Monday, April 8, 2013

What is Lead Generation and Why Herbalife is Banning Most of Them?

Herbalife product brochure Cover TU Turkey Turkiye
Herbalife product brochure Cover
TU Turkey Turkiye (Photo credit:
Starting in December 2012, Herbalife is in a fight of its life when Bill Ackman, fund manager, publicly denounced it as a pyramid scheme, stating that it should be closed, and made a 300+ page presentation . Since then, a lot of famous people have come out, both for and against that view. People against MLM lauded Ackman, while people for MLM accused Ackman of running a "short and distort" campaign against Herbalife.

The truth is somewhere in between. Herbalife itself does NOT know whether it is a pyramid scheme or not. It says it's not, but it cannot prove its claim. Herbalife ran its MLM without regard whether it had slipped over the edge into a pyramid scheme. Even it does not know how many "retail" customers it has. It could only "confirm" some 30% of customers are retail. The rest seems to be distributors, but some are no doubt "self-consumers", i.e. They just join for the discount on the merchandise. But how many? What percentage? Herbalife claimed to be conducting a survey and may have some results soon.

As for the rest of the distributors, who are really in Herbalife for the money, what are their chances of making it big, and how do they get there? A lot of them relied on "lead generation" companies (i.e. lead seller), who basically sell them a list of people who may be interested in their sales pitch. And these are QUITE expensive... Typically $100 per name.  What's more interesting, these lead generation companies are often run by Herbalife affiliates themselves. According to an article from the New York Post, 6 out of the top 20 Herbalife affiliates either run a lead seller, or has close ties to one. Herbalife is well aware of them and has a list of approved lead sellers, which numbered 29 as of 2010.

According to the New York Post article, that number of approved lead sellers has just been trimmed to TWO. That's right, from 29 to 2. Furthermore, that has been a longstanding clause in the affiliate agreement that affiliates may not sell leads or advertising to other affiliates. Apparently these lead generators are considered "third-party" and thus not covered by that prohibition clause, even though one of the remaining company is directly owned by a Chairman Club member Shawn Dahl. And even then, the internal Herbalife memo stated that no leads may be purchased from Dahl's company, Online Business Systems.

Lead generators are controversial due to potential conflict of interest. The top affiliates may be running a "side business" that benefitted off their primary business. Furthermore, many lower affiliates, hoping to get ahead in the "business", may end up spending thousands of dollars for leads that went nowhere, thus putting them further into debt. Indeed, one former Herbalife affiliate told the New York Post that's exactly what happened to him: he was hoping to MAKE money, not spending it, but he ended up spending ten thousand dollars over three months and got nowhere with the leads.

Furthermore, Amway, which had a lot of "support organization" that organize team meetings, makes sales aids, motivational videos, was often accused of running a cult-like atmosphere, or allow the ASO's (Amway Support Organizations) drive affiliates into debt buying up the sales aids, believing that those are the solution to their lack of Amway sales. There were many documented horror stories, even one profiled by Dateline NBC.

Clearly, Herbalife is only starting to realize what a precarious position it is in if it was indeed investigated by the FTC or SEC and have to prove its alleged innocence. Cutting ties to such companies may convince the FTC that Herbalife was NOT colluding with (or merely turning a blind eye to) top affiliates who are benefiting from the "new blood" by running lead sellers.

The main question is... why wait until now, when this should have been done LONG AGO?

As a sidenotelead sellers exist to feed scams as well. Zeek Rewards had several lead sellers feeding the affiliates with people allegedly signed up to receive free bids. (Zeek Rewards require affiliates to both buy and "give away" bids in order to qualify for that "daily profit share")  At least one lead seller was linked to Zeek affiliates. There were several others with unknown owners.

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  1. Lead generation is the practice of soliciting inquiries from potential customers. Traditionally lead generation occurred at places like trade shows, visitors to a company's booth would fill out a card with their contact information and turn it in to receive a call back from that company's sales team. Since the rise of the Internet, many businesses use their websites as a lead generation option.

  2. We spending thousands of dollars for leads but there is a not giving the write value. But these article have a great choice to given those are really interested for lead generation. Thanks for posting the article please provided these types of article in future.