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Q&A Domande frequenti

Domande frequenti

1. Se acquisto il Kit (I.B.P.  o  HMP) divento distributore? 
2. Una volta che sono Distributore quali obblighi ho? 
3. Come faccio a ordinare i prodotti? 
4. Come faccio a ottenere lo sconto del 42 %? 
5. Che cosa vuol dire "guadagno indiretto"? 
6. Se devo iscrivere qualcuno in Herbalife come faccio? 
7. Quante persone posso inserire in attività ? 
8. Quali obblighi fiscali devo adempiere: 
9. Quale garanzia ho di successo?
10. Cosa rischio a intraprendere questa attività? 
11. Dove posso trovare informazioni per saperne di più sui prodotti?


 

Se acquisto il Kit-IBP (I.B.P.) divento distributore?

Se acquisti il Kit I.B.P.  o HMP (Herbalife Member Pack) diventi socio di Herbalife. Non hai alcun obbligo di acquisti o di attività ma hai tanti diritti e privilegi.
Diventi "Membro - Cliente Privilegiato" ed hai degli sconti sui prodotti di minimo il 25% (puoi arrivare al 35% o 42%)
Se lo desideri puoi diventare Distributore ossia sei autorizzato a vendere ed occuparti della distribuzione dei prodotti e farne una attività.

Per attivare il tuo Codice di Identificazione (Numero ID) è necessario riempire il modulo di richiesta, allegare una copia di un documento e inviare il tutto ad Herbalife.


Puoi anche fare tutto OnLine in modo semplice da casa tua!

  • va sulla homepage  www.myherbalife.com  seleziona il tuo paese di residenza (Italia, Svizzera....)
  • NOTA: non la tua nazionalità ma il paese dove risiedi attualmente!
  • in basso a sinistra trovi icona "Diventa Socio/Distributore/... clicca 
  • metti i dati del tuo Sponsor :
    • Numero ID
    • le prime 3 lettere del nome
    • Non li hai? Richiedili qui adesso:  XXXXXXXXXXXX
  • Segui le indicazioni
  • puoi acquistare il tuo Kit IBP HMP direttamente e lo ricevi a casa tua!
  • inserisci tuo Nome, Indirizzo, data nascita, indirizzo e-mail e Nr.Telefono, allega Copia di Documento identità, crea tua "password"
  • procedi all'acquisto del Kit "HMP" ufficiale
  • puoi pagare con Carat Credito o PostePay... è fatto!
  • sei Socio , Membro di Herbalife edhai tutti i vantaggi e privilegi
  • nessun obbligo, nessun ordine o quantità minima da ordinare, nessun fatturato mensile necessario... 
  • è come tu vuoi... solo vantaggi !  BENVENUTO!

Una volta che sono Distributore quali obblighi ho?

Nessun obbligo, ma molti diritti, tra i quali il diritto ad avere uno sconto del 25% su tutti i prodotti che acquista

E' possibile avere i prodotti Herbalife scontati?

SI, diventando Socio o CLientePrivilegiato, ha il diritto allo sconto del 25% su tutti i prodotti che acquista
Per diventare Socio ci contatti e le faremo avere il suo CodiceID che è compreso nel Kit-HMP Herbalife Member Pack (*)
Questa procedura si puo' fare online in modo semplicissimo e veloce.
(*) Il Kit HMP Herbalife Member Pack contiene la sua Licenza e Tessera di Socio oltre a tutta la documentazione, DVD, LigroGuida, Piano formazione ecc.., contiene dei PRODOTTI per lei .

HMP contiene 1x Formula1 e Shaker

 

Puo' ordinare il suo Kit- "HMP" sul nostro sitoWeb  SHOPalTOP oppure  DIETALATOP (per Italia in €)


 

Come faccio a ordinare i prodotti?

Devi avere il tuo Codice ID che trovi nel Kit "HMP" poi basta telefonare all'azienda Herbalife direttamente (numero verde dalla Svizzera), deve dire all 'operatore il suo numero di Identificazione e può ordinare. Puoi anche ordinare comodamente online 24/24 dopo aver ricevuto il tuo CodicePIN.
Puoi anche ordinare i prodotti "online" dal tuo sito MyHerbalife oppure al n/ sitoWeb  

Come faccio a ottenere lo sconto del 42%?

Nel listino che lei troverà nel Kit HMP, potrà notare che ogni prodotto corrisponde a un punteggio ( PV = Punti Volume).
Ci sono 2 modi per avere il 42%
1- Sommando i punti di ogni prodotto e arrivando a 2500 PV nell'arco di 3 mesi ha diritto ad acquistare con il 42%
2- Effettuando un ordine unico di 1'000 PV esso sarà già al 42%.



 

Come fare per avere lo sconto del 50%?

Il 50% è lo sconto massimo accordato da Herbalife ai suoi collaboratori-SUPERVISORI
Totalizzando un Volume di 4'000 PuntiVolume in un periodo di 1o 2 mesi o accumulati entro un periodo di 12 mesi avrà il privilegio d'acquisti al 50%  e diventerà SUPERVISORE.
Ci sono altri 3 modi per qualificarsi Supervisore con 50%: 4'000 PuntiVolume in un mese, 2500 PuntiVolume in due mesi consecutivi oppure in cordata con altri Distributori.
Una volta raggiunta pa posizione essa viene mantenuta, senza quantità minime richieste o volumi minimi necessari.
La qualifica é valida un anno (quest'anno fino al prossimo 31.1. piu' un anno fino al 31.1 dell'anno sucessivo) ed ogni anno puo' riqualificarsi, pagando la tassa annuale e mantenere cosi' tutti i privilegi acquisiti.
Nel listino che lei troverà nel Kit, potrà notare che ogni prodotto corrisponde a un punteggio ( PV = Punti Volume).
Mi contatti al +4191 857.55.70 e potrà avere tutti i dettagli

Si iscriva adesso... la accompagneremo passo-dopo-passo al suo ritmo ad avere il 42% oppure il 50% fisso
Acquista il tuo Kit HMP da MEMBRO HERBALIFE   
http://www.shopaltop.com/index.php?route=product/category&path=71_72

 

Che cosa vuol dire "guadagno indiretto"?

Acquistando il Kit "HMP" lei ha la possibilità di inscrivere in attività altre persone, questi saranno suoi distributori, ammettendo che lei abbia acquistato con lo sconto 42% e fornisce al suo distributore alcuni prodotti con lo sconto 25% guadagnerà il 17% per differenza. Se invece lei è supervisore (50%) avrà una differenza sconto del 25% come guadagno indiretto.
 

Se devo iscrivere qualcuno in Herbalife come faccio
Puo' ordinare da noi il Kit Ufficiale Herbalife  "HMP" Herbalife Member Pack e quando le arriva provvederemo all 'iscrizione.
Il nuovissimo kit "HMP"  costa solo 65.-CHF  o € 55.- permette di iniziare immediatamente ad un costo minimo (contiene tutto ed un Shake Formula 1)

Oppure puo' procedere all'iscrizione Online su sito MyHerbalife, è veloce e pu' ordinare il Kit "HMP"direttamente da li'. Sul Kit "HMP" non c'è guadagno e non ci sono sconti.... per nessuno.

Quale indicazioni per procedere deve inserire

  • Codice dello SPONSOR
  • prime 3 lettere cognome sponsor
  • Non li hai?  Richiedili adesso qui   XXXXXXXXXXXX

 

Quante persone posso inserire in attività?

Non ha nessun limite.
 

Quali obblighi fiscali devo adempiere:

Nessuno, fino a un volume di acquisti di 7'000 € dopo di che è necessaria solo la partita IVA. Da questo limite in poi riceverà i compensi dalla Herbalife al netto delle ritenute . Il reddito percepito non dovrà essere inserito nella dichiarazione dei redditi in quanto si tratta di redditi pre-tassati alla fonte, pertanto questi non faranno cumulo con altri redditi personali.
 

Quale garanzia ho di successo?

Non possiamo garantire il successo, questo dipende da Lei dalla sua volontà e dal suo impegno. Dipende dalla sua voglia di imparare, partecipando ai seminari e ai corsi di formazione che la Herbalife tiene per ogni livello della carriera. Quello che possiamo assicurarle è che la sua carriera è disponibile come per altri distributori che hanno saputo approfittare dell' opportunità Herbalife

Cosa rischio a intraprendere questa attività?
Nulla, non ci sono i soliti rischi di fallimento come nelle attività imprenditoriali e commerciali. La Herbalife non la obbliga a fare acquisti o a mantenere dei budget di vendita. Lei è libero di acquistare i prodotti che le servono senza fare investimenti sostanziali. Tuttavia qualora ritenesse nel corso del suo lavoro di voler cessare l' attività, la Herbalife può darle un supporto ritirando i prodotti invenduti, sempre che non siano danneggiati e scaduti.
 

Dove posso trovare informazioni per saperne di più sui prodotti? 
Nel Kit HMP (Herbalife Member Pack)  ci sono tutte le informazioni necessarie, nel nuovo DVD "Soluzioni per una sana nutrizione".... ma può anche visitare il nostro sito www.vivialtop.com che le permetterà di avere un' ampia panoramica dei prodotti, del modo di uso e di alcune testimonianze di risultati.
La miglior cosa  comunque è.... se chi chiama, potremo illustrare ,senza impegno, tutti i dettagli di questa semplice, entusiasmante e redditizia attività.

Importanti informazioni le puo' trovare su  DIETATOP   o   SHOPalTOP
 

Acquista adesso il tuo KIT "HMP - International Business Pack"...
ed iniziamo il tuo percorso verso una vita migliore

 

Acquista qui il tuo Kit Ufficiale  "HMP - Herbalife Member Pack"
ed iniziamo il tuo percorso verso una vita migliore
  • contiene tutto il necessario
  • solo vantaggi e privilegi
  • nessun obbligo e nessun limite 
  • puoi guadagnare da subito.... !

con il NUOVO...  Kit "HMP" Herbalife Member Pack    l'inizio è ancora piu facile... solo privilegi e vantaggi
 



ISCRIZIONE al Colloquio di Lavoro Online

Anne T. Coughlan, July 2012

 Download PDF

What is a legitimate MLM? ¹

MLM (multi-level marketing) is a retail distribution channel form including a manufacturer and a set of registered independent distributors who together distribute the manufacturer's products directly to the market. MLM is therefore a type of direct selling; it is distinguished from other direct selling methods by its compensation system, which awards income to distributors both for their "personal sales" (sales they themselves generate to end-users) and the personal sales of distributors downline from them (that is, distributors who are recruited and mentored by the upline distributor). Almost all the member firms of the U.S. Direct Selling Association use the MLM form of compensation. MLM channels sell a wide variety of products and services, both in the U.S. and worldwide.

Is MLM just a fluke, or is it a recognized method of retailing?

MLM is far from a fluke. In 2011, there were 15.6 million direct-selling distributors in the U.S., who generated $29.87 billion in retail sales. Worldwide direct-selling sales were $153.727 billion in 2011, generated by over 91.5 million direct-selling distributors.² The U.S. is the largest country market for MLM sales in 2011.

What value does the MLM firm add, if the distributors generate the sales?

The MLM and its distributors form a symbiotic system, with the contributions and efforts of each being crucial to the success of the MLM business for both. The MLM firm provides distributors with a ready-made product line to sell; with a product infrastructure that reliably delivers products to them to sell, takes returns, and handles customer service inquiries; with a comprehensive IT infrastructure that manages logistics as well as payments; and with a compensation system that rewards distributors' productive efforts to sell products and to develop and mentor downline distributors. The MLM firm also creates, monitors, and enforces important rules of conduct that protect all distributors as well as the MLM firm itself.

An entrepreneurial individual can engage in an MLM business opportunity without incurring all the overhead costs mentioned above, so MLM is an attractive option for entrepreneurs who do not have the financial wherewithal to build their own business from scratch, or to pay sometimes substantial franchising fees to start a franchise retailing business.

What are the value-added activities of distributors in the MLM channel?

The distributor contributes to the work of the MLM distribution channel in different ways than the MLM firm does. This is the heart of a good distribution channel partnership - that channel partners share the work of getting products to the market, educating consumers about them, and generating sales.

The distributor's job in the MLM channel is to be a salesperson and, if s/he is interested, to be a sales manager as well. In the distributor's "salesperson" role, s/he prospects for new customers; teaches them about the benefits of the MLM firm's products; helps them place orders for products they want to buy and processes those orders; may also deliver the products directly to the customer; and follows up afterward to generate repeat sales. In the distributor's "sales manager" role, s/he recruits interested individuals (often from the ranks of his/her retail customers) to register with the MLM company as distributors; and then mentors, develops, and trains them so that they too can generate sales and, if interested, recruit and develop new distributors downline from them as well.

Who can register as an MLM distributor? Are there restrictions?

There are very few restrictions on registration as an MLM distributor. The MLM firm generally imposes no requirements for prior sales skill, business-building, or retailing experience. There are typically no restrictions on the prospective distributor's financial situation either. The main requirement across various MLM firms is that the prospective distributor be 18 years old (or if less than 18, have the signed permission of a parent or legal guardian). In the current challenged economy, this opportunity can be especially attractive to the unemployed or underemployed, and to those without the ready capital to start up other types of entrepreneurial businesses.

What motivates a person to become an MLM distributor?

The ease of registering as an MLM distributor makes it possible for people with many different motivations to find satisfaction with the MLM business opportunity, for example ³:

  • The ability to personally consume preferred products at a wholesale price rather than pay retail prices;
  • The desire to share the benefits of the MLM's products with others;
  • Short-term goal seeking (like making money for holiday gifts);
  • Augmenting earnings from one's full-time job, or retirement income;
  • Building a full-time career selling and business-building; and/or
  • Finding recognition for one's achievements and a sense of community.

Because there are so many viable motivations beyond building a full-time career, it's reasonable to see many MLM distributors who are satisfied with small (or even no) commission income from their MLM distributorship.

How does an MLM distributor earn income? 4

There are two major sources of MLM income. First, the distributor earns the difference between the retail price s/he charges and the wholesale price s/he paid to acquire product. Second, a business-builder can earn commissions on the sales of distributors downline from him/her. Beyond this, the distributor financially benefits from personal consumption at wholesale prices, because s/he otherwise would pay some retail markup to acquire these products for personal use.

In a legitimate MLM, a distributor does not earn any income from merely recruiting a downline distributor; income is earned based on sales generated, not the number of people downline from a distributor.

What is a pyramid scheme and why is it illegal?

Pyramid schemes compensate participants for recruiting other participants into the scheme, without regard to the generation of actual product sales. The FTC noted in the 1979 Amway case, finding that Amway was a legitimate MLM and not a pyramid scheme, that these payments could take the form of "headhunting fees," or of commissions paid on mandatory product purchases by new recruits, leading to inventory loading.v

A pyramid scheme is illegal because its very compensation structure guarantees its ultimate demise, and because that demise comes with guaranteed losses to later participants in the scheme. A participant makes money in the scheme only by recruiting others into the scheme, who in their turn only make money if they recruit yet others into the scheme, who…. Thus, later registrants are doomed to losses because their initial fee to enter into the scheme (used, by the way, to pay earlier participants) can only be recovered through further recruitment - not through viable product sales. Ultimately, further recruitment is mathematically impossible (there is a finite number of human beings to recruit), so later participants are sure to make losses.

Key to this logic is the notion of misrepresentation of the business opportunity to later participants. If they knew that there was no mathematical possibility of making money in the scheme, they would not choose to join.

Observing that some individuals lose money as MLM distributors is not proof of a pyramid scheme. A true pyramid scheme causes all later participants to lose money on the scheme and only those who enter early make money. In contrast, in a legitimate MLM, an early joiner may lose money and a later joiner can make more money than those who joined the MLM earlier.

How can you distinguish a legitimate MLM from an illegal pyramid scheme?

It's a simple test, based on the definition above: an illegal pyramid scheme awards payments to participants for mere recruitment. In contrast, if the distributor earns income only when sales happen, the business is not an illegal pyramid scheme, but rather a legitimate MLM company.

Is "too low" a proportion of sales to non-distributor end-users a sure sign of a pyramid scheme?

There is no accepted legal threshold level for the proportion of MLM sales to non-distributor end-users below which the business can be surely categorized as a pyramid scheme.vi This is because there is no sensible business or economic reason to establish such a threshold level as a criterion of a pyramid scheme.7

Because many or most new MLM distributors were enthusiastic consumers of the products before registering as a distributor, it is natural that MLM distributors are also end-user consumers of the respective MLM firm's products. After all, their liking for the company's products does not disappear the day they sign the registration agreement to become a distributor!

This logic makes it clear that the MLM firm's "retail sales" properly includes not just sales to non-distributor end-users, but all sales for personal use, whether use by a non-distributor or by a distributor.

How can an MLM firm be sure that its distributors are actually consuming or retail-selling the products they order at wholesale prices?

Because an MLM distributor is not an employee of the MLM firm, but an independent contractor, the MLM firm cannot observe every transaction the distributor makes or every product consumption occasion. Nevertheless, it is common for MLM firms to have rules that mitigate against inventory loading (the practice of over-ordering inventory in order to artificially inflate sales volumes to make higher commissions). One example is the common practice of offering to buy back unsold inventory from a resigning distributor. With such returns, the MLM firm logically claws back the compensation that was previously awarded to the upline distributor, since it was in fact unearned. This claw-back provision deters an upline distributor from urging a downline to inventory-load because the upline will not be allowed to keep commissions on returned product.

Such rules and policies, along with reasonable monitoring and enforcement, are designed to promote retail consumption rather than inventor holding. For example, the MLM firm's monitoring might observe a distributor with reasonably consistent order quantities and order frequency over time; such a distributor is most likely selling and/or consuming what is ordered. In contrast, infrequent or sporadic ordering of large quantities of product - particularly if linked to an attempt to reach a higher performance and compensation level - suggests the possibility that not all of the ordered product is being consumed by end-users, but instead may be loaded as inventory. In addition to such monitoring activities, some MLMs allow end-user consumers to order from their distributor online through a website hosted by the MLM firm. In these cases, the MLM firm directly observes retail selling activity.

For an MLM to be legitimate, does the distributor force have to keep on growing over time?

While growth in the number of distributors over time is of course good for an MLM firm, the growth rate of the distributor force over time (positive, zero, or even negative) is not informative about the question of whether the business is a legitimate MLM or an illegal pyramid scheme.

Many factors affect the rate of growth of the distributor force, including competition for distributors with other MLMs, relevancy and breadth of the product line, intensity of training activities by the MLM firm and by its business-building distributors, national and international legal environments, international exchange rates, etc. These are distinct from the legitimacy of an MLM - so whether an MLM firm's distributor force is decreasing or increasing over time, one can't conclude that the firm must be operating a pyramid scheme or is obviously operating a legitimate MLM business.

Isn't it true that the only way to make money in an MLM business is to get in early? Don't all latecomers make less money than early joiners?

No, because a legitimate MLM offers the exact same business opportunity to all distributors. A legitimate MLM does not offer the ability to "buy one's way in" to a "higher position" in the sales structure.

Those business-builders who work hard and stick with the MLM business for a longer time may have greater income than those who haven't been at it as long; but this does not mean that the newer arrival cannot build just as strong a business with a legitimate MLM through the same path as others have followed beforehand.

In short, a legitimate MLM is not a "get-rich-quick" scheme for anyone - early joiners or more recent arrivals to the distributor force.

What other business practices do legitimate MLMs frequently follow that would not make sense if the firm were operating an illegal pyramid scheme?

 

The business practice:

If this were a pyramid scheme, this business practice would not make sense because…

Low enrollment fees

Low enrollment fees would not be "rich" enough to fuel compensation based on mere recruitment.

Investment in the science of R&D, manufacturing and raw materials where applicable, quality assurance and quality control in production to offer sellable products

There would be no point in spending money on these product-related scientific activities, since money is made through recruiting, not product sales.

Willingness to take back unsold product when a distributor resigns

Taking back unsold product would merely decrease the pyramid scheme profitability and thus would make no sense.

Discouraging distributors from inventory loading

Any products sold would have little or no real market value, so discouraging inventory loading would result in no product being bought at all and thus no fueling of the pyramid scheme that gives commissions on mandatory purchases by new recruits.

If turnover in the distributor ranks is "high," is that proof of an illegal pyramid scheme?

No, it isn't. First, there is no accepted criterion for classifying turnover as "high" versus "low," so we can't use turnover as a criterion for assessing a business to be a pyramid scheme. Further, turnover can be high for other reasons. Recall that it is easy and low-cost to become an MLM distributor, and that there are many motivations for doing so, only one of which is to build a full- time business. Other distributors may join in order to meet short-term goals while being able to buy product they love at wholesale prices and, once these goals are met, they leave the business. With this in mind, turnover can occur for many reasons that have nothing to do with the operation of a pyramid scheme, so we can't infer pyramid status from turnover statistics.

Endnotes

1 Multi-level marketing is described in brief in Coughlan, Anne. T. et al. (2006), Marketing Channels, 7th Edition, Upper Saddle River, NJ: Pearson/Prentice-Hall, pages 454-460, and the effect of compensation on sales and network growth is investigated in Coughlan, Anne T. and Kent Grayson (1998), "Network Marketing Organizations: Compensation Plans, Retail Network Growth, and Profitability," International Journal of Research in Marketing, vol. 15, pages 401-426. Also of interest for further information on multi-level marketing are Berry, Richard (1997), Direct Selling: From Door to Door to Network Marketing, Oxford: Butterworth-Heinemann; Bartlett, Richard C. (1994), The Direct Option, College Station: Texas A&M University Press; and Peterson, Robert A. and Thomas R. Wotruba (1996), "What is Direct Selling? - Definition, Perspectives, and Research Agenda," Journal of Personal Selling & Sales Management, Vol. 16 (4, Fall), pages 1-16.

2 Source: Direct Selling Association, Fact Sheet: U.S. Direct Selling in 2011. 95.4% of sales; 98.7% of sellers; and 95.7% of direct-selling firms used a multi-level compensation plan, so these statements about direct selling are basically statements about MLM.

3 This set of motivations is described in Bartlett, Richard C. (1994), op. cit., pages 69-71.

4 For a simple example of MLM compensation, see Coughlan (2006), op. cit., pages 456-460.

5 See also Webster v. Omnitrition Intern., Inc., C.A.9 (Cal.), 1996, which says that the "Sine qua non of [a] 'pyramid' scheme is [the] right to receive, in return for recruiting other participants into [the] product sales program, rewards unrelated to [the] sale of product to ultimate users."

FTC v. BurnLounge (U.S. District Court, Central District of California, No. CV 07-3654-GW(FMOx), Statement of Decision, notes that "Inventory-loading pyramids are illegal not simply because there are wholesale purchasing requirements. They are illegal because the purchases are incentivized by commissions that result from recruiting others to join the scheme through similar purchases."

Stull v. YTB International (U.S. District Court, Southern District of Illinois, Civil No. 10-600-GPM, September 26, 2011), states that "A lawful MLM program is distinguishable from an illegal pyramid scheme in the sense that the 'primary purpose' of the enterprise and its associated individuals is to sell or market an end-product with end- consumers, and not to reward associated individuals for the recruitment of more marketers or 'associates.'"

The Amway case (FTC Final Order, In the Matter of Amway Corporation, May 8, 1979) states: "'Pyramid' sales plans involve compensation for recruiting regardless of consumer sales. In such schemes, participants receive rewards for recruiting in the form of 'headhunting fees' or commission on mandatory inventory purchases by the recruits known as 'inventory loading.'"

6 In the FTC's Staff Advisory Opinion - Pyramid Scheme Analysis, dated January 24, 2004, its Acting Director of Marketing Practices stated: "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. A multi-level compensation system funded primarily by such non-incidental revenues does not depend on continual recruitment of new participants, and therefore, does not guarantee financial failure for the majority of participants. In contrast, a multi-level compensation system funded primarily by payments made for the right to participate in the venture is an illegal pyramid scheme."

7 See Peterson, Robert A. and Gerald Albaum (2007), "On the Ethicality of Internal Consumption in Multilevel Marketing," Journal of Personal Selling & Sales Management, Vol. 27 (4, Fall), pages 317-323, for a full discussion of why distributor purchases of MLM product for personal use are properly counted as retail sales, and why the proportion of such sales to all sales of an MLM is not a reasonable criterion for a pyramid scheme.

¹ © Anne T. Coughlan, 2012, all rights reserved.

² J.L. & Helen Kellogg Professor of Marketing, Northwestern University, Evanston, IL 60208,

This document was prepared with the financial and data support of Herbalife Ltd. It represents Anne T. Coughlan's opinions of the Herbalife business as of July 30, 2012.

 

 

What is Herbalife's business?
Herbalife is a global network marketing company offering a range of science-based weight management products, nutritional supplements and personal care products intended to support a healthy lifestyle.
 

What is Herbalife's vision?
We are changing people's lives by providing an opportunity to improve their health and financial well-being.
 

How can I find out more about Herbalife management?
Information about our management team is in our 10K filing which is posted on this website, as are executive biographies in the section, "Corporate Governance."
 

How can I find the biographies for the members of Herbalife Ltd.'s Board of Directors?
Information about our Board of Directors can be found in the Corporate Governance section of our website, on the Board of Directors page.
 

What is the exchange and ticker symbol for Herbalife?
Herbalife is traded on the New York Stock Exchange (NYSE) under the symbol "HLF."
 

How can I buy Herbalife stock?
Herbalife common stock can be bought or sold through a stockbroker, bank or financial institution that offers brokerage services, or through the stock purchase service of your choice.
 

What is Herbalife's fiscal year-end and expected earnings release cycle?
Herbalife's year-end is December 31st. The earnings release cycle is in accordance with Securities and Exchange Commission requirements of 45 days after the end of the relevant quarter for 10 Q filings and 90 days after the fiscal year-end for the year-end filing.
 

Will Herbalife offer a direct investment program (DRIP)?
No, Herbalife does not have a direct purchase plan. Shares of Herbalife can be purchased through the stock purchase service of your choice.
 

How can I access the Herbalife SEC filings?
Herbalife SEC filings are posted on this Web site.
 

How do I request information on Herbalife?
You can receive information by signing up for e-mail alerts delivered directly to your desktop.
 

What is Herbalife's CUSIP number?
Herbalife's CUSIP number is G4412G-10-1.
 

Who is Herbalife's transfer agent?
Herbalife's transfer agent is Mellon Investor Services LLC.

Mellon Investor Services LLC
P.O. Box 3315
South Hackensack NJ 07606
General number (800) 356-2017
TDD for Hearing Impaired (800) 231-5469
Foreign Shareholders (201) 329-8660
 

How can I contact Herbalife Investor Relations (IR)?
If you are unable to find the information you are looking for on this Web site, you may forward your issues and/or concerns to:

Investor Relations
Herbalife International
800 West Olympic Blvd.
Suite 406
Los Angeles, CA 90015
Investor relations e-mail: investorrelations@herbalife.com
 

Do you have another question that hasn't been answered?

 

 
 

Valutare un Business MLM  -  Assessing an MLM Business

Anne T. Coughlan, July 2012

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In a companion piece¹ I summarize common questions and answers about the nature of legitimate multi-level marketing (MLM) businesses, illegal pyramid schemes, and the differences between the two.

The framework from that piece is applied here to assess a specific MLM company's business model - Herbalife - and to conclude that Herbalife meets the criteria for a legitimate MLM, while it fails to meet any of the criteria for an illegal pyramid scheme. The framework includes the fundamental criterion differentiating a legitimate MLM business from a pyramid scheme: compensation not for mere recruitment, but tied to actual product sales. Beyond this, the framework highlights four other business practices that are not "litmus test" criteria for legitimacy, but nevertheless are consistent with the operation of a legitimate MLM while they make little or no sense for a pyramid scheme operator to follow. Lastly, I discuss an issue commonly - but erroneously - seen as a test for pyramid status, the percentage of end-user sales to non-distributor versus distributor ultimate consumers.

Compensation Based on Retail Sales, Not on Mere Recruitment

Herbalife's distributor compensation plan offers compensation that is directly linked to the generation of product sales. It does not award any compensation for mere recruitment³.

An Herbalife distributor can earn income through:

  • Mark-up of a product's price from the wholesale price paid to the retail price;
  • Wholesale commissions on product sales of a downline distributor;
  • Royalty Overrides calculated as a percentage of the suggested retail price of a downline

Supervisor-level distributor's sales volume;

  • Production Bonuses calculated as a percentage of a senior-level distributor's entire downline organization's product sales volume, subject to meeting minimum sales levels; ranges from

2% to 7%; and

  • The Mark Hughes Bonuses, awarded annually to the most successful Herbalife distributors who have demonstrated superior leadership and motivation in the past year; up to 1 percent of product retail sales is given annually, with $52.3 million in awards in 2012.

None of these components are earned without product sales behind them, and all are directly linked to the amount of product sales. Herbalife's compensation structure caps royalty overrides at 44% of Herbalife product sales revenue, so compensation cannot rise without limit or be greater than the company's sales revenue, no matter how the distributor network grows over time. Herbalife thus fails to meet the fundamental test of a pyramid scheme, because its compensation is directly related to sales volume (not to recruiting) and therefore its business cannot collapse under the weight of its compensation plan.

Low enrollment fees

Registration as an Herbalife distributor requires only the purchase of the Herbalife Mini International Business Pack (IBP), a kit that includes the distributorship application and other documents to help the distributor launch his/her business. A few product samples are also included in the Mini IBP. If the registering distributor prefers, s/he can buy the full IBP, which includes all the same documentation, plus a starter supply of some of the company's full sized products (e.g. a canister of Formula 1 Shake; a jar of Herbal Tea Concentrate; and energy bars). The Mini IBP costs $57.75 and the full IBP costs $95.55 in the U.S.

As comparison, the U.S. Direct Selling Association reports that "the median cost for the start-up kit is $99 and usually includes items such as samples, catalogs, order forms and other tools that help the seller begin selling." 4 Thus, Herbalife's registration fee is reasonable in comparison to those of other direct selling companies.

In contrast, an illegal pyramid would not benefit from low enrollment fees, because they are the primary means of compensating incumbent participants in the illegal pyramid scheme.

Scientific and product investment to create and manufacture sellable products

Herbalife makes significant expenditures across multiple scientific areas that support high- quality and innovative product development. It maintains its own design and testing laboratory and manufacturing facilities for its products. It has 180 scientists on staff, 19 of whom have Ph.D.s. Thirty consulting scientists supplement this internal staff, all with Ph.D.s. In 2011, Herbalife spent about $25 million combined on research and development, technical operations, scientific affairs, quality assurance and quality control, product safety, and compliance efforts. Beyond this, an additional $11 million was spent on nutrition affairs, product licensing, and strategic sourcing. Herbalife continues to support outside scientific research, with 12 clinical studies initiated between January 2011 and March 2012, five on the Formula 1 product.

As a result, Herbalife sells well over 100 different products; often positioned as part of an overall program that targets particular segments of consumers (e.g. weight-loss; products focused on women versus on men; etc.). This enhances sellability in two ways: first, it improves distributors' ability to match products to the particular buyer's desired benefits; and second, it naturally promotes cross-selling of multiple products together.

In addition to the product portfolio itself, Herbalife's retail pricing is attractive when compared with competitors' products; in a May 2012 comparison with other protein shake products, Herbalife's Formula 1 product was priced at $1.29 per serving, ranked 8th in price per serving out of 11 products compared (i.e., only three were priced lower). This price point is even more attractive when one considers that the consumer gets the product plus the personal-selling services of education and convenience when buying Herbalife products, while purchasing the competitive products from a bricks-and-mortar store is a "do-it-yourself," lower-service purchasing experience. Herbalife Nutrition Club (NC) members who were surveyed reported their primary reason for attending; the top two reasons were "Healthy Meal Replacement" (listed by 54 percent) and "Advice and Coaching by the NC Operator" (listed by 28 percent). These two reasons reinforce the dual importance of quality/sellability of product, and customer service that is the hallmark of direct selling.

These efforts do result in sellable products, one obvious measure of which is Herbalife's actual sales results through time. The company's 32-year history suggests its ability to design, produce, and sell products that end-users want to buy; it would be hard to imagine a company continuing in existence for this long if its products did not offer value to end-users!

And indeed, Herbalife has enjoyed robust sales growth. Herbalife's net sales (the actual revenue to Herbalife after distributor allowances) grew from 2007 to 2011 from over $2.145 billion to over $3.454 billion, a 61 percent increase. The company paid out over $1 billion in royalty overrides to distributors in 2011 (which does not include wholesale or retail profits also earned by distributors).

In contrast, an illegal pyramid would have little incentive to make these scientific investments in product design and quality in order to enhance the sellability of its product line, because these investments are wasted in a scheme centered on "headhunting fees" rather than on successful product selling.

Willingness to take back unsold product when a distributor resigns

Herbalife offers a buy-back policy if a distributor decides to resign the Herbalife business, but is left with unsold inventory, appropriately adjusting commissions or royalty payments paid to the upline distributor for the now-returned product. Herbalife also requires a sponsoring distributor to allow a new distributor applicant to decline the business opportunity at any time within 90 days of becoming an Herbalife distributor. These two policies allow the Herbalife distributor to consider both the initial decision to sign up, and a later decision to leave the business, without the burden of unsellable inventory to bias those decisions. Herbalife also offers a money-back guarantee, but product return and buy-back expenses were only 0.4% of retail sales in 2011,v suggesting this is a minimal problem for the company.

In contrast, an illegal pyramid suffers if it offers a reasonable buy-back policy, because any products it does offer for sale have little value or marketability, and thus the pyramid scheme operators would likely face very high return rates.

Discouraging distributors from inventory loading

Herbalife discourages both new and ongoing distributors from loading up on inventory that the distributor cannot sell, or does not want to consume, in the near term. A sponsor of a new distributor is expressly forbidden from requiring the new distributor to maintain a minimum stock level of products or materials. Ongoing distributors are similarly not permitted to stock up on products primarily in order to advance their position in the Marketing Plan and face sanctions if they do so. Instead, the company tells distributors that "Products purchased from the Company are intended to be sold and distributed to retail customers and downline Distributors, or used for Distributors' and their immediate families' own personal consumption."

An illegal pyramid has no incentive to promulgate a no-inventory-loading policy, because any product it might sell would have little or no real market value, so discouraging inventory loading would result in no product being bought at all and thus no fueling of the pyramid scheme that gives commissions on mandatory purchases by new recruits.

Consumption by Non-Distributor versus by Distributor End-Users is Not a Relevant Criterion

Please see my companion document, "FAQ on MLM Companies" for a discussion of non-distributor consumption. The lack of any (or any significant) non-distributor consumption might be informative in trying to assess whether a firm is operating a pyramid scheme, but only if it is also established that the product for sale has little or no value and that sales are driven only by a money-making program based on recruitment (4). Herbalife's compensation plan, based on retail sales, along with its no-inventory-loading policies, mean that it does not reward distributors for mere recruitment.

Herbalife, like other MLM firms, does not have an end-user product- and quantity-specific database that would permit precise measurement of the proportion of sales made to non- distributor end-users. Beyond other traditional direct sales methods for in-home consumption, it estimates that 34-41 percent of sales are driven by daily consumption methods, mainly consumption at Nutrition Clubs but also consumption through other methods such as Weight Loss Challenges. The development and spread of Nutrition Clubs is a notable indicator of the attractiveness of Herbalife products at retail. These are locations (either a distributor's home or a commercial location) where an Herbalife distributor provides single-serve product(s) (e.g. the Formula 1 Shake, often offered together with herbal aloe concentrate and herbal tea concentrate) to his/her retail customers. The customer can pay a single day's membership fee and have the product prepared for him/her. The results of a survey in 2010 indicate that 55 percent of Herbalife retail customers who have visited a NC in the U.S. do so every day, and that 55 percent of those who have visited end up attending for longer than six months.

Thus, not only does Herbalife's compensation plan fail to reward mere recruitment, but its products are in fact sold broadly to non-distributor end-users as well as to distributors for personal consumption.

In Summary…

Herbalife's compensation plan and business strategy are consistent with the practices of a legitimate MLM, from its practice of paying distributors only based on actual sales to its investments in product and marketing strategies to promote sales and growth. Herbalife's practices are inconsistent with the operation of an illegal pyramid, and an illegal pyramid scheme operator would have little or no incentive to follow these practices. My conclusion is therefore that Herbalife indeed does operate a legitimate MLM business.

Hallmarks of a Legitimate MLM Company:

How Herbalife Measures Up:

Compensation based on 
retail sales, not mere recruitment

All compensation is directly linked to product sales.

Low enrollment fees

Herbalife's Mini IBP costs $57.75 in the U.S., well below the median cost of a start-up kit.

Scientific investments in product design, 
consistency, and 
reliability promote 
product sellability

Significant scientific investments combined with robust sales growth signals sellable products.

Buy-back policy

Herbalife buys back product from a resigning distributor who is left with unsold inventory.

Discouragement of 
inventory- loading

The buy-back policy is accompanied by a claw-back provision that takes away the incentive for an upline to urgedownlines to inventory-load; Herbalife explicitly discourages inventory-loading.

Consumption by 
non-distributor 
end-users

While not a true test of legitimacy, Herbalife has significant non-distributor consumption, both at home and inNutrition Clubs.

Endnotes

Coughlan, Anne T., "FAQs on MLM Companies," July 2012.

Multi-level marketing is described in brief in Coughlan, Anne. T. et al. (2006), Marketing Channels, 7th Edition, Upper Saddle River, NJ: Pearson/Prentice-Hall, pages 454-460, and the effect of compensation on sales and network growth is investigated in Coughlan, Anne T. and Kent Grayson (1998), "Network Marketing Organizations: Compensation Plans, Retail Network Growth, and Profitability," International Journal of Research in Marketing, vol. 15, pages 401-426. Also of interest for further information on multi-level marketing are Berry, Richard (1997),

Direct Selling: From Door to Door to Network Marketing , Oxford: Butterworth-Heinemann; Bartlett, Richard C. (1994), The Direct Option, College Station: Texas A&M University Press; and Peterson, Robert A. and Thomas R. Wotruba (1996), "What is Direct Selling? - Definition, Perspectivs, and Research Agenda," Journal of Personal Selling & Sales Management, Vol. 16 (4, Fall), pages 1-16.

For example, The Webster v. Omnitrition case (Webster v. Omnitrition Intern., Inc. C.A.9 (Cal.), 1996) says that the "Sine qua non of [a] 'pyramid' scheme is [the] right to receive, in return for recruiting other participants into [the] product sales program, rewards unrelated to [the] sale of product to ultimate users."

FTC v. BurnLounge (U.S. District Court, Central District of California, No. CV 07-3654-GW(FMOx), Statement of Decision, notes that "Inventory-loading pyramids are illegal not simply because there are wholesale purchasing requirements. They are illegal because the purchases are incentivized by commissions that result from recruiting others to join the scheme through similar purchases."

Stull v. YTB International (U.S. District Court, Southern District of Illinois, Civil No. 10-600-GPM, September 26,2011), states that "A lawful MLM program is distinguishable from an illegal pyramid scheme in the sense that the 'primary purpose' of the enterprise and its associated individuals is to sell or market an end-product with end- consumers, and not to reward associated individuals for the recruitment of more marketers or 'associates.'"

The Amway case (FTC Final Order, In the Matter of Amway Corporation, May 8, 1979) states: "'Pyramid' sales plans involve compensation for recruiting regardless of consumer sales. In such schemes, participants receive rewards for recruiting in the form of 'headhunting fees' or commission on mandatory inventory purchases by the recruits known as 'inventory loading.'"

Direct Selling Association, The Difference Between Legitimate Direct Selling Companies and Illegal Pyramid Schemes," available atwww.dsa.org.

5 Herbalife Annual Report 2011 , page 18.

See for example FTC v. BurnLounge: "A structure that allows commission on downline purchases by other distributors does not, by itself, render a multi-level marketing scheme an illegal pyramid." Also pertinent is an FTC letter of January 24, 2004 from James A. Kohm to Neil Offen, stating: "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. A multi-level compensation system funded primarily by such non-incidental revenues does not depend on continual recruitment of new participants, and therefore, does not guarantee financial failure for the majority of participants. In contrast, a multi-level compensation system funded primarily by payments made for the right to participate in the venture is an illegal pyramid scheme."

¹ © Anne T. Coughlan, 2012, all rights reserved.

² J.L. & Helen Kellogg Professor of Marketing, Northwestern University, Evanston, IL 60208,

This document was prepared with the financial and data support of Herbalife Ltd. It represents Anne T. Coughlan's opinions of the Herbalife business as of July 30, 2012.

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