Business Model
USANA, a multilevel marketing company, sells its products primarily via non-employee distributors known as sales "associates" as well as via the Internet. Associates may be eligible to receive commissions based on their own product sales as well as through sales made by any new distributors they recruit (referred to in multilevel marketing parlance as a "downline"). USANA's compensation plan awards commissionable 'points' for sales volume. When the points reach a pre-determined number, the associate is paid. If the points do not reach the payment threshold, they accumulate towards the next week. The firm requires that associates purchase a minimum of 100 volume of products (equivalent to approximately $110–$130) every four weeks in order to remain eligible to receive compensation. If this minimum is not maintained, the distributor loses the points that have accumulated but not yet been paid. According to documentation from USANA corporate, 87% of associates fail to make enough from commissions to recover the cost of their qualifying purchases with 67% of all associates making no commission; 72.2% of the company's commissions are earned by the top 2.31% of associates. According to a 2011 article published by the Salt Lake City Tribune, the firm's FY09 income disclosure statement indicated that the average yearly income of the company's 165,710 associates, which includes those just starting out, was $617, while the "top-of-the-pyramid distributors earn an average of $857,865 annually".
The firm's 2010 income disclosure statement defines "associates" as those who are actively building a business, acting as wholesale buyers, or are new distributors. The firm's 2009 SEC 10-K filing draws a distinction between associates and preferred customers. Associates are independent distributors of USANA products who also purchase their products for personal use. Preferred customers may purchase products, at wholesale prices, strictly for personal use and are not permitted to resell or to distribute. As of July 2011, the firm had 222,000 active Associates and 68,000 preferred customers.
USANA's associates are bound by distributor agreements, which forbid distributors from making "misleading income claims" to potential associates, and from making health claims for the products. However, an investigative report aired by Radio-Canada in February 2009, which included hidden camera filming of recruitment and other sessions, found that one group of associates appeared to violate the company's policies. The program contrasted the information about potential revenues presented at meetings and in written materials with the Canadian legal requirements for multi-level marketing schemes to provide clear, frequent and complete information about the revenue of the typical participant. In addition, the same group of associates were filmed making recommendations for using USANA products to treat illnesses including leukemia.
In 2008, two Canadian USANA distributors were awarded $7 million in compensation for damages related to their wrongful dismissal from the company. The firm had terminated their positions in 2003 because it believed the distributor had violated the companies' policies and procedures.
New Zealand government statistician for the Commerce Commission, Dr. Murray H. Smith, who served as an expert witness in every pyramid scheme case brought by the Commission preceding 10 years, opined in 2008 that very few USANA distributors are likely to become wealthy, and stating "you can make a very strong argument that this could be a pyramid scheme." When asked by the National Business Review to review the firm's business structure and compensation plan, it was Smith’s opinion, from a statistical not legal standpoint, that the firm demonstrated a number of characteristics commonly occurring in pyramid schemes including that most members recoup less than what they pay to participate; that those at the top of the structure are more likely to make more than those on the bottom of the structure; and that as the company grows it will become harder to recruit others. Dr. Smith also noted the company’s significant turnover in distributors making it necessary to continually recruit.
Read more about this topic: USANA Health Sciences
Famous quotes containing the words business and/or model:
“It is possible that the telephone has been responsible for more business inefficiency than any other agency except laudanum.... In the old days when you wanted to get in touch with a man you wrote a note, sprinkled it with sand, and gave it to a man on horseback. It probably was delivered within half an hour, depending on how big a lunch the horse had had. But in these busy days of rush-rush-rush, it is sometimes a week before you can catch your man on the telephone.”
—Robert Benchley (1889–1945)
“...that absolutely everything beloved and cherished of the bourgeoisie, the conservative, the cowardly, and the impotent—the State, family life, secular art and science—was consciously or unconsciously hostile to the religious idea, to the Church, whose innate tendency and permanent aim was the dissolution of all existing worldly orders, and the reconstitution of society after the model of the ideal, the communistic City of God.”
—Thomas Mann (1875–1955)