Multi-Level Marketing

Published on March 26th, 2014

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Leading Nowhere: The Industry Within the MLM Industry

When Pershing Square hedge fund manager Bill Ackman renewed his push on federal regulators earlier this year to investigate Herbalife — a multilevel marketing company that Ackman says is a pyramid scheme — he zeroed in on “lead generation” businesses linked to the company that his website called “fundamentally corrupt.”

Ackman noted that several of Herbalife’s key players, who had reached high levels in the organization, left when the supplement company — which was coming under increased scrutiny by consumer advocates and congressional officials — decided to distance itself from this type of business. As a result, several Herbalifers took their lead generation businesses with them to other MLMs, including to Vemma, setting up new or revamped sites that critics say can put consumers at financial risk.

What is lead generation?

Simply put, in the business community lead generation is a way companies solicit inquiries from customers for the purpose of future sales. But in the MLM industry, lead generation companies can act as revenue generators for upper-level members (called distributors, affiliates and sometimes brand partners) in several ways. Owners of the lead generation companies set up websites offering vague business opportunities to attract potential new recruits. The companies then may sell the names and contact information of these potential recruits to current MLM distributors. The current MLM distributors want those names because they are looking to increase their own revenues by increasing their sales teams, also known as downlines, from whom they earn compensation.

Lead generation sites, which are often advertised on television, the Internet, and in radio ads, may also sell an assortment of business tools, such as “decision packets” that the website promises will help potential recruits decide whether to join the vague business opportunity. If a consumer does end up joining and becoming a distributor for the MLM, the lead generation site may also sell training videos and website platforms to help new distributors grow their own downlines so their compensation will increase. All of this benefits not only the owners of the lead generation sites but the MLMs that are getting the new distributors. It’s an industry within the MLM industry that critics say may drain the pockets of consumers looking to get wealthy, while lining the pockets of the owners of the lead generation sites.

MLM expert Bill Keep, who is dean of the business school of the College of New Jersey and who has investigated Herbalife, said lead generation sites can be troublesome.

“Some top MLM distributors have been accused of using deceptive practices to gather names and contact information of ‘prospects’ that they then sell to newly recruited distributors at considerable profit,’’ he said. “The selling of such unproven ‘leads’ and other business support services can increase the cost of trying to succeed with little documented payoff.”

Herbalife backs away from lead generation

While Herbalife allowed  — and Ackman says benefited greatly from — its high-level members’ lead generation efforts, in 2012 it backed away from these businesses. The company, under increased scrutiny, issued an advisory saying it would not allow distributors who used “unregistered business methods” (aka lead generation businesses) to build their teams to advance up the compensation ladder. Herbalife explained its rational for prohibiting such tactics as follows:

It could be misconstrued as supporting and rewarding Distributors with recognition when the methods used to achieve the qualification may involve misleading advertising or other abuses and therefore put the Distributor and Herbalife at risk.

As a result of the new edict, many key players left Herbalife, including Anthony Powell who had been a distributor for the company for 22 years and reached its President’s Team level.

Herbalife spokeswoman Barb Henderson said about Powell’s departure:

Anthony Powell’s stated focus is on creating ‘explosive growth’ fueled by lead purchases. As he has also stated, this is a ‘difference in philosophy’ not consistent with Herbalife’s focus on building business through daily consumption of our nutrition products.

Vemma welcomes former Herbalifers

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Despite Powell’s focus on lead generation, Vemma CEO Benson K. Boreyko welcomed Powell and his whole core team with open arms. Powell shortly advanced to the “Royal Ambassador” level at Vemma, which means, according to 2013 Vemma’s income disclosure statement, Powell is earning on average close to $1 million in bonuses.

Powell now runs lead generation sites that not only benefit him but Vemma —  through Global Pro Systems (GPS). Global Pro Systems is copyrighted to CRM Logix for which Powell lists himself as CEO on his LinkedIn page. One of his sites, 6FigureFrenzy, promises that for $29.95 a month and a $10 set-up fee, you’ll get “cool things” that will help you “conquer the world.” These cool things include email leads, online training, 24-7 coaching, and mobile apps.

It’s not until you look for the fine print that it discloses that the opportunity is to earn income with Vemma and that will also require purchases.

So, if you chose to participate, Vemma makes money and Powell makes money. Ca-ching! You may make money but are highly unlikely to make anywhere near six frenzied figures. Look closely at Vemma’s income disclosure statement. About 78% of “active affiliates” on average earned less than $1,600 in 2013 – an income that is, one should note, only four figures. And only 0.11% (or about 115 distributors) earned six figures in 2013.

Consumers complain

Consumers who complained to the FTC about Global Pro Systems said the company uses high-pressure tactics to push recruits to purchase additional products, repeatedly charged their credit cards for monthly purchases they did not want, charged for training material that was too vague and unhelpful and that the company would not refund their money when they tried to return the materials.

Said one consumer:

The product was supposed to be FREE! I was misled on information regarding work at home. The man on the site raves about scams and tells you he will give you FREE information and won’t ask for a penny like other websites, only to ask you to pay 9.95 for an express starter package and then I find out that my card will be billed 39.95 within 14 days. So the information is not free nor does he explain what kind of work will you be doing.

Said another:

Global Pro Vemma Nutrition advertised on the radio for a program to work at home. (T)hey advertised you could get started for $40 (but) first of all it turned out to be $50, then (when) you have your phone interview they say it will be $300 to start your training (and then) you have to pay for advertising. (T)hey also say that it is possible to make six figures within a year or two (but) after you sign up they send you a disclaimer which states only 25 percent of the company actually make that …

Powell’s team

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When Powell came to Vemma he brought his core team with him and they are featured in testimonials on several other lead generation sites that funnel recruits to Vemma.

anothergreatsuccesslissaLissa and Mark Munson were pictured endorsing BusinessSuccessPack.com, which had an “F” rating from the BBB (and now is no longer active on the Internet). Lissa, who tells Vemma readers “you need almost blind faith in your leaders,” is a busy woman. Moving on from BusinessSuccessPack, she is also featured on InterneteCashSystem.com and homebusinesspack.com. In fact, Munson, Kairrie McClain and John Beall – all part of Powell’s team –are pictured on homebusinesspack.com, which also funnels recruits to Vemma. McClain, Munson and Beall are also featured on paidathome.com described in the fine print also as an online method of becoming a Vemma brand partner. These sites are run by Kaption Media, or as it describes itself, “kapture prospects.” Capture prospects indeed.

Other Vemma high level distributors with sites

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Another distributor of Vemma, Matt Morrow, who also has reached the Royal Ambassador level, runs a lead generation business as well called Vemmabizleads.com, which promises to lead Vemma distributors to new recruits “in many cases without you ever having to talk to the prospect.” Costs range from $200 for 500 leads to $2,000 for 10,000 leads.

The site is careful to say in a disclaimer that the program is not affiliated or offered by Vemma and Vemma has no liability in respect to it. But its webpage also notes in large letters: “The simplest and most cost effective way to build your Vemma business.”

Says Morrow on his site:

Our business is simple; make a friend, then make a sale. We offer up to 10,000 potential new “friends” for you to build with who all expressed an interest in a home business for a FRACTION of the cost of competitors.

When TINA.org asked Boreyko why Vemma was embracing distributors who are running lead generation sites, Boreyko responded via an email from Vemma’s public relations firm. The email said:

We have a compliance department that monitors all third-party lead generation programs. While there are a handful of affiliates that operate third party companies that sell lead services, we monitor all lead generation programs, and take rapid action in the rare cases where we find mistakes are made.

Vemma’s compliance department may want to work extra hard. Earlier this month, the FTC signaled that it is taking a closer look at lead generation in general. Speaking at a consumer conference in Washington, D.C., FTC Bureau of Consumer Protection Director Jessica Rich referred to lead generators as “the artery of the fraud.”

More information about Vemma and MLMs can be found here.

UPDATE 9/10/15:  After the FTC filed a complaint against Vemma, temporarily shutting it down and seizing its assets, Anthony Powell left Vemma and is reportedly involved in a new MLM, Zyndio.

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Multi-Level Marketing – a way of distributing products or services in which the distributors earn income from their own retail sales and from retail sales made by their direct and indirect recruits.

Vemma Nutrition Company is a privately held multi-level marketing company that sells energy drinks, nutritional beverages and weight management products. Vemma, which calls itself an affiliate marketing company, is based in Tempe, Arizona. It was founded in 2004 by Benson K. Boreyko and his sisters. Vemma is an acronym for vitamins, essential minerals, mangosteen and aloe.

Sometimes termed “mouse print” or, more benignly, “disclosure language”, and presented in miniscule font. It is there to take back every enticing offer made in the ad.

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