Sunday, August 13, 2017

Critical Analysis of a R+F consultants denial that R+F is a pyramid scheme

Recently my news feed came across an R+F consultant (that's Rodan and Fields, an MLM cosmetics brand) denying that R+F is a pyramid scheme. Does her denial make sense?

She started out by casting a wide net, basically stating "I hear that from time to time... (some people) believe RF is a scheme... (but) RF isn't like that"

Then she immediately went into defensive dilemma, which means "if you say it to my face, I will assume that 1) you don't know me and I don't know you, or 2) you don't know what you're talking about"

But does the author know what she's talking about?

She never explained what a pyramid scheme is, or how R+F is not like that. She simply claimed that R+F is a legitimate company. But that's interesting are the two factors she cited in her denial.

We are different: really?

According to the author, "If you’re looking at a company’s payroll by levels of income, it’s probably going to resemble a pyramid. The owner is at the top and earns the highest salary, everyone else trickles down.  Right out of the gate, we are different."

Basically, the author is saying that R+F is NOT like a traditional company where the owner is NOT earning the highest salary, isn't it?

Unfortunately, it seems the author is merely half-right. Because R+F is run by Chairman Amnon Rodan (Dr. Katie Rodan's husband) and President/CEO Diane Dietz. Drs. Rodan and Fields own most of R+F. They pocket most of the profit, just not a direct salary.

R+F press release says they achived 626.9 million revenue in 2015, and maybe a billion in 2016. You can be sure all the top execs took home MILLIONS in salaries or other compensations.

It's definitely NOT as different as the author implied.



Level Playing Field: really?

Next, author tried to invoke the "potential equality myth".

"In regard to earnings, the playing field is level in Rodan+Fields. For instance, a Harvard trained attorney and a high school drop-out can earn the same income with RF…if building an empire isn’t your dream and you simply want to earn a few hundred dollars a month, that can easily happen with very little time invested."

It seems the author had not read R+F's own income disclosure statement 2016, from which I quote directly:

"Over the course of 2016, R+F had 286709 enrolled Consultants; 161361 were Paid Consultants (56%) who received payment in at least one month for sales that occurred during 2016; and 125348 were Consultants (44%) who received the benefit of discounted prices, but did not earn any compensation from R+F."

Out of 287000 consultants, 44% earned NOTHING. ZERO. NADA ZILCH. GOOSE EGG.

What of the remaining 56%? Figures are not encouraging.

60% of those 161361 "paid" consultants earned average of 334 PER YEAR ($28/month)
30% of those 161361 "paid" consultants earned average of 2304 PER YEAR ($192/month)

The percentage gets narrower as the income gets higher. The top tier says...

0.04% of those 161361"paid" consultants earned average of 1.244 million PER YEAR.

But what the author failed to tell you is this caveat stated in the income disclosure itself, from which I quote directly:

"To be eligible for commissions on products, you must have monthly sales to retail customers and/or personal purchases of roughly $100 worth of product [measured in Volume]. To receive greater commissions and maintain your status your direct Customers must purchase and/or your direct Consultants must sell 600 in Volume of products each month."

Basically, you can BUY your way out of any monthly sales quota by selling stuff TO YOURSELF! That's an expense you didn't count on in R+F, did you?

So the income, which is commission only, does NOT count any expenses, and surely won't cover the cost if you sell to yourself (i.e. expense only, no profit).

Once the sales network (read: minion tree) had been established, there's no way a low-ranker can make more than the high ranker who already have a tree, which is always growing by the minions.  The potential of equal income only exists when the company was brand new. And that was almost ten years ago.

Conclusion

Frankly, NEITHER defense addressed the issue: is R+F a pyramid scheme? Both defenses raised are completely irrelevant.

The "we're not traditional" defense was irrelevant and was half wrong as well. How does "we're not traditional" prove R+F is not a pyramid scheme? By invoking "traditional companies are pyramid-shaped", the author was guilty of using the "pyramid equivocation" bad argument.

The "equal potential income" defense was also irrelevant, not to mention wrong in face of current statistics. Why would one person's POTENTIAL income prove the company is not a pyramid scheme? It can't!

The author failed to defend her premise, that R+F is not a pyramid scheme. She raised some emotional triggers and tried to spin those as evidence. They are not, and they are often factually wrong at least in part.

However, keep in mind that failure to prove R+F is not a pyramid scheme does NOT mean R+F is a pyramids scheme. You need to prove it the other way too.

But it's clear that R+F is not as life-changing as the author thinks it is.


1 comment:

  1. No Danita, real businesses are NOT pyramid schemes.

    You see, in a REAL business the people at the bottom of the organizational structure get paid for their work. They are not required to purchase the company's product for resale to make their money, they just have to work to make their money (and health insurance, retirement contributions, etc.)

    In a REAL business, the people at the bottom do not recruit more people to buy the company's product and recruit more people to buy the company's product and recruit more people... They work at their assigned tasks/duties, then they get paid.

    In a REAL business, the people at the bottom do not get promotions based on how many more people they recruit to buy the company's product and recruit more people to buy product and recruit more people... Promotions are based on performance, seniority, experience, etc.

    You're mind controllers have programmed you to believe their gobbledygook about your product-based pyramid being the same as a REAL business.

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