Thursday, February 14, 2008

The Mirage of Multilevel Marketing

The Mirage of Multilevel Marketing

Stephen Barrett, M.D.


Don't be surprised if a friend or acquaintance tries to sell you vitamins, herbs, homeopathic remedies, weight-loss powders, or other health-related products. Millions of Americans have signed up as distributors for multilevel companies that market such products from person to person. Often they have tried the products, concluded that they work, and become suppliers to support their habit.

Multilevel marketing (also called network marketing) is a form of direct sales in which independent distributors sell products, usually in their customers' home or by telephone. In theory, distributors can make money not only from their own sales but also from those of the people they recruit.

Becoming an MLM distributor is simple and requires no real knowledge of health or nutrition. Many people do so initially in order to buy their own products at a discount. For a small sum of money -- usually between $35 and $100 -- these companies sell a distributor kit that includes product literature, sales aids (such as a videotape or audiotape), price lists, order forms, and a detailed instructional manual. Most MLM companies publish a magazine or newsletter containing company news, philosophical essays, product information, success stories, and photographs of top salespeople. The application form is usually a single page that asks only for identifying information. Millions of Americans have signed up, including many physicians attracted by the idea that selling MLM products can offset losses attributable to managed care.

Distributors can buy products "wholesale," sell them "retail," and recruit other distributors who can do the same. When enough distributors have been enrolled, the recruiter is eligible to collect a percentage of their sales. Companies suggest that this process provides a great money-making opportunity. However, it is unlikely that people who don't join during the first few months of operation or become one of the early distributors in their community can build enough of a sales pyramid to do well. And many who stock up on products to meet sales goals get stuck with unsold products that cost thousands of dollars. Some companies permit direct ordering of their products, which avoids this problem.

Dubious Claims

More than a hundred multilevel companies are marketing health-related products. Most claim that their products are effective for preventing or treating disease. A few companies merely suggest that people will feel better, look better, or have more energy if they supplement their diet with extra nutrients. When clear-cut therapeutic claims are made in product literature, the company is an easy target for government enforcement action. Some companies run this risk, hoping that the government won't take action until their customer base is well established. Other companies make no claims in their literature but rely on testimonials, encouraging people to try their products and credit them for any improvement that occurs.

Most multilevel companies tell distributors not to make claims for the products except for those found in company literature. (That way the company can deny responsibility for what distributors do.) However, many companies hold sales meetings at which people are encouraged to tell their story to the others in attendance. Some companies sponsor telephone conference calls during which leading distributors describe their financial success, give sales tips, and describe their personal experiences with the products. Testimonials also may be published in company magazines, audiotapes or videotapes. Testimonial claims can trigger enforcement action, but since it is time-consuming to collect evidence of their use, government agencies seldom bother to do so.

Government enforcement action against multilevel companies has not been vigorous. These companies are usually left alone unless their promotions become so conspicuous and their sales volume so great that an agency feels compelled to intervene. Even then, few interventions have substantial impact once a company is well established.

Recent Promotions

During the past 15 years, I have investigated more than 50 multilevel companies marketing health products. Here are some recent examples:

Body Wise International, of Carlsbad, California, markets "fitness" products and weight-management products. In 1995 the FTC charged the company with making unsubstantiated claims that Cardio Wise was "designed to give an extra margin of insurance against heart disease" and that its weight-management products would foster weight loss without dieting. The company signed an FTC consent agreement prohibiting it from making unsubstantiated health-related claims in the future.

Mary Kay, well known for its cosmetic products, is now marketing a $29.50-per-month daily supplement packet alleged "to help bridge the gap between what a healthy diet provides and what a woman needs for optimum health and beauty." Tufts University Diet & Nutrition Letter has observed: (1) the supplements contain huge amounts of thiamin, riboflavin, vitamin B6, and vitamin B12, which almost all Americans get from their food; (2) they lack iron, which might benefit some women of childbearing age; and (3) more rationally formulated multivitamin/mineral preparations are available elsewhere for one tenth the cost.

In 1993, Melaleuca Inc., of Idaho Falls, Idaho, began offering a "wellness assessment" by a company that provided in-home testing. The procedure included a questionnaire, a blood cholesterol test, a blood-pressure reading, and an estimate of the percentage of body fat. The resultant report evaluated personal risk factors and recommeneds modifications in diet, exercise habits, and lifestyle. The recommendations includde taking a "balanced vitamin/mineral supplement every day" and "working closely with a 'Vitality for Life counselor' (a Melaleuca distributor) to implement the suggested changes. Prospects were then encouraged to purchase a "Vitality Pack" of "55 different vitamins, minerals, and other nutrients, all in the proper amounts and proper proportions," which wholesales for $263.40 for an annual supply. Although the health-risk appraisal could provide useful information, the Vitality Pack is a waste of money. People who wish to take a multivitamin/multimineral formula can obtain equivalent nutrients at a drugstore for less than $50 per year. The company also marketed a patented "fat conversion activity bar," an expensive candy bar whose ingredients are claimed to make exercise easier by "inhibiting the body's ability to hold on to fat."

Matol Botanical International, a Canadian firm, markets Km, a foul-tasting extract of 14 common herbs. Km was originally marketed as Matol, which was claimed to be effective for ailments ranging from arthritis to cancer, as well as for rejuvenation. Canada's Health Protection Branch took action that resulted in an order for the company to advertise only the product name, price, and contents. In 1988 the FDA attempted to block importation of Matol into the United States. However, the company evaded the ban by adding an ingredient and changing the product's name. The product literature acknowledges that Km has never been tested for effectiveness against any disease and states that distributors should not diagnose or recommend its products for any specific disease. However, many distributors do so

Nature's Sunshine Products, of Spanish Fork, Utah, markets herbs, vitamins, other nutritional supplements, homeopathic remedies, skin and hair-care products, water treatment systems, cooking utensils, and a weight-loss plan. Its more than 400 products include many that are claimed to "nourish" or "support" various body organs. Its salespeople, dubbed "Natural Health Counselors," are taught to use iridology (a bogus diagnostic procedure in which the eyes are examined), applied kinesiology (a bogus muscle-testing procedure), and other dubious methods to convince people that they need the products.

Nu Skin International, Inc., of Provo, Utah, sells body-care products and dietary supplements.

Nu Skin's Interior Design division markets expensive antioxidant, phytochemical, and "active enzyme" products. The enzyme products are said to be important because "the majority of cooked or processed foods we eat lack an ideal level of enzyme activity" needed for digestion. This statement is nonsense because the enzymes needed for digestion are made by the body's digestive organs. In 1993, the company and three of its distributors agreed to pay a total of $1,225,000 to settle FTC charges that they made unsubstantiated claims for Nutriol Hair Fitness Preparation and two skin-care products. In 1997, the company agreed to pay $1.5 million to settle charges that it had made unsubstantiated claims for five more of its products. The products, which contained chromium picolinate and L-carnitine were falsely claimed to reduce fat, increase metabolism, and preserve or build muscle.

Sunrider Corporation, of Torrance, California, claims that its herbal concoctions can help "regenerate" the body. Although some ingredients can exert pharmacologic effects on the body, there is little evidence they can cure major diseases or that Sunrider distributors are qualified to advise people about how to use them properly. During the mid-1980s the FDA ordered Sunrider to stop making health claims for several of its products. In 1989 the company signed a consent agreement to pay $175,000 to the state of California and to stop representing that its products have any effect on disease or medical conditions. The company toned down its literature but continued to make therapeutic claims in testimonial tapes included in its distributor kits. In 1992 a jury in Phoenix, Arizona, concluded that Sunrider had violated Arizona's racketeering laws and awarded $650,000 to a woman who claimed she had been misled by company representations and had become ill after using some of its products. On January 7, 1997, The Wall Street Journal reported that Sunrider's president and his wife were indicted for conspiracy, tax evasion, and smuggling. The article stated that they had (1) underreported their 1987-90 income by more than $125 million, (2) used foreign companies they controlled to overcharge Sunrider for ingredients so the company could understate its profits, (3) wired millions of dollars to pay the inflated charges, but "recycled" the money to purchase U.S. real estate and Chinese antiques, and (4) filed falsely low customs declarations to reduce the import duty on dozens of art works.

Motivation: Powerful but Misguided

The "success" of network marketing lies in the enthusiasm of its participants. Most people who think they have been helped by an unorthodox method enjoy sharing their success stories with their friends. People who give such testimonials are usually motivated by a sincere wish to help their fellow humans. Since people tend to believe what others tell them about personal experiences, testimonials can be powerful persuaders.

Perhaps the trickiest misconception about quackery is that personal experience is the best way to tell whether something works. When someone feels better after having used a product or procedure, it is natural to give credit to whatever was done. However, this is unwise. Most ailments are self-limiting, and even incurable conditions can have sufficient day-to-day variation to enable bogus methods to gain large followings. In addition, taking action often produces temporary relief of symptoms (a placebo effect). For these reasons, scientific experimentation is almost always necessary to establish whether health methods are really effective. Instead of testing their products, multilevel companies urge customers to try them and credit them if they feel better. Some products are popular because they contain caffeine, ephedrine (a stimulant), valerian (a tranquilizer), or other substances that produce mood-altering effects.

Another factor in gaining devotees is the emotional impact of group activities. Imagine, for example, that you have been feeling lonely, bored, depressed or tired. One day a friend tells you that "improving your nutrition" can help you feel better. After selling you some products, the friend inquires regularly to find out how you are doing. You seem to feel somewhat better. From time to time you are invited to interesting lectures where you meet people like yourself. Then you are asked to become a distributor. This keep you busy, raises your income, and provides an easy way to approach old friends and make new ones -- all in an atmosphere of enthusiasm. Some of your customers express gratitude, giving you a feeling of accomplishment. People who increase their income, their social horizons, or their self-esteem can get a psychological boost that not only can improve their mood but also may alleviate emotionally-based symptoms.

Multilevel companies refer to this process as "sharing" and suggest that everyone involved is a "winner." That simply isn't true. The entire process is built on a foundation of deception. The main winners are the company's owners and the small percentage of distributors who become sales leaders. The losers are millions of Americans who waste money and absorb the misinformation.

Do you think multilevel participants are qualified to judge whether prospective customers need supplements -- or medical care? Even though curative claims are forbidden by the written policies of each company, the sales process encourages customers to experiment with self-treatment. It may also promote distrust of legitimate health professionals and their treatment methods.

Some people would argue that the apparent benefits of "believing" in the products outweigh the risks involved. Do you think that people need false beliefs in order to feel healthy or succeed in life? Would you like to believe that something can help you when in fact it is worthless? Should our society support an industry that is trying to mislead us? Can't Americans do something better with the billion or more dollars being wasted each year on multilevel "health" products?

Recommendations

Consumers would be wise to avoid multilevel products altogether. Those that have nutritional value (such as vitamins and low-cholesterol foods) are invariably overpriced and may be unnecessary as well. Those promoted as remedies are either unproven, bogus, or intended for conditions that are unsuitable for self-medication.

Government agencies should police the multilevel marketplace aggressively, using undercover investigators and filing criminal charges when wrongdoing is detected. People who feel they have been defrauded by MLM companies should file complaints with their state attorney general and with local FDA and FTC offices. A letter detailing the events may be sufficient to trigger an investigation; and the more complaints received, the more likely that corrective action will be taken.

12 comments:

Anonymous said...

I find it interesting that you are so concerned about MLM's selling nutritional products that have a history of working for many people but you have nothing to say about the pharmeceuticals MD's prescribe for their patients every day without having any understanding of what these chemicals can do to the body. There is not one prescription medication on the market that is safe for human consumption (if prescribed by a doctor or not). There are nearly 250,000 people each year that die from "correctly" prescribed medications. How many people are dying of "Natures Sunshine, Reliv, Mary Kay or any other products you list as something people should stay away from. As an MD you should be aware that not all of us look up to you as a nutrition guru by any means, since your education in nutrition and health is about zero. You were taught how to deal with disease not health.

The_Reliv_Watchdog said...

Hello Poster - Thank you for taking the time to read my blog and to post your thoughts. But sadly you are extremely misguided by what I am doing on this Blog.

Rarely am I the author of these articles. Most of the time I simply publish articles that I have found or that have been forwarded to me. Such as this one about "The Mirage of Multilevel Marketing". I am mostly interested in getting peoples personal testimonies as these are the most helpful.

I think if you will take the time to read through everything, you will find that the information I have published is accurate and that products such as Reliv are dangerous. Many of these articles have been taken from information written by MDs, Scientists, and Universities.

I don't claim to be a guru and would never want anyone to look up to me. The purpose of this blog is to give people a chance to read and decide for themselves. It is not fair for people to be presented with only one side. I want to give them a chance to have the information needed to make a correct decision before joining or taking Reliv.

And yes, I am very aware of the dangers of taking prescription medicines. But if I took the time to chance down every danger that comes to my attention, I would spend my time chasing my tail. I would like to encourage you to create a blog or website and inform people about these dangers so that they can choose to be healthy!

Anonymous said...

I can't believe that you feel RELIV is dangerous. My huband is a physician and he has truly helped and changed more lives since Reliv came into our lives. I have lost count of the countless people we have put on the products that it has helped. RELIV has never failed anyone. The people have failed reliv, but not taking it consistently or long enough. We live in a society where we want a quick fix forgetting we have maybe had a condition for many years and for some all their lives. I have hundreds that have been allergic to soy and have no problem taking reliv. Why no foucs on the good of things rather than always looking for bad.

The_Reliv_Watchdog said...

Hello Poster - Thank you for taking the time to read my blog. I have said on more than one occasion that Reliv "can" help people but is the "help" worth the risk? We have had a number of stories from people who ended up with worse problems than they started with. Reliv IS NO miracle cure. For each person that is helped, there are just as many or more that are damaged or get no results at all. All the while spending 100s of dollars a month to pad the pockets of the higher levels.

I AM HORRIFIED that your husband, as an MD, would even consider telling people to take Reliv. This is a GROSS mis-use of his position and he should have his medical license taken away. People trust him as a Doctor and therefore follow his advice. This is just wrong on your his part. Not to mention having a hidden agenda. I mean for crying out loud, making money on a MLM company while doing a medical practice. Shame on him!!!

And this is just another instance of why Reliv is just wrong.

HEHE, maybe I have been a little bit hard on you but do some more study into the dangers of Soy. I think you will find that Reliv isn't what you are leading people to believe it is. And tell your husband to stop recommending it his gullible patients.

Anonymous said...

I recently learned about Reliv through a co-worker. The most interesting thing about the "presentation" I received was that it focused almost entirely on the MLM money-making aspect, rather than whatever perceived benefits might be garnered from using their product. The mention of the word "soy" caught my attention on this blog. Unlike some people, I don't have real strong emotional reaction to the simple mention of soy, but I do have two thoughts to share on it. The first, is that like most diets that focus on elimination of any particular food or "normal" part of our regular food intake, too much of anything will be detrimental to our health. This is not to be confused with documented and substantiated health and medical maladies which absolutely require a person to alter their "normal" diet. The second point is that I personally know a woman who consumed soy, and soy products, to the point that she needed a double-masectomy. Her oncologist informed her that her consumption of soy, almost to the exclusion of any and all other "normal" food, had very likely been her un-doing.

Like some other intelligent people, I am very skeptical of anything, (or anyone) that makes unrealistic promises, which are designed to seem like a miracle cure. Unfortunately, common sense is not very common. This allows people to easily influence others with the "cure-all" and "easy-fix" mentality. It seems that very few people recognize that moderation is the key to good health. Even soy is probably not dangerous to most people if taken in moderation.

If you are interested only in making profit, then any MLM will suffice. If the idea is to help mankind, donate to the Red Cross.

Anonymous said...

I am no fan of MLM I can understand people's not trusting that part. I was reading the blogs and I was hoping to read what type of side effect was caused by soy. I eat soy milk in my ceral because I can not drink regular milk which has it's problems.(Everything in moderation.) I have taken some things that worked wonders for some one else but did not help me. I always try to read with a open mind. I think you have a good informative site.
I was a little supprised how you berated that doctor. There are more doctors that prescribe worse than Reliv and people has actually died from. I see the advertisement of prescription medication and they have way more side affects then benefits. But what it comes down to is the side affect worth the benefit.It is a persons choice. But regardless people need information to make their choice.

The_Reliv_Watchdog said...

Hello Poster - Thank you for taking the time to read my blog and I hope that you were able to find the info that you wanted about Soy. I have posted many articles and there are many websites that also have lots of info.

I realize that prescription drugs are extremely bad but unlike Reliv they come with a warning and so a person knows what could happen should they take them. Usually with Reliv people are told they will cure you without any side effects.

And like you said, a person needs to be able to choose for themselves and this is why I created this blog. I want to give people a chance to read the other side of the story.

Catherine said...

The big difference in pharmeceuticals and Reliv is real clinical research. Reliv has only stories from people that it has "changed their life". Pharmeceuticals go through intense clinical research to get FDA approval. To say that there is not one prescription medication on the market that is safe is ridiculous. I do clinical research for a living and know what kind of real studies medications go through before they are FDA approved. Do you have any idea what would happen to the millions of people who have diabetes if they didn't have the medications that are available for treatment of their disease? That goes for most any disease or condition. You have to be smart when taking prescription medications. There can be risks or side effects but you have to compare the risk to the benefit. Would you rather be dead from diabetic ketoacidosis or possibly have a non-lifethreatening side effect from a medication? Most people take prescription medications without any problems plus it controls their disease or condition giving them a better and longer life.

The_Reliv_Watchdog said...

Hi Catherine,

I would like to thank you for reading through my blog and for taking the time to post a reply.

I think many do forget about all the good we experience today due to modern medicines and I want to thank you for reminding us.

Anonymous said...

I've recently been approached by a woman at the local Target store about Reliv. She was excited about the product, the MLM as a whole. She was about 60/40. MLM / Product. I was interested in the product, but I've heard these lines having once tried Herbalife. I really wanted her to focus on ingredients and price. Once I got price out of her, she so greatfully told me she had some in her car, I explained I'm disabled and on a tight budget, she then went back into pushing the MLM side. Finally after feeling like I could not just walk away I gave her my name and phone #, but flat out told her, if this is like Herbalife in any way I'm not going to be suckered into it. She said it was not. A month past, I did some research and found that it is indeed the MLM. So I thought, put the MLM aside, yeah, Watchdog, you mention that people join up to get a discount, which is exactly what she tried to get me to do, only 2 days ago. Put me on the phone with another person and their testimonial, and I explained again my financial situation and the MLM came into play again. If Reliv is such a darn good product then it should sell and sell well with no problem, so needing to do an MLM should be a waste. A product that is great sells it'self. If I could go to Alaska and buy a new Z06 Corvette for 500 bucks, and drive to Florida and sell it used for $30K I'd be doing it all day long. Makes no sense right, exactly. If the product is so well made then why the push on the MLM?

OK, put the MLM aside, go to the product? I've asked this lady over and over and will continue to search the internet and ask her, I want a list of all the ingridents in the product, and I mean 100% of the list, not Soy and other herbs and vitamins. If there is less then .000001% of something I want to know that, PERIOD!!! But I can not get that info anywhere. I want to take this list to my Dr and let him look at it. I want to see the list, ok for 80 bucks a month I go buy some Flinstone Vitamins, Drink some OJ, buy some Soy Milk, get a generic multivitamin, and boom, I'm out 20 bucks and have a much better tasting list of ingridents to enjoy, but who know's, I can't get the list of ingridents.

If it turns out that it has all the suff I listed above, then it comes down to do I want to spend 80 bucks to buy 1 thing at 1 time in 1 place, or buy several things, walk around the store, which by the way is a little more exercise, and have several boxes. So should I say my story will be that I walked all over Target to get the entire list of ingridents to have a true level of multivitamins? Jared walked back and forth to Subway, I believe it was a mile each way, was it really the sub sandwich he ate, or can we actually say the exercise played a roll, I think Reliv would want to commend the concrete layers for the road, or the City for putting in a sidewalk.

Anonymous said...

What that point, MLM's such, as Watchdog said, maybe you make some money, but you have to be the 1st in the area to sell it because a simple supply and demand rule applies. So investor of the MLM, its kind like buyer beware.

The product itself, so me the ingredients 1st, and let me decide.

2nd, another Anonymous person said that customers let Reliv down by not taking it every single day or not taking it long enough, then if it's such an awesome product, but needs to be taken for a long period of time, let's say I've had a chronic problem for 6 years does that mean 6 months, 6 weeks, or 6 years of taking reliv. In any amount of time a FULL REFUND needs to be put out there, not just a 30 day refund, that I'm guessing will be almost impossible to actually get if I have a problem.

So you reliv lovers, cough up the ingredients, 100% of them Let's start there. Then we consumers can make a decision on to spend, waste, or research it. Get the refund way way way longer then 30 days. Make it a year. Or just offer 1 year for free, if it works I'd gladly start paying for it.

We risk out lives taking med's Dr's give us that is for sure, we also put lots of trust of people that spent lots of time educating their carriers, based on my spelling, I'm sure I make a wonderful seller of relive, you can trust a person who can't survive without a spell check. Dr's on the other hand have furthered their education in a field of helping and making lives better. The FDA tests the heck out of drugs, that's why we know of all the warnings, Reliv and others would be up a certain creek without a paddle if they had to go thru the same process of tests, making employees’ who don't even make the drugs go thru training, using the correct color pens on documents, correctly crossing things out on documents, and again, I had to do this training working in IT Help desk, I answered the phone when your e-mail did not work, nothing to do with how a drug was made, but yet I had to be trained to follow FDA rules. Even if I was out in public, and I over heard that a person taking a drug that this manufacture made, I was required by FDA law to go into work and report it and I better have gathered as much info about it as possible, and news flash the Hippa Laws do not block me from being able to ask or obtain the info about the reaction someone had. All this working in IT nothing to do with the drugs.

Reliv, you may have some great benefits, but Flintstone Vitamins may do just as well for way less. Is it really worth me lining the pockets with money up the pyramid, and in my case with tax payers money since I'm on disability?

Thank you for a place to vent, I feel better now if someone from Reliv dares to post the ingredients, and when I get that phone call again to join. Any job that requires you to pay them to work for them, you really need to look at that as a no no, unless you are going to actually own the business.

Be Safe People, Research, Go To A Dr, Ask The Question, There Are No Stupid Questions, Just Stupid Reasons Not To Ask Them!!!

Anonymous said...

You can access the ingredients list on "Classic" @ http://content.reliv.com/old/userfiles/Classic.pdf For Reliv "NOW" you can go to http://content.reliv.com/old/userfiles/NOW.pdf
In Canada and Australia Reliv products are considered FDA or pharmacuetical grade products. Today, Reliv International is encouraging the gov't to regulate the industry. Reliv says "bring it on" because they are already in tune with what the FDA requires for consumers to take.