Alert #225: 4/15/2014

The Inside Network Marketing show includes an recurring segment called “The Kitchen”. As in, if you can’t stand the heat, stay out of. Past Kitchen guests include Randy Gage, Kevin Lehmann, and Empower Network co-founder Dave Wood. I started doing this segment after listing to so many “hard hitting, no hold barred” interviews of various MLM personalities where the interviewer did little more than toss softballs and blow love kisses.

And if you’ve heard any of the series of other interviews Vemma founder BK Boreyko has done recently you’ll see that nothing has changed.*

For the record, I like BK, a lot. He’s a good guy, and I’ve always been a fan of his companies (full disclosure: I consulted on the original New Vision compensation plan). And he’s always been a fan of the MLM space. He claims he still is – even though he seems to be going to great lengths to now distance himself from it.

I’m not going to spell out my, and others, concerns and objections here, as they are clearly stated in the interview. However, based on the rampant and perpetual mischaracterizations of them elsewhere (e.g. Mel Atwood’s desperate attempt to voice many of the concerns we share on Facebook, which I reference during the interview). I will emphasize again that this has nothing whatsoever to do with semantics, or simply what BK wishes to call his company. It’s much deeper than that.

BK’s claim that Vemma is no longer a multilevel marketing company because their business model is now “more like affiliate marketing”, and “less like Amway, more like Amazon”, is not a matter of subjective opinion. Very clear definitions, both legal and advisory, apply to what defines an MLM operation. As long as Vemma is still using the same binary compensation plan they’ve always used – which they are – their business model will still involve multiple levels of people marketing.

Those aspects that BK is claiming causes Vemma to depart from the MLM model are, for the most part, not particularly unique to MLM. For example, while it is true that the majority of MLMs charge retail customers more than reps, there are several that don’t (e.g. Melaleuca and USANA). Nor is having no sign up fee. Yes, the large majority of MLMs do require such, but one could argue (and I could easily be the one), that this is a good thing. I’ve heard it claimed recently that franchises have a “97% success rate” (it’s closer to 65%**, but either way, it’s higher than non-franchises), and that MLM, with all of it’s advantages, should have just as high a rate. Except there’s one glaring difference. When people invest $1.5 million into a Taco Bell franchise they have a huge incentive to work hard, and for as long as it takes to get to profitability. When someone risks nothing they have practically no incentive to do anything. It’s actually healthy for an MLM to have at least some barrier to entry. Forgoing a $25 distributor kit fee in lieu of a free enrollment only gains you one class of participant – those that would not have joined if the cost to start their business was $25, but will if it’s free. In other words, even more people getting into your business that have no business getting into business (of any kind).

Vemma now also claims that now “everyone must first join as a customer”, and you can upgrade to a distributor (which Vemma now calls Affiliates) by either enrolling another customer or buying the $499 Affiliate pack. However, you can buy the Affiliate pack and become an Affiliate right after you went through the online enrollment process. So, technically, I guess it’s true. Most who now join Vemma as an Affiliate will be, at least for a few seconds, a customer.

My strongest concern is that now, when the industy is under attack based on a false premise (and if you think this is just an Herbalife issue, you’re so very wrong), and when we need the strongest, most admirable and respected representatives of the space to stand up and help us defend it, one decides to cloak its true identity to avoid the negative stigma that these high profile attacks have created, and are creating – all in the name of “greater transparency”.

But I’m starting to do exactly what I said I wasn’t going to do. I’ll be discussing this in much more detail on the next INM show. I can say in five minutes what takes me an hour to type. For now, here’s the interview…

http://www.insidenm.com/podcasts-library2/

It’s only room temperature in The Kitchen for about the first 15 minutes. The heat does rise over the last 45.

These MLM denier companies, like Melaleuca, Mary Kay, and now, unfortunately, Vemma, are all bound to MLM by an unseverable chain. If this ship we call multilevel marketing ever sinks, they’re going to the bottom right along with it. And we do seem to be taking on a little water. I would strongly suggest that rather than trying to saw through the chain, they might want to grab a bucket.