treat them as such. You can then give them the option to change categories if they so choose at any time. But if they are getting the same price as they would get as a distributor, then the only incentive to change would be if they truly wanted to build a business.
In the world of investments you are not allowed to "park" your license. If you go long enough without any activity your license will be terminated. I think we should re-categorize people after a certain length of time who have essentially "parked" their distributor agreement.
Another method is one my company uses where they charge you a "technology fee" each year. This money actually pays for things like a yearly background check, etc., which we must do because of the highly regulated industries we are in.
But my point is the fee is enough (though not very much) where someone might pause at re-upping if the really didn't want to do the business and just considered themselves a customer.
4. I would have a very active and distinct emphasis on customer acquisition. Does that mean every distributor will do this? No. But the key IMO is what does the company lay out, even if there are old school marketers in their midst.
For all the "recruit, recruit, recruit" my company puts out, there are *weekly* classes on how to acquire *customers* in the different services we have almost without fail.
The leadership is also savvy enough to constantly say there are many ways to go about this and you may just want to do personal production, and that is okay, but we think those who want to be really big are better off building a business.
Cool. I can live with that since not everyone wants or has the ability to build it really big.
I know many if not most NM companies probably can't do what I'm about to suggest, but it does help if you have a path to the top that can be reached *by selling only*. Short of that I would make sure the comp plan allows people to make some money just acquiring customers/clients.
Of the four previous companies I was with, 2 of them started out with a path to the top position that could be reached by personal production alone, and then they eventually removed it. One never had one, and the other still has a personal producer path which realistically probably can't be reached without B2B sales (although I know two people who did it with individual sales alone). Nonetheless it is there.
Michael
www.wlgweb.com
www.grmbeyond.com
www.globalequitylending.com
Kim,
I agree with the message you're sending in your blog, but wanted to point out a few important pieces of information regarding this particular case.
First off, I would categorize what this guy (who published the report) is doing as an obvious case of stock manipulation and fraud. He has no real interest in the company or its operation. The purpose of this report is not to "enlighten" anyone, but simply to drive down the stock price.
What's really going on is he and his "partners" purchased put options (a bet that the stock price goes down), then published a bunch of information disparaging the company. Somehow, they got this into the Wall Street Journal, and accomplished what they set out to....earn a large profit by driving the price of the stock down.
This is illegal, and I wouldn't be surprised to see the SEC charge him with a crime (he's been convicted of stock fraud before, by the way).
Second, most of the "facts" he's published are, in fact, either false or highly misleading. The company (Usana) has filed a defamation lawsuit against him and has the statistics and evidence to disprove his claims.
For example (data from 2006 Annual Report), yes Usana has over 150,000 associates. But, there are also nearly 80,000 active customers. And note that in the US, those figures are 59,000 and 50,000 respectively. On many teams that are more established (like mine), the number of customers exceeds the number of associates, often by a large margin.
Yes, more AOL/Cable TV type customers would be a good thing. Many associates work toward that end, and I have new customers coming into my organization every week. So, I agree with the meaning of your message as I said before.
Just understand the source of the information you published is unreliable, with ulterior motives that are fraudulent and illegal. You have to view the Wall Street Journal article and the "report" they've published in this light.
Scott Simon
http://ssimon.networkmarketingcentral.com
Excellent suggestions Michael (10:47 a.m. -- with Global Equity Lending).
Your contributions are a great example of the good that can come from a controversy like this one.
I'm going to suggest to USANA management that they read these comments--lots of great ideas from the field (by that I mean from USANA Associates *and* from distributors with other companies, which is awesome).
All the Best,
Mark
--
Mark D. Worthen, Psy.D.
6601 Harrison Rd
Charlotte, NC 28270
Yahoo Messenger: markdworthen
MSN Messenger: markdworthen(at)hotmail.com
Google Talk: mworthen
AIM: markdavidworthen
Skype: mark.worthen
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Just in case people think that this situation is the same across the network marketing industry … there are other companies out there who do things a little differently.
One that I work with places a great emphasis on getting customers. Their latest statistics (for 2005) show:
• more than 60% of those who buy this company’s products every month are just customers and never go on to build a business;
• 32% of these customers have referred at least one other customer to the company;
• only one out of twelve (8%) of customers go o to build a business and obtain a minimum of 8 customers or more (their average annual income is about $1,900)
• of those who go on to “build a business”, about 2% end up with a group that has about 400 active monthly customers, of which about 60 would have been personally enrolled; their income averages about $54,000 p.a.
• The final 1% build businesses with an average of 3,300 customers (about 85 personally enrolled) earning an average of $185,000 p.a.
We can use information like this – and that obtained from the few other companies that provide such statistics – to help argue against those who say that network marketing is a fraud and can never work.
It also illustrates what Kim has been saying for years: it ain’t easy to build a large business but if you focus on getting customers and staying consistent it will come.
Kim,
This article brings so much to light, so much to think and talk about...
I have been involved in Network Marketing for over 8 years. My first experience was joining a young company - one that was shut down by the SEC and labelled a Pyramid Scheme.
Anyone remeber IHI...?
I recovered, but I am always aware of the connection between our industry, and the ever possible abuse, and accusations related to
Are We -or- Are We NOT Operating as undesireable and fraudulent schemesters.
I believe that most participants - customers and distributors, are willing vounteers - participating in, and/or buying from legitimate businesses.
Important articles are being written about us! We all are effected by recent press, and should be aware of the Wall St Journal article, as well as the article appearing in the March 2007 issue of Playboy Magazine.
Credibility questions aside, the article about a relatively young Network Marketing company is must read material.
Anyone care to discuss it?
Fondly, John
www.50bucksamonth.com
john@fiftybucksamonth.com
As long as the industry keeps inflating income potential we leave ourselves wide open to this sort of allegation.
It serves us right. This time Usana, tomorrow, who knows?
I hope networkers from all companies will defend Usana if the
topic comes up in conversation with non MLMers. One for all, all for one sort of thing.
The more we all follow New School principles, the more we'll
improve the image of the industry
as a whole.
I don't think anyone can sell you a dream. You either have it or you don't. So I don't think Usana (or any other MLM company for that matter) is selling a dream.
Unfortunately, many NWM reps exaggerate claims and quote numbers..."so and so's check is 10,000 a week! wouldn't you want to get something like that? and you only have to get two people! think of what you can do! you can buy a big house! a sports car! a boat!"
And of course, people have the tendency to believe this because they want for it to be true...and they grab the opportunity without really knowing their reasons for doing it. And of course, they fail. And of course, they blame their upline, or the company and become anti-MLM. most people end up treating MLM like a job instead of a business...expecting that they are going to see money regularly...like a paycheck - even if they don't do anything.
With Usana...I don't think it's the product (they're great), not the company, and I still find the compensation plan great...I think mostly the problem stems from distributors who make promises and practice front end loading.
I'm no expert but I think it would be great if Usana would offer a bonus/reward for people who sponsor preferred customers/retail - let's say you have 10 customers then you get something...if you have 20 then you get a bit more...or something like that...
I do know that Usana has retail requirements - 5 PCs/retail per distributor if i'm not mistaken...
To say that 63% of USANA associates never earn a check is very misleading. That number should be higher. I say this because may commission checks handed ou by USANA are given to people that buy into the company at the highest level. This check is more like an instant rebate. Factoring this in and arriving at 63% is misleading and untrue.
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