So who is John Peterson? As mentioned before, he's one of the top salesperson in Herbalife, claims to earn 3 million a year from commission, apparently brought Herbalife to Mexico (and from there backfilled into US Latino communities), and has properties in Brazil, Mexico, Colorado, and Wyoming. He's so rich, he had 3 kids, divorced his blonde trophy wife, and traded up to a Mexican bonita by the name of Fernanda.
His rise to top of Herbalife is a bit controversial, as he rose through one of this schemes called "Work from Home Inc." Basically, it's the same model that another Founder's Circle member "Shawn Dahl" used: create a recruiting firm, that sends out these "business opportunity kits" that is basically a teaser DVD for $50 (though you'll advertise it as $10, but only if you return it in 14 days). The DVD comes with a form you can fill out and send back and someone will call you to enroll you with their support system and take your money, which is usually DOUBLE what it normally costs to join Herbalife (the extra goes into his pocket for some lame webpage and some brochures), but that's only if you're really enthusiastic. If you're a bit hesitant or did not actually mail back the form yet, your name will be sold to someone who already joined and is eager to "buy leads".
Through this sort of borderline scheme (not quite a scam, but shady as heck) Peterson and Dahl and others clawed their way up the Herbalife affiliate human ladder to the very top, over other affiliates' backs, and is raking in the money to the tunes of millions per year, while the average Herbalife affiliate earns HUNDREDS per year (not counting expenses).
One then speculates what was would cause him to take his own life, and what effect would this have on Herbalife?
Herbalife, in an attempt to dodge the spotlight shined on it by Ackman and the FTC, has announced in April that it is banning all of the lead generation companies... which would include Peterson's firm and Dahl's firm. It is also reforming quite a few of its marketing practices to ensure it will comply with whatever FTC may throw at them.
This has created some severe backlash at the highest levels of affiliateship, esp. in Founder's Circle's elites. Shawn Dahl switched his company to recruit for Vemma instead, and Dahl took his downlines to a new company called Nutrie, which is basically a clone of Herbalife. Another top affiliate, Anthony Powell, and Tonya MacDowall, took their downlines to Vemma. MacDowall publicly stated that Herbalife's new marketing policy had "handcuffed" her and her affiliates, and they re going to a company that has no such restrictions.
While it would be too much to state outright that Herbalife's decision to cut off Peterson's moneytree at the root (banning the lead selling business) is the cause of Peterson's suicide, it is very obviously a factor that would have some weight in whatever decision process that he used to arrive at the fateful action.
So how will this affect Herbalife? Will Peterson's "sacrifice" redeem Herbalife, or doom it to hell?
My vote is on redemption, but not a total redemption. There are still sins to be repaid.
----
One of the little known facts is Shawn Dahl's business model is NOT unique. In fact, his mother in law had operated the exact same model (with minor differences) in Canada, and was closed by Canadian authorities as a pyramid scheme. This was revealed by "The Verge". Dahl simply took the same thing south and replicated it.
Thus, one must wonder if Peterson had received word that he is the one getting investigated by the FTC as a pyramid scheme, not Herbalife. The fact that Herbalife is "cleaning house" should tell you that it considers itself vulnerable to FTC investigations should it continue to associate (or allowed to operate) such lead generation companies, which are essentially recruitment driven scam.
One must now wonder why didn't Peterson choose to adopt a wait-and-see attitude, spend the money on lawyers if need be, and basically fight until the bitter end, if there is one? It may not be that bad. It may just be an investigation.
Here's something for conspiracy theorists to chew on... Did Herbalife throw Peterson to the (FTC) wolves to save itself?
And if there's nothing to investigated on Peterson's end, and Dahl can easily run north of the border (and most of this marketing company is paperworked out of Barbados) that would leave FTC not much to work on. With the changes Herbalife already impelmented, it may be enough for the FTC to claim they did an investigation and didn't find enough to prosecute,
Herbalife did lose some affiliates but those can be regained. It will lose far more if FTC hit it with any sort of sanction.
So in essence, Peterson's death will "redeem" Herbalife somewhat / a lot.
Of course, it is also possible that Peterson had implemented some sort of failsafe MAD plan where his death will take down Herbalife by revealing some insider secrets that prove Herbalife had endorsed the lead generation companies and encouraged growth of such to fuel corporate growth and stock prices, thus proving a conspiracy to operate a pyramid scheme.
Unlikely though. :)
Im not involved in MLM, but its a business like any other business. I would say its more fair in fact. Red Bull pay someone to jump from outherspace, Herbalife and others pay People to promote the Products. I see no problem With that. I have a old style business and doing well so I will not join any mlm, but for most People its the best business you can do. Low cost and low risk. But you have to do the work, have you joined a mlm and was waiting for the cash to come to you ? Is that why you are the mlm skeptic ? - Johann, Sweden
ReplyDeleteIt may be low startup cost, but I don't consider it "low-risk". Just looking at the income disclosure statements of various MLMs should tell you that vast majority makes peanuts on "commission". If they actually sold items then they may have profit left over to pay for expenses, but if they bought it just for themselves to "qualify" for commission then it's a net loss, forcing them to recruit others (like themselves) and trying to generate "sales" that way. That's a very deep "rabbit hole", so to speak.
DeleteAs for low startup cost... MLM makes the affiliates pay for advertising, and often exploits their social network, thus, spending their "social capital" instead of money. And one's social capital is not infinite.
I was not in any MLM, nor have I been. Explained all that in the "About" section.
But most of their "distributors" are customers. I talked to the owner of a mlm Company and 90% of their People have not signed up anyone and have no innterest in doing so. They just want the discount on their Products (They do that when they buy a kit or something) And many of their dist just do a part time hobby thing. What you have to look at is how many of those dist work 10 hours or more per week and what do they earn ? Saying this I will never join a mlm myself. But I thing their biz is great.
DeleteThe problem here is a matter of definition.
DeleteWhat separates MLM from pyramid scheme is one simple difference: pyramid scheme pay on recruitment, MLM pay on SALES.
So some bad MLMs mix the two: REQUIRED SALES UPON RECRUITMENT (i.e. auto-ship upon join) That makes them a pyramid scheme.
So a criteria was added: sales only counts as sales if it's to the "ultimate consumer OUTSIDE THE COMPANY" (webster vs. Omnitrition)
So do you see the problem here? Herbalife, in counting those customers as distributors, makes it impossible to determine if they are really "ultimate consumer outside the company"! After all, they signed the agreement and all that, so they're INSIDE, not outside!
That's what Ackman was talking about.
Herbalife was supposed to make a new survey and reclassify these people but they haven't gotten around to it.
It's NOT a difficult fix. Just reclassify them as "preferred customers" and kick them OUTSIDE the company. No commission. Cannot sell stuff. Done.
Why haven't Herbalife done it?
Just to remind you. Im not in a mlm, and probably will never be... So do you think 100% of the mlm Companies are scams or do you Accept some of them as legal Companies ? What I have noticed is that many big big names of traditional business talks in favour of MLM Companies. Like Bill Gates, Trump and so on. The problem for me With the mlm Companies is that many is not telling People that you need to WORK. In traditional business like mine you must work Your socks off to succeed...Just sign up 2 friend ha ha ha. In my business we need to work hard to earn good Money. Sometimes it looks like you dont need to work in mlm. And I dont buy that. And With good reasons. But if you put Your time into it I belive if you find a good Company With great Products you can earn a lot in mlm. But you need skills. And you need time to build up those skills. But I do not understand why you attack big Companies like Nuskin and so on. They are traded on the NYSE. I have tried USANAs Products and I liked them,and I have tried NUSKIN and a few more. I tried Herbalife and did not like it. But for me Herbalife is a solid business. So is it the industry in total you dont like or is it some of the Companies in their industry... Yours sincerly.. Johann- Sweden
DeleteI don't believe all MLM companies are scams. I know some people who do, and I was banned from someone's blog for voicing my reservations in universal condemnation of MLM.
DeleteI do believe, however, that MLM companies are forever in danger of TURNING INTO a scam if it doesn't watch its affiliates who may exploit new loopholes and such thus TURNING a legal business into a scam, or create scams that leech off the legal business. I personally think Herbalife let the affiliates ran them rather than they run the affiliates. Now that they took the reins again, the "top affiliates" are leaving in droves searching for another company that don't care what means they use to succeed.
I don't recall having ever attacked Nu Skin. I may have said some nasty things about Mary Kay, but I was making snide comments following other people's article about Mary Kay (NPR OnPoint, I think it was), and they raised legitimate concerns about some abuses that happened among the rank-and-file.
You got my respect on that last comment. And I do belive a lot of Companies in mlm has to "clean up". And I also agree With you that Herbalife is in a "greyzone". In Scandinavia they sold in $ 4000 packs in the 80s 90s and early 2000s. People filled up their basements With Products to "qualify". It was bad! But please dont slam the all industry. As I told you Im not in a mlm and will probably never be. But I do know some People With no skills and no Money that could not build up a business like I have done. They started in a mlm and With 100% focus and hard work they are now millionaires. Good for them. So I belive mlm is good for some People. The problem as I posted earlier is that many Companies claims you can get Rich just by signing up some People.. BS ! Its a business and you have to work! Could you name 5 Companies you belive is good mlm Companies ? Johann - Sweden
DeleteI don't evaluate companies. For reviews of companies you can visit BehindMLM.com, where OzSoapbox reviews what seems to be every MLM and matrix schemes under the sun. :)
DeleteMLM is right for certain subtypes of people: those who are good socially (have a lot of social capital), have a good moral center (will not resort to unethical promotional techniques), have a decent amount of money saved up to dedicate to growing this new "sales empire".
Unfortunately, that excludes a LARGE SEGMENT of the general population.
I did say I'm a skeptic. :) A cynic is one that hates everything about a particular topic. :)
DeleteYou should read my "six types of MLMer" article. :D
http://kschang.hubpages.com/hub/Six-Types-of-Network-Marketers-which-type-are-you
Ok, thanks :)
DeleteJohann - Sweden
An impressive share! I have just forwarded this onto a colleague who was conducting a little research on this. And he in fact ordered me dinner because I stumbled upon it for him... lol. So allow me to reword this.... Thank YOU for the meal!! But yeah, thanx for spending some time to discuss this subject here on your internet site.Click here HERBALIFE SCAM REVIEW
DeleteGood article, you may be underestimating the impact this scammer's death may have on the FTC investigation, and Ackman will make sure to make hay of it.
ReplyDeleteHerbalife would do anything..and I mean ANYTHING to save it's own bacon. Absolutely right about Peterson being 'thrown to the wolves'.
ReplyDeleteWilling buyer, willing seller. Many people are living the life of their dreams thanks to the Petersens. Time to grow up and take responsibility for your own success or failure and stop blaming everyone else.
ReplyDeleteExcept according to Herbalife's own income disclosure statement, VAST MAJORITY of members make next to nothing. How many suffered financially to allow those people live their dreams?
DeleteThe recruitment setup was not forced upon you. I tried it, did not like it and therefore did not participate in it. I had bad feelings about it. Lots of reps from different companies have made money by additional means. Distributors from Amway did this with tapes and tools.
ReplyDeleteThe difference with John was that he believed in helping his downlines. He always said he would make sure that his new reps knew how to move the product they were planning on buying before they bought it. If they had no plan, he told them not to. Many uplines did and do not do this. They encouraged the purchasing of large quantities of product and really never helped their downlines sell. This is despicable, and reps in many companies do it. It is called "buying your cheque".
Ultimately, I stopped working Herbalife because I was burnt out and needed a break from the weight loss babysitting business. I had also gotten tired of some things to do with the business side.
I believe in the network marketing model, not like Herbalife and others where you have to carry inventory. I won't do that again. My current company is an online service with no real competition, no inventory required, and a feel good service. Yes, it's consumable, and the retention rate of customers is great and our prices are 1/3 to 1/5 of the store bought alternative (which really isn't comparative). I don't know too many MLM companies whose product or service is less than the store bought product.
Whether John's death will save or hurt Herbalife remains to be seen. One thing I do know, is that whatever is happening, or will happen, John's family who is mourning him deserves prayers, respect and our best wishes.
Recruiting may not be OVERTLY forced upon you, but if the "business" was structured in the way that recruiting other people (both to sell and to self-consume) is the only seriously way to make $$$ with minimum effort, then is there really an ethical difference?
DeleteWhile I am glad to hear that you believe John Peterson did not encourage inventory loading his downlines, with the advent of drop-shipping, auto-ship/subscription, and online ordering inventory loading is pretty much a dead issue except certain companies like Mary Kay where you are still encouraged to carry inventory for face to face sales (more reason why MK is under attack).
I don't know if you guys have heard about the club strategy it works great because you keep selling the product by selling "memberships" to the people who come to your club and also teach them how to do the same if interested. It's amazing to help people change their life by teaching them how to eat better and get paid to do it.
ReplyDeleteThat's the job of a registered dietician or nutritionist, not someone who's trying to sell his or her powdered drinks.
DeleteThen there's always the question: the "diet club" was invented by Herbalife affiliates in Mexico in 2003 or so. So what was Herbalife doing for 23 years before that?
And yes, I know quite a bit about the club strategy. Copied from Tupperware parties. Took them 20 years to do it.
Delete(cough cough) HATER hahahaha
DeleteMaybe you should come up with a reason WHY I'm an idiot before you accuse me of being one. Random accusations without cause is a sign of idiocy.
DeleteAs for "making stuff up"... did you bother reading the last sentence? Or perhaps your reading comprehension haven't reached that point?
Maybe you're the hater, not me. You're the one calling me names, after all.
Thanks for sharing this informative blog about Herbalife Business Opportunity. It s Very helpful blog
ReplyDelete