Over on BloggingStocks, I've written about Barry Minkow's allegations of fraud at multi-level marketing giant Herbalife.
Here on WalletPop, I thought it might be worth taking a look at Herbalife -- especially its recruiting tactics -- from the personal finance perspective.
On the Herbalife webpage, there's a form you can fill out to receive more information about becoming an Herbalife distributor. Among the questions:
How much would you like to earn monthly?
An extra $500
An extra $1,000
An extra $2,000
The sky's the limit!
Well who couldn't use an extra $500 a month? But a better question is: What are your chances of earning an extra $500 each month as an Herbalife distributor? The company's statement of average gross compensation (PDF) tells the story.
Only around 25% of Herbalife distributors reach the rank of "Supervisor" or higher, which qualifies them to earn commissions on their sales volume and the sales volume of those they sponsor. Of that 25% that reach "Supervisor" or higher, 87.5% are supervisors, with average annual earnings of $549. That's $45.75 per month. Another 5.8% are at the "World Team" earnings level, with average annual earnings of $4,219. That's getting better, but still about $150 below the minimum amount you could check off under how much you'd like to earn monthly on Herbalife's questionnaire.
Think about it: only 6.6% of "leaders" fall into a category reflecting average earnings of more than $500 per month. And only 25% of all distributors reach any of the "leader" categories. So the chances of a distributor earning "an extra $500" per month are about 1.65%!
Is it misleading to make "an extra $500" the lowest dollar level on the questionnaire when the chances of reaching that level are only slightly higher than the chances of any given newborn turning out to be a genius? It sure seems like it to me.
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