The following is a summary of the main points contained in original 14 posts of "The Arbonne Results Approach Analysis". For the full information on any sections below, click on the heading title link and it will take you to that post.
- Actual Consumable Volume: In the Group Presentation and the One-on-One Systems all the volume comes from orders placed by customers who in most cases will use and consume the product which will result in a large percentage of these persons reordering. This system produces a large consumer base with residual income which makes for a stable network.
- Potential Consumable Volume: In the Results Approach System all the volume from the "Result Kits" is "potential consumable volume". It only becomes "actual consumable volume" when the "Result Kit" is purchased or generates a purchase of a Results Set. In addition, any volume in a network that is "potential consumable volume", since it is not being consumed, it stands outside Dr. Charles King's "consumable product definition" which is one of the keys to a successful business.
- Only 3% of the population actual does what it takes, and does what it takes long enough to be successful.
- As a result of the above there is always failure in the system.
- But the data from our analysis showed that the failure rate was significantly increased in those networks that used the Results Approach.
- The greater the percentage of volume in a network that is from the Results Approach, the greater the failure rate.
- The cause of this is the "potential consumable volume" from the Results Kits. The more "potential consumable volume" there is the greater the risk that this "potential consumable volume" will never be converted from potential to "actual consumable volume".
There are two issues caused by the data we outlined above.
- The first is the Result Kits are never converted into consumable volume which means that line flashes out and dies. Because if they cannot move their kits, they are not going to bring anyone else into Arbonne.
- This impacts residual income. In a Group or One-on-One Presentation System all volume has the potential to be residual income, for those Kits that are not moved there is a 0% chance that there will be a reorder. Thus the impact on residual income is dramatic and devastating due to the 50 to 80% failure rate and the 0% of reorders from Result Kits that are not moved.
- Because there is a known 50% to 80% failure rate in networks that do the Results Approach.
- And because this menas 50% to 80% of the upfront potential volume from Result Kits will never be converted to actual consumable volume.
- This means the "potential consumable volume" in a network is false volume.
- The greater the percentage of false volume in a network, the greater the odds are that this network will fail.
- The key element that distinguishes a legitimate Multilevel Marketing Network from a Pyramid Scheme is a legitimate network is compensated for selling product to consumers and establishing a market.
- Pyramid Schemes on the other hand make their profit on volume sales to new recruits who buy the product.
- As the DSA Website says: "IF YOU COULD BE STUCK WITH UNSOLD INVENTORY, BEWARE! Legitimate companies which require inventory purchases will usually “buy back” unsold products if you decide to quit the business. Some state laws and the DSA Code of Ethics require buy-backs for at least 90% of your original cost."
What does this mean for the Results Approach?
- Since the Result Kits are product sold to recruits
- Since there is a known 50% to 80% failure rate
- That means 50% to 80% of the recruits will be left holding product
- This percentage tips an Arbonne business from a legitimate network into a pyramid
- The attempt to escape this reality by saying the percentage of failure volume compared to the overall volume in the network is minimal does not address the ethical and legal issues.
- Even if the total percentage of failure volume in the entire network stays below the tipping point, this does not mean the localized network that was processing 100% as a pyramid scheme is now legitimate.
- Those impacted by a localized network processing 100% as a pyramid, are impacted 100% by a pyramid scheme.
- Failure to deal with this ethical issue taints the network involved, those that put such a system into motion, those that allow it to continue, those who profit from it and the company as well.
Transfer of Ethical Responsibility:
The practice by Upline Consultants and by Arbonne Corporate of using the Independent Consultant Agreement as a sheild to protect themselves is not a legitimate ethical option and, now with notification, is not a legitimate legal option either. This is especially true in light of the fact that there is a business model that will eliminate the upfront potential volume so Arbonne Corporate does not have to walk this tight rope.
Any upfront purchase of Results Kits places the new business builder in an ethical dilemma because their upfront risk can only be reduced by adding more business builders to the network with the same upfront risk they have so they can be compensated. Here are some ways out of this ethical dilemma.
- The new recruit could wait and see if she can find four people to place the same upfront order thereby reducing or eliminating her risk. But then the new recruit would have to allow her new recruits to do the same. The problem is that this can go on ad infinitum down the food chain. But this fails because at some point this process has to end and when it does someone is holding "potential" not "actual consumable volume".
- The Upline Consultant can guarantee to buy back any "potential" volume that is not moved. But this ethic is not offered because it would place new recruits at a high risk and thus no one would bite on the offer.
- Upline Consultant could (and this has been done) explain to the new recruit that they have 45 days to move the product and if they cannot they can return it to Arbonne under the 45 money back guarantee. But this is not an ethical solution as this 45 day money back guarantee was implemented for the customer not to reduce a business builders risk.
So if there is a system that can build an Arbonne business without the upfront risk, why this system with risk?
Because the Upline Consultant gets paid immediately on the up front volume from the Result Kits even though this is all potential and not actual consumable volume. So this system is more about the up-line’s pocket book than it is about the success and dreams of the new Consultant. This is not the Arbonne culture.
Beyond the ethical and legal there is the simple fact that the potential consumable volume in the Results Approach creates a balloon effect on an existing network.
What is the balloon effect?
- Let's say you have an existing RVP network that is doing $120,000 a month in volume. This volume is all product sold to consumers so it is actual consumable volume.
- This network has 30 active business builders in it.
- The RVP decides they are going to do the Results Approach and all 30 business builders purchase $2,500 in Result Kits.
- $2,500 in Result Kits times 30 Business Builders equals $75,000 in additional income over the existing actual consumable income in the network.
- This $75,000 added to the $120,000 totals $195,000 and pushes this RVP into qualification.
- But the additional $75,000 is all potential consumable volume and what ever portion is not converted from potential to actual consumable volume will eventually flush out of the network.
- The amount of potential consumable volume that is not converted to actual consumable volume will be the amount of eventual down turn in the network.
- The Results Approach is really a One-on-One System.
- Thus the fact that a Consultant using a One-on-One System has to compensate for this by increasing activity is a weakness of the Results Approach.
- To compensate for this the upfront quantity of Results Approach Kits are increased .
- But this causes the network to build faster with business builders and consequently with less consumers.
- As a result the potential consumable volume form the upfront orders moves down the network levels more rapidly.
- This in turn causes the volume from the Results Kits to more quickly pass out of the pay range of the Upline Consultant. When this happens their paycheck suddenly decreases accordingly.
- The only way to correct this is for this Upline Consultant to add more business builders into the system directly to her or to build a consumer network.
- The result of the above scenario is what I call "The Mathematics of Weakness" in the Result Approach.
- Because the Results Approach is really a One-on-One System, the increased volume cannot be attributed to the efficiency of the system.
- Our research indicates those networks that used the Results Approach without large upfront orders grew at or below those that used a Group Presentation System.
- So where does the "Fast Track" volume come from?
- In a non-Results Approach System if a Consultant starts and then quits, the Upline Sponsor only gets paid on the amount of success that person had while they did the business.
- But in a Results Approach System, if a Consultant starts and then quits, the Upline Sponsor will get paid on all the volume in the upfront orders or the front loaded volume.
- So in the second case the up-line Consultant was paid before she made the new Consultants successful. In fact she was paid even though the new Consultant may have failed. I call this type of revenue that comes from the upfront orders of Consultants that fail, “failure volume”.
- Because in the Results Approach System the Upline gets paid on this volume whether or not those in her downline can move the Results Kits and convert that volume from potential to actual consumable volume.
- And because there is a 50% to 80 % failure rate.
- And because a large portion of this additional volume in the Results Approach Network comes from the failure in the system.
- In light of this everyone has to ask themselves this question. Do I want to build an Arbonne business with a system that will produce more revenue, when all or most of this additional revenue is generated by the failure in the system?
- In light of the information above, "Large Upfront Orders Make the Arbonne Results Approach Unethical".
- The above is not an incidental consequence. These facts change everything. When data indicates that the additional revenue is generated by the failure in the system, a decision to use the Results Approach System as opposed to any other system ceases to be a business strategy decision. Rather, it is now both an ethical decision and a legal decision, and, in light of this data there is really only one correct answer.
- The data we have uncovered would indicates that there is an ethical way to build an Arbonne business using the Results Approach, but a Results Approach System which includes upfront retail volume that the Upline Consultant gets paid on prior to it being actual consumable volume; this system is not included in this ethic.
- The first option is for Arbonne Corporate to issue a directive. But specific direction could be a violation of this independent consultant relationship. As a result any option that could only be enforced by corporate fiat is not workable in the case of Arbonne.
- The second option falls into the category of the slippery slop. In these cases a recommendation is provided by the Arbonne Corporate that would keep the Arbonne Results Approach within the ethical guidelines such as only 2 or 3 Results Approach Kits are allowed. This would then reduce the large upfront orders that result in front loading and then push the network over the pyramid scheme tipping point. However, due to Arbonne Corporates inability to enforce this limit without violating the Independent Consultant relationship this option is not workable.
- The third options is the use of sample packs in conjunction with the Results Approach Kits. This is one option that Arbonne Corporate attempted to implement. For details visit the Arbonne University Results Approach Training. But enforcement of this once again runs into the conflicts as Arbonne Corporate directing an Independent Consultant. To be absolutely open and honest about this, and with all due respect to Arbonne Corporate, this strategy was less a solution to the ethical issues the Results Approach inflicted upon the Arbonne field and appears to be more of a basic CYA for Arbonne Corporate. Because the only issue the sample pack addressed was cleanliness and thus Arbonne Corporate liability in this regard. The training did not address the ethical and legal issue of the upfront volume from the Result Kits. In fact the Arbonne University Training made this issue even worse because a new Consultant can still be enticed into purchasing a large quantity of these Result Kits which still places the new Consultant at risk, and the Arbonne Results Approach Training appears to give the Arbonne seal of approval to this system. Thus Arbonne is complicit in this risk. This strategy implemented by Arbonne in this Results Approach Training, was legalese, and created a wall of protection around Arbonne Corporate while at the same time it left those in the field totally vulnerable to the very same ethic from which Arbonne Corporate had protected itself. In essence, the field had been left to swim with the sharks as Arbonne profited from this system.
- A fourth option would be for Arbonne Corporate to force the Sponsoring Consultant to buy back any Result Approach Kits that are not sold. This would bring even those Consultant’s networks that use large upfront Results Approach orders in line with the standards as set out by the DSA web site. But Arbonne Corporate would once again be on shaky ground when it came to enforcing this on an Independent Consultant. Not to mention there would be a lot of “he said, she said” and no one wins in these situations which would ultimately leave Arbonne exposed.
- A fifth option would be for Arbonne Corporate itself to buy back the Kits. But this would only provide greater incentive to those Consultants who were pushing the unethical boundaries with the Result Approach Kits to push them even farther. After all, if you have a sugar daddy who is going to pick up the tab if those you sponsor cannot move the Result Approach Kits, why worry about whether the prospect can actually move the kits. Do the hard sale and move on to the next. Can anyone say Fannie May and Freddie Mac.
- The sixth option would be to leave the Results Approach System in tact but this allows a consumable product with retail volume to be purchased as a business aid which allows the upline Consultant to benefit monetarily from this volume. So to prevent Consultants from returning any Results Approach Kits that are purchased in large quantities to Arbonne, or to prevent these Result Approach Kits from appearing on E-bay, each Result Approach Kit would have to be tagged with a unique ID so it could be traced back to the source. This option is not feasible because it is cost prohibitive.
Our Recommendation that Creates an Ethic Proof Results Approach System:
The only viable option would be for Arbonne to provide Consultants with testers that have a 3 to 7 day supply and are self contained. This solution has the following advantages:
- It eliminates the potential contamination that the full size systems are susceptible to.
- It does not require a directive or edict from Arbonne Corporate thus protecting the legal separation between Arbonne Corporate and the Independent Consultant’s business.
- It would allow Arbonne Corporate to categorize these testers as a business aids. This is important because items that are classified as Business Aids have no retail volume attached to them. Consequently this would take away the incentive to up-line Consultants to push large upfront orders so they could receive monetary compensation on Results Approach Kits.
It would eliminate the need for Arbonne to dance the ethical line by on the one hand supporting the Results Approach System (Trainings, etc.) and on the other hand recommending that Consultants:
- Use sample packs in conjunction with the Results Approach Kits (which they cannot enforce)
- That the Consultants are responsible for any contamination to the Results Approach Kits (which again they cannot enforce)
- Try to prevent front loading by questioning those who order large quantities of RE9 Systems (which again they cannot enforce)
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