The Truth I Uncovered About Network Marketing and Pyramid Schemes

For all my life, I’ve been an MLM snob. First off, I’m British, and we generally think dismissively of them – a scammy, Americanised way to make money (don’t get me started on British money story issues!)

Second, my dad was in Amway for a hot minute back in the 90s when I was a kid, and all I know is that he barely made any money and he found it really embarassing.

Third, I’ve run my own business online since 2014, and I always looked down on MLM’ers like it wasn’t a ‘real’ business (sorry!).

At the end of last year, I was invited to join doTERRA by a successful business coach and personal friend I have a lot of respect for – Jessica Nazarali.

What on earth was she messing around in MLM for? I wondered, not very graciously.

I was a network marketing cynic!!

But here’s the main problem: I didn’t actually KNOW anything about network marketing.

So, I did some digging.

If you’re also cynical – have you ever actually experienced a network marketing business? If you haven’t, I’ll explain more about what really happens under the hood in this blog.

 

Is it a Pyramid Scheme?

The definition of a pyramid scheme from the Merriam-Webster dictionary is:

a usually illegal operation in which participants pay to join and profit mainly from payments made by subsequent participants.”

A pyramid scheme is a bit like a Ponzi scheme – like Bernie Madoff. You pay in to join, and the people above you only get paid from the money you and other newbies pay. There’s no actual value creation, so the the only way to keep paying the existing people in the scheme is to keep getting new people.

When there is a true product, there is no scheme. People are buying a legitimate product that adds value to their lives. In doTERRA’s case, this is essential oils.

This is the same in ANY business today:

  • Nike makes money for employees and shareholders by selling shoes.
  • Whole Foods makes money for employees and shareholders by selling food.

In doTERRA’s case, it’s essential oils they sell. In fact, 89% of doTERRA purchasers are pure customers: they aren’t part of the MLM business. They are simply buying a product like they would from any store.

The only difference is that instead of giving money to a standard multinational company like Whole Foods, they are buying from a multinational company that pays small local businesses  – the wellness advocate who is educating the customer.

 

Who actually makes any money?

Only the people at the top make anything… right?

Wrong.

The compensation plan (in doTERRA at least) is fully transparent. You earn X based on Y sales. There are two main factors to earn:

1 – Sales

You need to make sales. That should be pretty obvious! You won’t earn a sales commission unless you actually sell some oils. For each new customer, you earn 20% of their sales in the first 60 days of their enrolment, then 2-7% thereafter.

Usually that is a kit worth around $250-$400, then most often customers order another $100 in month 2 – so about $60-$110 in commissions per new customer. The most expensive kit is around $2,000, so you could earn $400+ per customer.

2 – Helping your team succeed

Some of your customers will want to start the business as well, and they will join your “team”. You can only move up the ranks by having your members of your team move up too.

Why rank advance? doTERRA gives 7% of their global sales to a bonus pool for leadership members (i.e. from Premier rank to Presidential Diamond rank). Members of each leadership rank get a progressively larger slice of the global sales pool as a monthly bonus. In the beginning, it’s not much – about $260 a month at Premier level. But as that grows, it becomes thousands and even tens of thousands per month – because you are managing a larger team and doing more for the doTERRA business as a whole – extra trainings, etc.

But the key here is that you ONLY rise and unlock these larger bonuses as you help your team rise. You cannot profit without helping them. For example, if you are at Silver rank, you can only achieve this by helping 3 of your team to reach Elite level (sell around $3000 of oils in a month – about 10 new customers). But for you to become Platinum, you can only do so by helping 3 team members hit Silver. You’re constantly helping others rise with you.

A wellness advocate can outrank the person above them.

For example, when you help 3 members of your team achieve Elite rank, you reach Silver rank. But if the person above you in the organisation has not helped other members rise, no matter what her sales volumes are, she’ll still be Elite too because all higher ranks require you to help your team rise to certain ranks as well.

You can rise as fast as you like simply by hitting the transparent targets:

  • My own team leader, Alice Nicholls, got to Presidential Diamond in 18 months by hustling hard
  • Allyse Sedivy hit Diamond rank in just 62 days

All you need to do is make sure you are hitting the relevant sales volume and team rank requirements, and the rank is yours! Eventually, every single person in the company could be Presidential Diamond if they did the required work to reach it.

Contrast that to a typical corporate job, where there’s 1 big boss, 10 managers and 100 employees. The only way for an employee to become a manager is for his manager to get fired or be promoted himself. And the only way for the employee to be chosen is to be chosen by the big boss. He can’t choose his own promotion timeframe.

Looks and sounds more like a pyramid than doTERRA, right?

 

Who profits from your doTERRA business activity?

1 – You! 

You are paid your direct sales commissions on every new customer, and recurring commissions for all future sales of  the same customer (if any). doTERRA has an incredible customer retention rate of 69% vs an MLM industry average of just 8-15%. This is because the products work, and clients actually want them. (Remember from above, 89% of customers are simply customers, and not affiliated to the business at all).

2 – Your ‘upline’

When you join doTERRA as a business – ie. you want to share doTERRA products and be paid a commission on sales – then naturally you will be placed in the organisation of the wellness advocate who introduced you to doTERRA products in the first place.

That’s because this wellness advocate is essentially acting as a recruitment agency for doTERRA. I’ve worked in recruitment, and a recruitment agency would typically earn 10-25% of the hire’s starting salary as commission for finding them for the company. Since wellness advocates are paid commission and not a salary, it makes sense that the person who introduces you gets paid some commission on your sales too – between 2-10% depending on a few factors. If they weren’t paid, they wouldn’t be compensated at all for hiring a new salesperson for doTERRA, which isn’t very fair!

3 – doTERRA themselves

Naturally, doTERRA the corporate company is making a profit. That’s business. What’s amazing about doTERRA is the amount of charitable work they do with that profit. They run the Healing Hands Foundation, which is funded by donations and sales of certain products. Most charities fund their admin & staff costs through donations – sometimes at a cost of up to 30% of donations. With the Healing Hands Foundation, however, doTERRA corporate funds all admin costs.

Healing Hands has worked with organisations such as O.U.R., which helps save children trafficked for sex; and Days for Girls, which funds menstrual products and education for women in remote and impoverished areas.

4 – doTERRA suppliers

doTERRA is dedicated to supporting its suppliers in over 40 countries, over 2/3 of which are developing countries. They offer fair wages, wage balancing (so higher wages are paid in off season), infrastructure development and profit sharing to allow farmers and cooperatives to create economic stability for themselves and their families. You can read more at www.sourcetoyou.com.

This is where I get really excited about my doTERRA business!

Are there any benefits to MLM vs a standard business model?

I’ve been a business coach for 3 years. I helped women launch their own brands and create their own service based products. Typically they would spend around 3-6 months just figuring out their idea, then need to do market research, beta test their services and programmes, and build an entire brand from scratch. Then, as the business scaled, they’d need to invest in a team of  website designers, customer service agents, etc. It often took them over 12 months ad thousands of dollars to get up and running.

Here’s what I’d never noticed in all my poo-poo-ing of network marketing:

It’s an amazing set up – doTERRA does all the back end services like customer support, research and product development, even marketing strategy totally free. You’re getting all the benefits of a billion dollar business…without having to invest at the level of a billion dollar business!

I used to run my own brand and was $5,000+ out of pocket minimum by the end before I earned a penny each month. Not so with doTERRA – the only requirement if you want to be paid a commission that month is to order around $100 of product (which, if you are a wellness advocate, you will want anyway!) At any point, you can stop the purchases.

 

How does MLM go one better than a regular business?

As a recovering MLM snob, I have to admit I’ve done a total 180 degree turn in my opinion. Here’s why…

Because of the multi level system, anyone who does the business is able to grow a true residual income. That means, you build up to a point where you earn money no matter whether you work or not.

You earn a residual income in two ways:

1 – Recurring Customer Purchases

You are selling an amazing & consumable product that customers want to keep purchasing. They see how their baby’s colic/toddler’s sleeplessness/husband’s back pain/grandma’s asthma is improved through these beautiful natural wellness products. They feel their own energy improve when taking the supplements. They love how their home smells without any of that toxic crap they used to use to clean.

doTERRA has a very generous loyalty rewards programme that does incentivise customers to keep ordering – because they can earn up to 30% back in product points. So, they can switch all their monthly consumables like natural toothpaste, home cleaner, etc and then get some more ‘exotic’ oils for free.

This is very different to the traditional MLM autoship, where customers get locked into receiving the same shitty products month after month. A doTERRA customer can choose their own products each month, and at any point they  can end their loyalty rewards monthly orders.

With these monthly orders, you will earn 2-7% commissions depending on where each customer is in your organisation – you get paid up to 7 levels deep, with the 2% on level 1 (close to you) and the 7% on level 7.

This compensation plan is different from many others in the industry, because it pays your more where you have MORE people. As you can see on the chart below, on level 1 you are earning 2% from just 3 people, whereas by level 7, between your customers and your team, you have 2187 people from whom you are earning 7% of all their purchases. With the doTERRA commissions in purple ($27,142), they are nearly 3x higher than the standard MLM compensation structure – on the same sales!

2 – Team Commissions

You also receive this commission on all your team’s customers’ orders too. So as you grow and develop your team through mentoring and training, both you and they earn from their recurring sales.

3 – Organic Ranking

Eventually, your team will “organically” hit a certain rank each month purely through customer retention and their new customer sales as they continue to grow. This means you will automatically hit a certain rank without hustling on your part, and will therefore receive the requisite part of the bonus pool for that rank.

 

Why residual income is awesome

With the MLM model and residual income, you can build your business up to your chosen level, then take time out, work on other projects, have a baby, even just have an extended holiday!

When one of our team leaders, Tara Bliss, became very ill while pregnant, her doTERRA business was organically generating her 5 figures a month of commissions, so she could rest easy without worrying about money.

I am working more actively now to build my business to a point where I can take an extended maternity leave when the time comes.

Many people build the business to the top, then use the $1million+ annual income to fund and manage charities. That’s my eventual goal as well.

Contrast that with my coaching & online course business, which though created “passive income” (i.e. I didn’t have do anything to deliver the content once bought) – I still had to actively market it, and manage a team. It was anything but lying on a beach!

So when people get snotty about MLM, nowadays I feel sad for them. If they work a 9-5, run a shop, or even run an online business – good luck to them taking maternity leave or caring for a sick parent  without their income suffering.

 

Why doTERRA specifically?

1 – The company mission

doTERRA was born through a small group of executives from another essential oil company. They didn’t like how it was run, and so they decided to do things differently. They saw the power of these oils in their purest, highest quality form. They knew if they could get them into the hands of normal families, they could change their lives.

That’s the mission we all have in doTERRA. We want to spread wellness. The  rather large cherry on top is the beautiful humanitarian work we can do through our supply chain and Healing Hands Foundation.

2 – Product quality

doTERRA is obsessive about product quality. They know that these natural medicine must be of the highest quality. “Organic” wasn’t good enough for them – they created a whole new quality standard, Certified Pure Therapeutic Grade (CPTG), which is triple tested (externally) and guaranteed to be free from pesticides, fillers, synthetics and anything that shouldn’t be there!

On top, they know that the oils will have the most potency when the plants are grown in their natural environment – hence why they source from over 40 countries, including some more complicated places to do business, like Somalia. Other companies simply grow the plants where it is convenient for the company itself.

At the end of the day, the product quality and the results people see from these oils are what keeps them coming back, and keeps the customer retention rate so high (69% vs an industry average of 8-15%)..

3 – The most generous compensation plan in the industry

I explained this fully in the How does MLM go one better than a regular business? section of this blog. For the same sales (aka the same effort) doTERRA pays 2-3x what the typical MLM company would pay. Why work the same for less pay?

4 – The community

doTERRA is a true community. The compensation plan creates that – because you only succeed by helping your team to succeed as well.

Beyond the compensation incentive, there’s a feeling of family among all cross lines. Lots of leaders share their training content publicly through YouTube and podcasts.

There’s lots of  travel opportunities, from incentive trips, to Healing Hands missions, to leadership training events and 3 annual conferences. The US one in Utah HQ gets 35,000 attendees, and sold out in 24 hours this year!

5 – The ethos

Most MLM companies lead with the huge “opportunity” – “BECOME A MILLIONAIRE!!”; “CHECK OUT MY FREE LAMBO!”. doTERRA is very, very different. It’s purely mission based. We talk about families helped, and charities donated to.

There’s no mention of individual earnings, just rank averages. We celebrate impact, not income.

It’s also an incredibly family friendly company. At the annual Europe convention, I sat near the front and watched the CEO and Chief Medical Officer play with the kids in the front row before they went on stage. The whole convention was filled with kids! And that’s how it should be! doTERRA gets that Mums & Dads often want a more flexible career, and doTERRA is the perfect way to earn a  great income while having massive impact – AND being the super present parent you want to be.

 

I joined doTERRA on a whim when Jess explained to me how it could act as an alternative product line in my business coaching business… but within a few weeks I realised this was something very special, a far better opportunity for someone to start their own business(or add another income stream) than to launch their own product. The impact you can have as part of this huge (and huge-hearted) company is amazing. I’m hooked!

 

Interested? Here are your next steps:

If you’d like to join me in my doTERRA Team Living Rosy, you can learn more here.

I’m launching a $7,000 scholarship to a special doTERRA premium business coaching programme which closes at the end of the month – learn more about that here.

If you have any questions, just reach out through my Contact page. I’ll be happy to help 🙂

 

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