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Herbalife -
business modelPublished 07/31/2014 07:30 PM | Updated 10/03/2016 10:36 PM
What is a pyramid scheme and how does it differ from a MLM? What makes Herbalife a legitimate MLM?
An illegal pyramid scheme awards payments to participants solely for bringing other participants into the scheme. A legitimate multi-level marketing company, like Herbalife, pays compensation to Herbalife independent distributors based on the sale of product to satisfy demand by end-users.
Herbalife is focused on selling its products to people who want to consume them. There is widespread consumer demand for Herbalife products. Independent research by Nielsen in 2013 showed that 8% of the U.S. adult population - or 19.2 million - have purchased an Herbalife product for personal use. A separate study by Lieberman Research Worldwide in 2012 showed that 5% of U.S. households, or 5.7 million households, had purchased an Herbalife product within the last three months.
Herbalife distributors are compensated solely based upon product sales (which includes retail profit from direct sales to customers) and the product sales of the distributors in their "downline." Nothing is earned by distributors for mere recruitment or for converting a customer to a Herbalife preferred member or distributor. This element of the Herbalife
business model is referred to as multi-level marketing.
In a multi-level marketing
model, distributors do not receive compensation solely for recruiting other distributors into their downline. Instead, they become eligible for increased discounts or "commissions" only when the new distributors in their downline purchase Herbalife products for consumption and/or for resale to consumers.
Herbalife products are sold by Herbalife distributors.
Preferred Members join simply to receive a discount on products they consume; distributors join to make part-time income as well, and a small percentage join in search of full-time income.
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