Is Your Network Marketing Company About to Change? | Network Marketing in the Post-“FTC Settlement” Era
If you're in the network marketing space at all, and especially if your downline is made up mostly of distributors/reps/consultants/etc. then this is something that you NEED to know.
Your network marketing company might be about to change.
Right now, in the wake of the settlement between the FTC and Herbalife—an iconic Network Marketing company—the government may have just radically changed the business model of network marketing.
How the Herbalife fallout affects all network marketers...
Traditionally, many network marketing companies have required that distributors/reps/etc. be on something called "autoship".
This is where distributors are required to purchase a certain amount of product every month in order to meet their numbers.
Those in the network marketing companies will tell you that this is so that people who are selling the product, and recommending it to others, are actually using the product, and therefore recommending it honestly.
(Note: I think that distributors/reps/etc. should be using the products that they recommend, in order to give honest recommendations....the problem is when a company's growth consists mostly of distributors on autoship.)
Sometimes you see a network marketing company go through a period of "hypergrowth" where sales are through the roof and teams are growing like madness.
In many cases, these companies are entirely recruitment based, and volume is being produced by the mandatory 'autoship'.
This is where network marketers get a bad reputation. You know...when you're asked "isn't this a pyramid scheme?"
The "pyramid scheme" misnomer comes from practices like this, where a company is focused almost exclusively on recruiting. If you are making money by recruiting distributors who make money by recruiting distributors, and there is little reliance on customers who are just in it for the product.... Well, that sets off some people's alarm bells.
And that's what happened with the FTC and Herbalife.
The fact is, we are not compensated to recruit people.
We are compensated for selling product volume.
That's how it's supposed to work in theory, anyway.
And to build a network marketing company that is both profitable and sustainable...
...one where most of your downline doesn't quit or switch companies...
...and one where you are not reliant on a constant influx of new recruits who need a constant influx of new recruits....
...you need to focus on getting a solid base of customers underneath each distributor/rep/etc.
The majority of product volume is not being purchased by the general public...
...but by distributors themselves, which presents some potential legal issues.
One of the big "red flags" to look out for here is when companies focus a lot on internal sales: they encourage their distributors/reps/consultants to purchase a lot of product "for their business".
This can create a massive amount of cashflow for the people at the top, without generating any actual sales to people who are just interested in using the product.
And the FTC is starting to stand a stand against such policies.
And now back to the Herbalife story...
About 2 years ago, Bill Ackman, a hedge fund manager, publicly attacked Herbalife with these false and misleading accusations and shorted the company’s stock.
This created a battle between Ackman and another investor named Carl Icahn, who sided with Herbalife.
And while the two were battling it out, in the media, about whether this company was a pyramid scheme or not...
The FTC started looking into the Herbalife’s dealings and filed a complaint in US District Court, ‘Federal Trade Commission v. Herbalife International of America, Inc’.
The result was that the U.S. government was forced to investigate Herbalife for 2 full years.
Herbalife finally reached a settlement with the FTC in mid-July 2016…
The results shocked a lot of people...
...attorneys who were experienced in the network marketing space, distributors, and especially top earners in the company.
The autoship strategy is what they were specifically warning against.
Since Herbalife is actually one of the more retail focused companies in our industry, they had no trouble agreeing to the terms set by the FTC.
But for many of us, this is a risky gamble.
So what are these terms?
What do they mean for our industry?
And that's exactly what we're about to explore...
What you'll learn today are the three main points that came out of the 'FTC v. Herbalife' settlement, which are most relevant to YOU...
And why they are a WARNING to our industry
Settlement Result #1: Controlled Sales Volume
Per the settlement, as I understood it, Herbalife distributors are now required to have 66% of all their organizational product volume come from retail sales.
That means that 66% of a Herbalife distributor's sales must comes from customers, not from other Herbalife distributors.
That's a HUGE restriction!
If this gets implemented industry-wide, then it could mean BIG changes to how your business in run.
But there's good news in this retail v. distributor restriction: it limits internal sales, which means that those 6-figure earners at the top can no longer make all their money from distributors/reps/etc. buying products for their businesses.
Settlement Result #2: No More Mandatory Autoship
The next settlement results was no more mandatory autoship.
Basically, this means that distributors cannot be required to enroll in autoship for product every single month.
And let's face it...
...this is a big part of many companies' business plans.
Autoship as a requirement for getting a check and being a part of distributorship is simply not allowed anymore.
If this rule goes industry wide, then the businesses that are based largely (or solely) on recruitment and personal consumption will no longer be able to operate the same way they were before.
Settlement Result #3: Is This Coming Law?
Today, the restriction on product volume and banning of mandatory autoship are only binding for Herbalife, NOT the entire industry.
...many legal experts think that this is a sign of things to come. These restrictions may in fact become industry standard and become legally binding for all companies.
And if this happens, many companies in the network marketing industry will have to drastically change the way they operate.
And many network marketers will have to drastically change the way they run their businesses.
"So What's Next For My Business?"
How are you going to respond to these 3 major changes, if it applies to your commission check?
Because even if you are not affected by this ruling today, you should be thinking about the near future....
To start with, you can ask yourself these 3 questions.
- How is your company teaching you to build?
- How is your upline teaching you to build?
- How are you actually building your business?
Because if you're focusing on recruiting and not on getting customers, then your business may be legally labelled a "pyramid scheme" and be shut down.
So how can you ensure that your business survives these coming changes and that you don't lose your commission check because of some new legal rules?
Because if your focus is on recruiting and not on getting customers, then your business may be legally labelled a "pyramid scheme" and shut down.
Here are 2 simple ways to avoid that.
How to Build an Opportunity Prospect List Online
Building an opportunity prospect list is actually WAY easier and WAY less stressful online than it is offline.
I can tell you this from experience, because I tried the traditional "talk to everyone you know and everyone you meet about your business" approach when I first joined a network marketing company and I totally failed at it.
When I started building my business online, however, I was able to master a small set of skills and eventually get prospects to COME TO ME...
...people who were already interested in what I was doing were raising their hands (literally, sending me emails) and saying "Yes! I want to know more." "I want product samples." Or simple "I want to join your business. How do I start?"
Think for a moment about what that would look like in your business....
Well, to make this happen, you have to build a following and build a 'brand for yourself. Now, this has nothing to do with logos, slogans, and fancy colour schemes, and everything to do with who you are, what you stand for, and what you want to help people with.
Once you have a following of loyal fans, and not just a list of customers and team members inside your business, then you are completely immune from any fallout that happens if and when our industry changes.
For instance, let’s say something happens to your network marketing company—and heaven forbid, it goes away (as happens from time to time) or the FTC says your company isn’t compliant and your commission check disappears…
Well, if you've followed my branding strategy, that's not a problem!
...some of your followers will join your network marketing team, but I've found that as many as 90% of people won't join your business but are still looking for training on how to build their own businesses online.
If you can be the person who teaches them that, whether by offering your own products or someone else's products as an affiliate, then you can still make money from those 90% of people who say "no" to your business, and you'll build a community of people who like, know, and trust you and to whom you can sell other products in the future.
Because after all, you are going to learn A LOT about building a networking business as you grow and succeed, so why not build a community and some “security” by helping others learn what you’ve figured out.
That's why you build a list, a following, and a branding using attraction marketing.
How to Build a Product Prospect List Online
And speaking of customers, many top earners in our industry have built HUGE lists, followings, and brands, by introducing prospects to their products first.
If you can build a brand around whatever it is that you do, whatever it is that you're passionate about....
- health and wellness
- essential oils
- cleaner, greener, safer skin care
...then you can build a HUGE following of loyal fans who will follow you wherever you go, just by sharing what you're passionate about.
And this strategy can result in a really solid foundation of loyal customers, too, making that 66% retail sales rule a piece of cake.
The fact is that if you start by solving problems in your niche market, then you can attract a huge following and turn loyal fans into customers and team members for any business or product whatsoever.
And this strategy involves no home parties...
...no cold calling...
...no prospecting strangers in the park while your kids play on the slide...
...no relying on friends and family for sales.
You can use attraction marketing to help people solve any problem.
- money problems
- health problems
- energy problems
You can use attraction marketing to help people solve any problem.
If you become somebody who can solve someone else’s problems, in any market or niche, whether inside of or outside of network marketing…
Then you position yourself beautifully to actually...
Have a REAL business and long-term security...
...regardless of what happens in your network marketing company.
Using attraction marketing strategies means creating the ultimate security against anything that happens with the FTC or your network marketing company and the ability to attract endless product customers to you as well, if that’s what you desire.