We’re in the world of COVID-19 and I’m homeschooling two kids on two curricula at the same time. My military wife is deployed helping with the COVID-19 response.
However, the FTC has warned many MLM companies about COVID-19 claims about health and investment claims. I thought it may be useful to refresh (not republish) this article with this message. It may give you a flavor for how MLMs work in general.
Happy Halloween everyone. I’ve got a tale of a scary MLM to share. It’s my first attempt using a new writing tool, Scrivener and a new writing shorthand called Markdown. Normally, I’d put more time into proofreading the article and formatting, but having spent dozens of hours on it as it is, I need to bite the bullet and publish.
Regular readers know that I have a hobby of analyzing MLMs and showing consumers how they deceive you. Last week, I noticed that Nick Loper of Side Hustle Nation had highlighted a friend who has grown a $4k a month business in an hour a day. Kellie Gimenez is doing it with an MLM called Beachbody. You may know of Beachbody’s workouts: P90X and Insanity are two of the most popular ones.
Truth is, I’ve been meaning to write about Beachbody for a couple of years now. I noticed a good high school friend of mine promoting it on Facebook. I pushed it to the back-burner because I wanted to believe it was legit for his sake. Also, I see nothing wrong with P90X. From what I’ve heard it is a great workout.
With Nick’s podcast and what Kellie said, I couldn’t ignore Beachbody any longer. Oh well, this could make for an awkward 20th reunion in a few weeks if we both go.
This is a long article so if you want the “TL;DR” version, it’s:
“Get the hell away from Beachbody’s Shakeology and its ‘business opportunity.’ You are wasting your time and money. Every piece of information seems to show it is an illegal pyramid scheme according to the FTC’s guidelines. A former Beachbody Coach also gives good details into the pyramid scheme nature of the company. According to her, the focus is not on nutrition or fitness, but classes instead include: “How to never take no for an answer when trying to sign on new coaches” or “How to not take no for an answer when selling Shakeology.”
You can pick up Vega One available on Amazon which is extremely similar (and better in some ways) for half the price. A former Beachbody Coach mentioned Nature’s Plus Spiru-Tein High Protein Energy Meal is a great choice at about a single dollar per serving, 1/4th price of Shakeology.
There’s no reason to be a Coach to get a discount as you can get the Shakeology discount price on Ebay without paying coaching fees.”
The Products
As I said in the introduction, I don’t mind the workouts. They seem legit.
What is extremely fishy is the Shakeology product. The product itself isn’t particularly, but the pricing. Before I cover it allow me to explain why pricing matters in an MLM.
Why Does Pricing Matter in an MLM?
This is a good question and few people seem to grasp it initially. One of the best explanations I’ve seen is by a commenter on FatWallet using an analogy:
[I go into this analogy in more detail here.]”Say Mr Pyramid buys pens in bulk from Staples and sells them for $100 each. Who’s gonna pay $100 for a pen? But tell them that they can also sell pens for $100, and we’ll pay you $30 for every pen you sell, plus you can recruit people to sell pens as well, and you’ll get $10 for every pen they sell, and $5 for every pen their recruits sell. Three levels, $45 commissions total on a $100 sale. Everyone has to buy 10 pens a month for personal use to participate in the program. Just find three people who find three people who find three people…. In the end, yeah, you are buying 10 pens a month for $1000, but you are getting $3150 in commissions, so don’t sweat it. Why wouldn’t you join?
Product is moving. The pens get used. No recruitment revenue, only product commissions. Absolutely 100% a pyramid scheme. The only real reason people are paying $100 for a pen is for the opportunity to make money off the sale of pens. Completely unsustainable as eventually, you run out of people to sell to and those at the bottom get hosed buying $1000 pens but not being able to sell them. This is an extreme example, but if you look at the world of MLM, there are some pretty big name companies out there that somewhat fit this mold on a less cut and dry basis.”
This is why The Verge and The Atlantic are writing about Herbalife which is being investigated by the FTC for being an MLM that is a pyramid scheme.
Back to Shakeology
Anyone who has read my ViSalus article knows this is a red flag. There I showed that ViSalus was charging $1.50 for a shake that any consumer could make with 3 simple ingredients for under 50 cents: whey protein, Fibersure, and a multivitamin. I know saving a dollar doesn’t seem like much, but in 10 minutes of time, you could save your $300 or more each year. Unless you are the CEO of company making millions this is exception use of your time.
Unfortunately Shakeology isn’t quite as easy to break apart. There are many ingredients. I found a nutritional label here, which is worth looking at.
There’s a pretty good product comparison of many shakes including Shakeology here. It criticizes Shakeology in quite a few places, but gives it an overall thumbs up for ingredient choices. His conclusion is interesting:
”Drinking shakes as meal replacements is not, in my opinion, a sustainable long term health plan. No liquid meal replacement satisfies the need to eat and chew solid food, which also stimulates the release of digestive enzymes in saliva… I do not recommend any of these products as a route to supreme good health. However, if you are going to drink a meal replacement, opt for Shakeology by Team Beachbody, it seems to be way better than the others in terms of the quality of the ingredients.”
So in fairness, Shakeology may have decent ingredients, but it isn’t necessarily a good health choice (according to this extensive review).
As we covered earlier, pricing does matter in MLM. According to Gimenez’ description on the Side Hustle Nation podcast, the meal replacement shake is around $4 or $120-130 a month. We’ll dig into pricing in a minute, but we are going to take a quick detour.
At the 11:50 mark of the podcast, Nick Loper politely says, “ummm, it didn’t really do it for me” while laughing (Translation: You don’t want to put this in your mouth.) Kellie says that some shakes “you can just shake in a shaker and go for it.” With Shakeology you need to “find your mix” and “you need to blend it.” She mixes the chocolate flavor with peanut butter, a banana, almond milk, ice.
This is where Shakeology starts to fall apart.
If you go back to the nutritional facts, it only has 140 calories a serving, not a good value for $4. It’s marketed a meal replacement, but I’ve never seen 140 qualify as a meal. The US RDA for calories in a day is around 2000 calories. (It varies with age/gender, but that is an average.) People typically eat three meals a day. Allowing for some snacks, a typical “meal replacement” should have between 400-500 calories.
Thus to get a true “meal replacement” you’d have to drink 3 shakes at a cost of $12. However, as Ms. Gimenez points out you need to “find your mix” and “blend it”, so it isn’t meant to be a “meal replacement” on its own. Let’s just say that for $4 and an additional dollar of mix ingredients, you can make yourself a $5 shake. That’s in your own home, not at a swanky restaurant as you might in Pulp Fiction (Note: adult language). If you are going to pay restaurant prices for a shake mix at home, you might as well buy $40/lb. steaks at your grocery store.
Wait, there aren’t any $40/lb. steaks at your grocery store? Are there any shake mixes that are $4 for 140 calories? The closest thing you can find is Carnation Breakfast Essentials, No Sugar Added, which has similar calories, protein, fiber, vitamins and minerals for $0.62 a serving (nutrition label: http://www.nestlehealthscience.us/asset-library/PublishingImages/8.0PRODUCTSLocalLandingPage/Nutritional%20Panels/CBE-Powder-NSA.jpg). If you use the Subscribe and Save option, the price comes down to 50 cents a serving. Yes, I know Shakeology Coaches are going to try to rip me apart for the comparison saying that Carnation is full of bad ingredients. However, as long as shakes aren’t a good health choice (according to the review referenced above) to begin with, quibbling over the differences here doesn’t make sense. What’s vastly more important is that the nutrition label is very, very similar, but at around 1/6th or 1/8th the price of Shakeology. If you are looking to get into shape the important things are calories, protein, carbs, fiber, etc., not whether it has apple pectin powder or wheatgrass in it.
Update 1: I found a similar product, Vega One available on Amazon, that is $53.48 (as I write this) or $2.43 per serving. Looks like it almost identical with digestive blends, antioxidant blends, probiotic blend, tons of vitamins and minerals, similar calories/protein. Vega One has double the fiber and an Omega 3 blend, which arguable makes it better at a much lower cost. Oh and Amazon’s autoship (Subscribe and Save) saves me an additional 20% off the $53.48 price making it $42.78.
Update 2: A former Beachbody Coach mentioned Nature’s Plus Spiru-Tein High Protein Energy Meal as a great choice in the comments. It is about a $1.15 a serving or nearly 1/4th the price of Shakeology. The comment also gives good details into the pyramid scheme nature of the company. According to her, the focus is not on nutrition or fitness, but classes instead include: “How to never take no for an answer when trying to sign on new coaches” or “How to not take no for an answer when selling Shakeology.”
In a year, you would spend over $1200 a year drinking Shakeology, but save a thousand dollars going with Carnation Breakfast at $225. That buys a lot of Beachbody workouts, time with a personal trainer, or other things that will help you get in shape.
And let’s take a minute to mention how terribly inconvenient it is blend a shake if competing products have an option to “shake in a shaker.” You certainly aren’t paying for convenience with Shakeology… you are paying for inconvenience.
However, if you are going to go with blending route anyway, I suggest that you get a Nutribullet (here’s my review) and make this mix at home for around 50 cents a serving. I combine frozen fruit (around a cup), whey protein (1/2 scoop), Greek yogurt (a tablespoon), and some spinach (you’ll never know it is there) and blend away. Sometimes I get crazy and add flax seed. It tastes great and costs probably around 50 cents a serving… again a fraction of Shakeology. So for the health nuts that have a problem with the Carnation Breakfast option, this is another option that should eliminate all health questions.
Finally here are some other cheaper alternatives to look into:
To summarize, it seems like Shakeology tastes so terrible that you need to mask it with a plethora of other ingredients. It is so expensive that the pricing at a restaurant is famous in a movie for being outrageous. Shakeology may be healthy for a shake, but shakes aren’t healthy to begin with. It misrepresents itself as a meal replacement when it is really nothing of the sort at only 140 calories. In only becomes a meal replacement when you add the other ingredients… at which point you might as well just had the meal.
Beachbody Bummer has a great chart about how absurd Shakeology pricing is… Pricing for 200 calories: Slimfast is $0.63, Ensure is $1.03, GNC Total Lean is 2.36, Shakeology is $6.66. Yikes!
Given all the problems with Shakeology, a natural question to ask is, “Who is going to pay $4 a serving for Shakeology?” If that sounds like the “Who’s gonna pay $100 for a pen?” from the Pen Pyramid Scheme, you are starting to get the idea.
What Can you Expect to Earn as Beachbody Coach
When someone presents you with a business opportunity it is always wise to crunch the numbers. Beachbody has posted an their income disclosure statement (PDF) on its website. You’ll want to click on that.
The first thing you’ll notice is that the document is from 2010-2011. Hmmm, that’s not a good sign. Giving Beachbody the benefit of the doubt, I dug deeper and found a Beachbody income disclosure statement from 2011-2012 at an obscure URL (see the link when you mouse over it).
I was unable to find information from 2012-2013. Maybe it exists, but I think Beachbody just gave up and didn’t release one. You’ll find out why I presumed they gave up as we analyze it.
To make things easy, these income disclosure statements are commonly referred to as an IDS in the MLM world, and I’ll keep the same convention. Also since they go from the end of December to the end of December, I’ll just use the year that encompasses 99% of the data. So I’ll refer to the 2010-2011 as simply the 2011 IDS and the 2011-2012 as the 2012 IDS.
I’ve evaluated IDSs from dozens of MLMs, and the first place to look is always the fine print. In footnote 2 of the 2011 IDS you’ll find that only 49.3 of Coaches earned a check from Beachbody… 50.7% earned nothing, nada, zilch. In the 2012 IDS it gets worse as footnote 3 says that only 45.9% earned checks… 54.1% earned nothing, nada, zilch.
Thus the chart that you see in each of the IDS’ is automatically missing half the data. It’s like analyzing hitter’s performance in baseball, by only looking at the hits and ignoring the outs he makes. Or it’s like evaluating a QB in football by looking at only the completed passes he makes and ignoring the incomplete passes.
It doesn’t make sense to sweep the failure of 50+% of the workforce under the rug in a footnote…
…but it gets worse.
In each IDS footnote 1 says that it includes Coaches who were with Beachbody the entire period. Thus the data includes only experienced coaches who have been with Beachbody for a year. The growing pains of people new to Beachbody are excluded. This means that those who have put in a year in the business had a less than 50% chance of receiving a check of any kind.
Churn Rate in MLM
I Interrupt this analysis to talk about churn rate in MLM.
It’s important to note that there is a huge churn rate in MLM. It ranges from 60-90% from the few companies that have accidentally disclose it at one time or another. (It is never regularly reported by any MLM that I am aware of.) It’s not often that people will stick around in business when they aren’t earning a check. In fact, I go out on a limb and say that it is dumb to put a year in a business that isn’t paying you a check. It’s a crazy limb to go out on, I know.
There is a great article on Seeking Alpha that explains that the people at the top of the pyramid stay year after year while the people at the bottom quit when they make no money and are replaced by new people (i.e. churn).
Back to Beachbody IDS analysis
Getting back to the IDS analysis, all the people who got churned in under a year or were members from June to July (not qualifying for either IDS), are excluded from this analysis.
Here’s what I would consider a more accurate representation of the Beachbody Income Opportunity. This chart has four “cases” depending on the churn rate that I don’t believe is disclosed by Beachbody. It assumes 100,000 Coaches – I had to pick a number since I didn’t see one disclosed. This is a nice round number to get an idea of the percentages… and in my experience it probably isn’t too far off from the actual number of Beachbody Coaches in the United States.
From my experience with MLMs, “Case C” or “Case D” are the most likely cases accounting for the churn. So when you read this chart you’ll see that somewhere between 4.59% (4,590 of 100,000 in Case D) and 18.36% (18,360 of 100,000 in Case C) of Coaches earn checks after accounting for typical churn for IDS 2012. From there you’ll most of those (71%) are “Retail Seller” Coaches.
Beachbody Expenses
While Beachbody provides an Income Disclosure Statement, like all MLMs, it avoids any attempt to estimate expenses. Thus we are at a loss to figure out how much money a Beachbody Coach actually brings home.
The excuse they give is that the expenses vary with each person. They do, but many of them are consistent. Here are a few to think about:
- Conference Fees – The Beachbody Coach Summit ranges from $99 to $295 depending on when you buy it. As I write this, 10/24/14, the price for the event on 7/16/15 (still nearly 9 months away) is $195. The early pricing was expired months ago (7/31/14).
The people who benefit from this early pricing are the people who are already in and already making good money… the people in the diamond ranks. It doesn’t seem right to me that the people who are making the most are going to end up paying the least. The new person who joins in 2015 is going to pay $245 or more.
This doesn’t count hotel, car, airfare, and food (restaurants are expensive), which reasonably add another $1500 in costs. Some will argue that conferences are optional. No doubt about it, they are.
However, the same people will talk out of the other side of their mouth saying that if you are serious about the business, you need to go. They’ll also say that the people who aren’t making money aren’t putting in the effort in doing stuff like this.
To those people, I’d say, “You can’t have it both ways.” Either going to the conference is a critical ingredient AND COST of doing the business or it is not. If it is not, then not going is not an example of something “not trying.”
- Monthly Coach Fees – There is a monthly $15.95 fee to be a Coach. That pays for a website and a subscription to “Success.” I’ve covered this already when I wrote about the ViSalus scam, a similar MLM shake company, but it is worth mentioning here.
The “Success Magazine” is brainwashing material, more commonly known as propaganda, directed at the MLM business. If you look at the company that distributes it, they make it clear that their business is partnering with MLMs. Just go through all the partners at the bottom of the screen and you can see that they work (it appears 100% exclusively) with pyramid selling companies. If you’ve ever seen a copy of Success Magazine, you’d see that 90% of it is sound business advice designed to gain trust… but the other 10% of it is about legitimizing MLM. In contrast, pick up any other business magazine, Fortune, Entrepreneur, Inc. Fast Company, BusinessWeek, and you’ll see nothing about MLM being a legitimate business. In fact, Inc will tell you quite the opposite.
The problem is that most people buying into MLM are too brainwashed to see that “Success Magazine” is essentially an infomercial. You shouldn’t pay a monthly fee for propaganda… especially propaganda that sells advertisements. It is a combination of paying for the Metro and your company newsletter.
The website is another area where the company shouldn’t be charging money. Facebook, Tumblr, and other similar websites don’t charge money. They make their websites available to you for free and you don’t even work for them. Why would you pay Beachbody money for a website to sell their products? Does your current office job charge you for the use of the company’s email system? Of course not.
The website that Beachbody provides has almost no incremental cost to add coaches. It is similar to the cost that iTunes incurs when you buy music there: it is fractions of a penny to send the music. The real costs are in producing the product the first time. Same thing with the Beachbody website. I don’t know how often they roll out new tools on the website, but for the most part it should be very basic, something with minimal costs to produce the first time and very few ongoing costs to update pricing and policies.
It may not seem like the monthly $15.95 fee is outrageous, but it’s a huge deal when Netflix raises rates from $7.99 to $8.99. Netflix is a good example of a company that provides product in unlimited quantities that is extremely expensive to produce… and it’s priced at nearly half of Beachbody Coach fees. It is interesting to see how the $190 in annual Coach Fees stacks up add up to the income that is being earned.
- Weekly Club Fees – I’ll let this Beachbody Coach explain this: “There is also an option to be Club Member that costs $2.99 a week and is billed quarterly. I consider the Club Membership as a cost of doing business, because in order to qualify for the customer lead program, one of the requirements is for a Coach be a Club Member. Some Coaches don’t like this, but to me $2.99 a week is a small price to have customer placed in my business.”
This is Mindbloggling. It is an annual fee of over $155 a year. It is almost as much as the Coach Fees themselves, but it can be overlooked since it is such a small number. It’s billed more often though. I realize this is “optional”, but many, like the Coach above, consider “a cost of doing business”, simply because the Beachbody created a policy to makes this fee a requirement for the customer lead program.
The customer lead program is a hairy best of complexity. Good luck wrapping your head around this 5 part series. The gist of it is that if someone signs up at Beachbody who wasn’t referred by a Coach, Beachbody will place that customer with a Coach who has paid this $155 annual membership.
Breaking it down, Coaches make money by either selling product or recruiting people to be Coaches who buy product… but this system allows Coaches to make money for doing neither. Essentially Beachbody’s website is doing the Coach’s job. Sounds like a nice free lunch, until you realize that it isn’t free.
It should be obvious that it is a strange game Beachbody is playing. They charge Coaches for websites, but when the Beachbody.com website makes money they disperse the commission to Coaches.
Shouldn’t Beachbody keep those commissions that they earned without any Coach’s help and use it to pay for the websites? That would make sense. The only reason I can see to NOT do it this logical way is that there are very few leads, and it is more profitable for Beachbody to collect the annual $155 in Club Membership fees from Coaches to qualify to get one.
Profit Analysis
It’s business 101 that income minus expenses equal profits. Making money is earning profits, not income. Here’s some analysis from Beachbody’s own information.
The easy expense is coaching fees. The $15.95 monthly fee comes is rounded down to $190 a year. The “cost of doing business” weekly fee to qualify for leads is another $155 a year. That’s $345 and you haven’t gone to a conference. You didn’t put gas into your car to go a meeting. You didn’t buy any sample product to give away. This is pretty close to the bare bones minimum.
When you fall into the 50% that didn’t earn a check after a year, the Beachbody people are going to say, “It’s because you weren’t committed.” However, by “committing” yourself, you are guaranteeing yourself of only one thing: greater expenses. As we see, the odds of greater income are extremely slim and there are certainly no guarantees.
If you start adding some of the expenses I listed it isn’t trivial. It can be thousands of dollars.
Using “Case C” of the 2012 IDS in the above chart, we see that only 18% (18,360 of 100,000) earned any income at all… 82% (rounded) earned nothing. Of those lucky enough to make a check, 71.4% had an average income of $467 Combine those two stats and 95% of Coaches are below Emerald who either lose money or maybe break even… earning no real profit for their time spent.
Using “Case D” of the 2012 IDS in the above chart, it gets worse with only 1% of Coaches making it to Emerald or above… around 99% either lose money or break even.
And remember these expenses are incurred from the start of the business, while the income is measured of those who have been there for a minimum of a year.
Is Beachbody a Pyramid Scheme?
That’s the question that people are going to ask when looking at MLM. Many people just jump to the conclusion that it is a pyramid scheme. That’s not a bad instinct and let’s look at why:
The Federal Trade Commission (FTC) is the authority on pyramid schemes and put together this document to help consumer tell whether an MLM is legit or if it is an illegal pyramid scheme. I’ll quote some important lines, but it is worth reading the whole document:
”Not all multilevel marketing plans are legitimate. If the money you make is based on your sales to the public, it may be a legitimate multilevel marketing plan. If the money you make is based on the number of people you recruit and your sales to them, it’s not. It’s a pyramid scheme. Pyramid schemes are illegal, and the vast majority of participants lose money…
… Avoid any plan where the reward for recruiting new distributors is more than it is for selling products to the public. That’s a time-tested and traditional tip-off to a pyramid scheme…
One sign of a pyramid scheme is if distributors sell more product to other distributors than to the public — or if they make more money from recruiting than they do from selling.”
In three separate places in one small document they’ve made it very, very clear… selling product to the public (people not in the MLM) is legit, making money recruiting people is a pyramid scheme. That’s consistent with every legal definition of a pyramid scheme that focuses on endless chain recruiting.
To summarize in caveman language: “recruiting hierarchy (”building a team”/pyramiding/[call it what you want]) is very bad. Selling to public (friends, family, etc.) is good.”
So with the FTC guidelines in place, I have to conclude that Beachbody is indeed an illegal pyramid scheme. I’m sure Beachbody’s lawyers are drafting their cease and desist letters now. To them I’d say, this is my constitutionally protected opinion based on the FTC’s guidelines and the information that I am going to (and have already) presented. While you may choose to conclude differently, I think your opinion would not be based on any evidence, so you might as well conclude the world is flat.
Before we Get started. Let’s debunk the pyramid scheme myths
To start I have to debunk the three pyramid scheme myths that MLMers always come to me with:
- A pyramid scheme doesn’t have a product or service. It seems this is part of a definition on Wikipedia. It simply isn’t true. Otherwise the FTC wouldn’t have put out the document on MLMs that I referenced above. MLMs clearly have products and services yet they can be pyramid schemes. Also, the FTC wouldn’t have shut down this MLM which was selling Dish Network products for being an illegal pyramid scheme.
- You can earn more than the person who recruited you, so it can’t be a pyramid scheme. That’s another common myth. Go through the FTC guidelines again and tell me where you see that. It’s a story that MLMers tell each other to convince themselves that they are legal. It’s not based on any case law or regulatory body that I’ve ever seen.
- Your company is a pyramid. This is the most common one. These people are confusing legal hierarchical organizations not based on recruiting with pyramid schemes that are based on endless chain recruiting. Think of it this way… A software engineer at Microsoft can make 6 figures a year without ever recruiting a single person. Typically zero percent of his annual salary is based on him recruiting others. If we go back to the FTC guidelines, this income is not based on recruiting, and clearly it is very legal. So no, Microsoft, nor your typical company, is not a pyramid scheme.
Here are some Beachbody Coaches spreading these myths (and a couple of others):
Coach 1 – Spreads “doesn’t have a product” and “a company is a pyramid” myths.
Coach 2 – This Coach doesn’t use any of the above pyramid scheme myths, but instead uses Donald Trump who licenses his name to MLM companies and sells books to MLMers. Of course Trump isn’t a distributor or Coach with any MLM company.
Coach 3 – Spreads the trifecta: “doesn’t have a product”, “a company is a pyramid”, and “you can earn more than the person above you” myths.
Lindsay Matway via YouTube video – Says a pyramid scheme is “making money not by selling product, but signing up people below them”, which is an accurate definition of Beachbody, at least in the Gimenez case study above. She spreads, “no real product being consumed” myth. The example of the FTC shutting down a company used Dish Network TV service, which is certainly a real product and consumed by viewers. The rest of the video is fluff unrelated to definition of pyramid schemes.
Coach 5 – Spreads “You can earn more than the person who recruited you” myth. Doesn’t address any of the key things that may make an MLM a pyramid scheme.
Coach 6 – Spreads “doesn’t have a product” and “a company is a pyramid” myths. Documents the money that Beachbody pays him, despite misleading people with these myths.
Coach 7 – Spreads “bogus product” myth.
Coach 8 – Spreads “doesn’t have a product” and “a company is a pyramid” myths. Creates a whole chart of misinformation such as legal MLM is generated ONLY by product sales which ignores the key difference of selling to recruits vs. selling to the public. Chart has a myth about the presence of a training program making a difference. Chart makes up a “get rich scheme” vs. “true work” myth. The only thing really accurate about the chart is the overpriced product being a sign of a pyramid scheme. As covered earlier, this points to Beachbody being a pyramid scheme. Spreads a myth about the BBB not accepting Beachbody as a member if it were a pyramid scheme, but the BBB page clearly says, “BBB accreditation does not mean that the business’ products or services have been evaluated or endorsed by BBB.” Spreads a myth about the DSA not accepting companies that pyramid schemes, but the DSA spreads a definition of pyramid schemes that doesn’t match federal regulators.
Coach 9 – Spreads “doesn’t have a product” myth. Doesn’t cover any of the points brought up by the FDA.
Coach 10 – Spreads “a company is a pyramid” (via image), and “you can earn more than the person above you” myths.
That’s 10 Beachbody Coaches I found in just a few minutes simply by going to Google and searching “Beachbody Scam” and “Beachbody Pyramid scheme.” Not one of them had a legitimate reason that I could see why Beachbody is not a pyramid scheme. Not one of the coaches addressed the point about making more sales to the public than through its downline of distributors.
Some of them are making significant money. It is gross negligence on Beachbody’s part to not sufficiently police the misleading of consumers. At a very minimum, Beachbody could put an official page on its site and tell distributors to not address the topic at all simply point to the website.
I just solved Beachbody’s massive compliance issue in under an hour. This stuff isn’t rocket science and any reputable company would have been all over it.
So How is the Money being Made in Beachbody?
The Kellie Gimenez case
Kellie made it clear in the Side Hustle Nation podcast that she makes $4000-4500 a month and that $500 comes from direct sales. The rest comes from commissions from her downline. Here is what she says at the 17 minute market of the podcast:
”A majority of your income isn’t going to be coming from the products. The majority of your income, as you grow a team, is going come from your Coaches and the volume they sell. Because you can only sell so many workouts a month… If they aren’t drinking Shakeology every month, I mean, they can buy one workout and never buy anything else from you.
… When I first started as a coach and didn’t have a team underneath me, I was making about $500 selling products. That’s not bad. It paid for our groceries. It paid for gas. It was a good income, but it’s definitely not something that could be a successful side hustle.
She’s clearly making more from recruiting than from sales to the public. Kellie is essentially saying this is how it is designed. She even is negative on making sales to public.
This fits the FTC’s definition of an illegal pyramid scheme exactly. Any reasonable person would have to conclude that using the FTC’s guidelines and definition, Gimenez is running a pyramid scheme. She may not even realize it, because of the myths of pyramid schemes that I presented above. She might be a fantastic person… certainly sounds like it on the podcast.
As a reminder Kellie is a Diamond level Coach in Beachbody. This is in the 0.4% or 0.1% of Coaches depending on “Case C” or “Case D” of the my IDS analysis chart above. If anyone in the organization should know the rules and is abiding by them, it should be diamond Coaches. Beachbody corporate should be “coaching” their distributors about the FTC’s guidelines regarding pyramid schemes and at the very least look at its top distributors and see if they are making their money from the downline vs. selling to the public.
Let’s Look Back at Shakeology’s Pricing again
Ms. Gimenez’ quote in the previous section about which products are being bought is significant. If someone buys a workout, the commission is earned one time and then maybe never again. However, Shakeology is different as a customer spends consistently on it month after month. It seemed like Nick cut her off before she could say it, but it certainly sounded like she was ready to say that the emphasis is on selling the shakes.
In fact, if you go back and listen to the podcast, at the 11:30 mark, Kellie says that she tries to get everyone to buy the shakes.
Given what we saw with the Pen Pyramid Scheme analogy in the section about Shakeology, it fits the mold to be a pyramid scheme. Get people using vastly overpriced pens/shakes regularly and reward a fraction of the money back to the people at the top pyramid.
It might not be a smoking gun of a pyramid scheme, but it is another major piece of evidence against Beachbody. They could very easily offer an affiliate program that rewards Coaches for selling product without the pyramid of rewards for recruiting more Coaches. Such an affiliate program would quickly end any questions as to whether it is a pyramid scheme.
Beachbody’s own words on their Income Disclosure Statements
I thought that Beachbody’s own words in its Income Disclosure Statement interesting.
”Many of our Coaches have chosen not to build a business, but rather join for the opportunity to purchase our programs at wholesale and to be able to earn extra income by helping their friends and family purchase our programs. For this period, 33% of our Coaches decided to take advantage of the bonuses available for those who help the company recruit and enroll other Coaches and retail Beachbody® products to customers. This activity is rewarded through a binary compensation plan which pays bonuses at the Development and Leadership Ranks of Emerald Coach and above.”
First Beachbody makes the fundamental mistake that most MLMs make and have Coaches “join the [business] opportunity” to earn a discount. Many MLMers describe it like being a member of Costco. There’s fine, but Costco conflate a business opportunity with a discount.
The discount earned by joining is 25% according to Kellie in the podcast. That is a hefty chunk on the monthly price of Shakeology. The question becomes, who is left to buy the products at a retail price… the “public” mentioned in the FTC guidelines?
Next, the Coaches who join “to be able to earn extra income by helping their friends and family purchase our programs” are building a business contrary to the opening sentence of that quote. If selling product to family and friends doesn’t count, then it looks even more like a pyramid scheme when evaluated through the FTC’s guidelines.
The final two sentences of that quote are confusing at best. It makes it sound like earning a bonus is a decision that someone makes such as ordering a cheeseburger at McDonalds. It then bonuses are earned by recruiting and enrolling other coaches as well as retailing Beachbody products to customers. However, according to the first sentence retailing Beachbody products to friends and family are not running a business. So unless there’s some distinction of what a friend/family/customer is (and the FTC doesn’t seem to make this) apparently we can exclude retailing Beachbody products in the later part.
That leaves us with earning bonuses for recruiting and enrolling. As you can see, this is where the majority of money is earned. That’s hits the FTC’s guidelines for being a pyramid scheme on the nose.
Beachbody Bummer is a great resource
I stumbled upon Beachbody Bummer which lists federal warnings about pyramid schemes and MLMs. I would have like him/her to link to the SEC’s guidelines, but nonetheless she/he does a great job at highlighting some of the important things like inappropriate pricing (as mentioned earlier).
The Beachbody Scam
As we’ve seen actual profits are very, very rare in Beachbody. Yet it doesn’t distributors from recruiting. They can’t see the “business opportunity” for what it is… a wolf in sheep’s clothing.
Here’s a great quote from Harper’s Magazine on Mary Kay and MLM schemes:
“The women I interviewed for ‘The Pink Pyramid Scheme’ told me stories about struggling to patch together daycare or to survive high-risk pregnancies while working long hours scouting prospects and hosting parties without any guarantee of a sale. Debts mounted, marriages failed. They couldn’t have it all because Mary Kay’s business model (like that of any multilevel-marketing enterprise) is designed primarily to profit from, rather than enrich, its workforce.“
Think about those recurring expenses in relation to the average income. Suddenly the Coaches fees and Club Membership fees make sense.
Think about the high margins the company is earning on distributors buying Shakeology… even when distributors buy it wholesale Beachbody makes a substantial profit. It’s essentially the Pen Pyramid Scheme, but with (slightly) less exaggerated margins and purchased much more regularly. The Pen Pyramid Scheme doesn’t become less of pyramid scheme if they give distributors the right to buy pens for $80 instead of $100. A 20% savings looks good, but it is minimal when the pricing is so absurd.
Do the Ends Justify the Means?
Beachbody Coaches may argue that in the end people are getting healthy, so who cares about all the scammy stuff that goes along with it. If you are really interested in people’s health, then I suggest you simply coach them without Beachbody. Form a buddy system and keep each other in check.
There are countless other tools available. The free website SparkPeople is a health community. Additionally you could also use another site StickK.com (my article on it: StickK to Your Goals) is a way to keep people motivated.
I have no problem with Beachbody workouts, but there are numerous options available. Workout videos have been around for decades.
Just a few minutes of research can give you all the value of the “ends” without all the problems associated with the “means.”
I STRONGLY IMPORE everyone to petition the government with your feelings about this as I have done. The official FTC Twitter account has instructions about how you can communicate your opinion of scams and help others avoid being scammed:
If you think you see a scam, talk with someone. Your story could help someone avoid that scam. Then report it to the FTC at https://t.co/gtPxXAxsek: https://t.co/PWFawyXejS
— FTC (@FTC) May 20, 2020
This article was originally published on October 31, 2014. It contains the best information I found at the time of publication. If anyone has factual information where I may be incorrect in my OPINION above, they are welcome to leave a comment for my own and public review. Readers with different opinions are always free to publicize those opinions elsewhere.
I strive to update this article, and all my articles, with the best information available to help consumers make an informed decision. I may not always achieve that goal due my other career and family obligations, but I do my best. If I’ve been informed publicly (such as Twitter) multiple times over 1-3 months it will probably get my attention. One easier way is to leave a comment.
Just to make it extremely clear to readers and MLM lawyers looking to sue me, the article above is my constitutionally protected opinion. It’s strange that I have to say it and cite the FTC above, but some lawyers act badly when they are offered a bunch of money by a company looking to bully a military family.
tom says
Hard to argue with sound logic and data… although many will try.
Another couple MLMs I’d be interested in hearing about… only because it shows up on my FB feed every.damn.day… is Young Living Essential Oils and Jamberry Nails. The “snake” oil sales people are the worst because they claim all of these health benefits from them. Homeopathic health may or may not be proven science, but to claim some of the crap these people claim is illegal. Some have even gone as far as claiming they don’t need a flu shot because the oils protect them… Just ridiculous.
Jamberry might be a legit MLM because at least they have a unique product that doesn’t claim any health benefits. Although I don’t know about their pricing or recruiting.
Lazy Man says
I’m hoping to cover the essentials oils, but maybe it is another company’s essential oils. I have to check my list.
If people are saying that about oils, then it’s not just ridiculous, but dangerous.
So far I haven’t seen too many dangerous claims with Shakeology, but I didn’t look. It was more than enough to pick apart the “business opportunity” and the evidence that it appears to be a pyramid scheme.
LazyMan,
I just finished reading your review and report on “BeachBody”. I never heard of them before this, but from your analysis I now know to stay away. Thank-you. It was very thorough and it seems better written than your report that I first read from you concerning “Youngevity”.
I made my comments on that one and haven’t returned because it seems like “beating a dead horse” at this point. From what I gathered about their products, they are beneficial to a point health wise, perhaps, but like you pointed out in the comments thread there and in this article, eating a healthy diet has the same vitamins and minerals.
As I said previously, I take vitamin and supplements, but if I can get the proper diet of food, solid or liquid form, I would cut the cost of buying those supplements that are in pill form.
Back to the article here, you mentioned MLM and I can really only give my experience of these types of businesses. I have never signed up for one to make money off of someone I recruited. I sign-up to sell the product; I suspect this is what attracts people to companies, like Youngevity. It did for me. But as I had pointed out, the cost of buying the product was to steep for me. And if the cost outweighs the benefits, then, forget it. Besides, it seems to me that those who would profit off of the efforts of others are running dangerously close to an old practice that was supposed to be outlawed over a hundred years ago; slavery.
That would be why a pyramid scheme is unlawful, because it is nothing more than fraud and a subtle form of slavery; this is mostly for those who will likely come on here and try to defend MLM, or other products and companies that they participate in.
I had signed up to be a distributor for Youngevity; it was an affordable price of $10 and I was supposed to get their products at wholesale. That was supposedly $20, but I ended up paying nearly twice that, for just one canister of Tangy Tangerine. I wish I could afford it, but not because I see it as a “cure-all” for diseases or other medical conditions; those are some outrageous claims.
I drink Snapple products because they taste good, to me, and they do not have a bunch added junk. They are a popular beverage and a healthy choice, imo. Yet, they do not claim that their products will cure you ailments. If I can ever get a business running based on affiliate marketing, I would love to promote Snapple. Of course, they do well enough without such a program, near as I can tell.
The only reason I have repeated what I said about Youngevity is because it is the last company with an MLM structure that I dealt with; though briefly. I am not trying to distract away from the topic of this article you have written. It was an example I use because it is one that I am familiar with and not Beachbody, as previously mentioned. Just wanted to make that clear.
Given that your articles so far, the ones I have read, are well done, I will keep your website in mind for reference toward the MLM type of deals.
Thanks again for the report,
Chris Kalkbrenner
Thanks for the comment Chris. I’m glad you found this more organized than the Youngevity one. I always struggle with how to structure an article, because there are people who are into the business and other who care about the products. And of course there’s those who are interested in both.
Time and again research tells us not to waste money on vitamins and minerals, but I don’t think I’ve read an article that says, “Eat a crappy diet. You need more processed foods and fewer fruits and vegetables.” I’m still waiting to be crucified for the mention of Carnation Breakfast Essentials, but sometimes you don’t have a blender with you (such as at the office). Personally, I’d skip shakes and get Kind’s Dark Chocolate Nuts & Sea Salt bar.
This is great! btw The link to the “their income disclosure statement (PDF)” is broken.
Thanks Cleder. I think all my links were broken. Something about importing from Scrivener caused all my quotes to be doubled. I’m sure it was my error in just not knowing how to use Scrivener well enough.
Lazyman,
There is a problem with the argument concerning vitamins and minerals. It seems to me that various foods, like fruits and vegetables, are sources for many different vitamins and minerals; all of which were supposed to be necessary nutrients for the body. So if there is anything to validate the article you referenced, then, what do they suggest when it comes to the above mentioned foods?
Did they also, take into account if any of those people involved in their study, were on prescription medications? Many such medications have side effects that are worse then, the condition that it is meant to treat; or so it seems to me.
Maybe, as a satire piece, someone should write an article saying what you said about eating a crappy diet. Actually, it sounds like it could be a skit from SNL. I wonder, though, how many people would take it seriously?
Chris K.
Christopher,
I don’t want your comment to be lost in the shuffle with Mat’s. I hope it won’t be, but Mat’s was long and my response was long, so it may be the case.
The article that I referenced, said, “The large body of accumulated evidence has important public health and clinical implications. Evidence is sufficient to advise against routine supplementation, and we should translate null and negative findings into action. The message is simple: Most supplements do not prevent chronic disease or death, their use is not justified, and they should be avoided. This message is especially true for the general population with no clear evidence of micronutrient deficiencies, who represent most supplement users in the United States and in other countries.”
My interpretation of that (and the rest of the article) is that with regard to vitamins and minerals the diet in the United States is fine. In my view the key words there are “with regard to vitamins and minerals”, because I definitely don’t want to say that the typical American diet is fine.
You can read the study, but when I read it (and it has been some time) it involved research from dozens of different studies involving hundreds of thousands of people. Each study has their criteria and some may or may not have people on prescription medicines. I wouldn’t be worried about side effects of prescription medicines. If every car commercial was required to disclosed that use of the product could result in head trauma, loss of limbs, death, etc. perhaps people would feel that way about driving. I think the commercials for prescription medicine get people focused on things that are extremely rare, because such disclosures are required by law.
I think that car commercial would be a better SNL skit.
In any case, I’d appreciate it if we can keep to Beachbody-specific questions. That’s what the people reading his are going to be interested in.
Lazy Man,
I love your blog, love how you base your opinions, and how authentic you are.
I am a Beachbody “Coach”, so is my wife. I thought I might throw out some devil’s advocate opinion into this!!
I got into Beachbody in 2012. I was doing P90X from home, I had the DVDs from a couple years back and just started the program on January 2nd 2012. I was the quintessential “New Years Resolution” weight loss goals guy!!
Being a social media person, to a degree, I felt I would post what I was doing on Facebook, to keep myself accountable. As soon as I told people what I was doing, a friend hit me up and invited me to a “Challenge Group.” This friend was a Beachbody coach, but I had no clue what that was and just wanted accountability. That’s what the group was. I just posted everyday….for literally 90 days every time I did a work out. And I did it every day. I didn’t miss one day.
Coincidentally, I lost about 35lbs in that 90 days. Going back a step though, in mid February, I had ordered P90X2, from QVC, and it came with a 7 day supply of Shakeology! I didn’t even look at it for 4 days. I was just going to throw it away, but I read the ingredients. This is what brought me to the Beachbody website. I questioned this stuff and wanted to look into it.
Low and behold, they have contests where people can win money. Real money for real results. The thing was, when I went on every person’s bio, they had all had Shakeology. Obviously results are based on much more than a shake per day, but it intrigued me. At least I would try it.
So it did, for the seven days. I loved it! It instantly changed my digestion and bathroom tendencies, I felt more energy and overall it was a little hard for me to believe. I already ate, decently healthy. No fast food, no soda, not much in the way of processed food. I had lost 15 or so lbs by mid February, so I was in it and loving it.
So, back to the computer. I needed to know more about this Shakeology. Time to research. I found out Beachbody was a MLM….red flag. I found out the price of Shakeology…..red flag. I already had done multiple mlms and had told my wife I would never join one again…..GIANT red flag. So I decided to not take “no” for an answer and went and read every word in the Terms and Conditions. I had a really good teacher, for my Business Law class at University of Washington, and I always read the entire Terms and Conditions when approaching a business of any mlm variety….to the “T”!!
Read it, had some questions, but it didn’t seem so bad. Went and and looked up FTC, as you mentioned in the article and did some comparing. Then I did my math, because remember, I just wanted to buy Shakeology. So here it is:
Shakeology – $130/month
Coach Fee – $15.95/month
Coach Discount – 25% off retail price
Club Membership – $2.99 per week, (but came free for a month and I read the details, and you can cancel before being charged.)
Net Savings = Approximately 10%
So, signing up to be a “Coach”, which I hated the title, but whatever, meant I saved 10% for this product that I wanted and I personally justified the cost. Sold.
Personally, no problems there. I told my wife that I could get Shakeology for 10% off and I didn’t have to sell anything. I got the okay and there went the order. I had no inclination or desire to sell anything. I just wanted a discount and no one had told me anything about it. I did all myself.
So, stating this, I believe a lot of the “Coaches” in Beachbody are of this variety. Numbers are very skewed based on this way of getting a discount. And I know for a fact, this equates to over 50% of coaches that sign up.
So, back to my story, I had just signed up and hadn’t even received my full 30 day bag of Shakeology yet and I was at a friends house. He was amazed I was looking so much thinner that just a month and half ago and was wondering what I was doing. I told him and he asked me how to sign up!! I literally had no clue. But this was the beginning that has now brought my wife and I to today. My wife mainly works the front end of the business and I do the nerdy and boring behinds the scene stuff.
So let’s talk about the direct sales side and how pay works. I talk to Jack, Jack buys Shakeology and a workout, called a “Challenge Pack” for $150. I receive a commission of 25-36% of the purchase price. In this case let’s say I make $40. There is a retail sale, easy. That person also gets a Club Membership, which is free for the first month, and oh yeah, when you buy a challenge pack, it puts Shakeology on an HD order system. This means it is Home Direct….monthly.
So far none of this is illegal, though I wouldn’t say I like it a ton, but I could go into “how to run a business”, because I own three and how much time it would take Beachbody to do it a different way, but you don’t want me to bore you with my opinion anymore than I already am!!! (Super long sentence!!)
Remember, I am an independent representative, a 1099 taxable entity, and it is up to me to tell people how to work Beachbody’s products. I know the rules, I know the systems and I am selling their products. I don’t work for them, I am outside sales representative choosing their product, because it worked for me and then going and selling it on my own. What they have done is created structure and allow us to profit share.
It is up to me, as that representative and as a good and conscientious person to tell my client all these things because they decided not to read any fine print. So we do. I say we, because my wife does it more than me. We have a system set up to remind our clients to cancel their Club Membership, if they want to, and that their Shakeology is on HD and to cancel it if they would like. It’s called good old customer service!!!
So, now we have covered retail, I will go into the “team” concept: As soon as Jack looses 30lbs, he comes to me and tells me he wants to be a Beachbody “Coach”. I show him how and he signs up. At that point he is no longer a retail customer. Any sales he does I am now paid through Team Volume Points(TV). This is where it also gets confusing but really makes it legal!!! Beachbody’s mlm is set up as a Binary system. As an Emerald Coach, I am paid $14 for every 200TV on one leg and every 100TV on the other. I am given points on all retail sales that a coach under me earns through their direct selling of Beachbody products. So essentially I lost the retail commission I was getting from Jack and now replace it with TV. Everytime I switch a person from retail to coaching, I lose money. In the short term or if that person only wants to do it for the discount.
To get free customers, I have to be an Emerald Coach, I have to have 50PV per month, (which means, I have to sell or buy something of about a $60 value), and I have to have a Club Membership. These “free” customers, as you said, come from Beachbody, after this customer has bought a program. Beachbody wants us to follow up with them and help them on their journey, potentially having them buy other products in the future. At this point, I am pretty sure, most would know what they are getting into and know the costs. And remember as an independent contractor, it is my duty to know what I am doing and to help those around me. (I know this may not be the industry standard!)
I may be mistaken, but after a lot of personal research, I believe that Beachbody is purely direct sales and retail. My wife and I support others to do the same. But the Team Volume is nothing more than retail sales of other coaches that are doing the same thing that I am…..helping friends and people I have in my sphere around me. They made a system to reward people for helping others. Now, you don’t have to like the price of Shakeology, but I lost 65 lbs in six months. I did P90X, Insanity and the Ultimate Reset, as well as Shakeology everyday. Fast forward to the present, I have been having Shakeology almost everyday, since February of 2012. You might call me crazy, but a lot of people don’t!! Is it crazy to spend $4 per day on a cup of coffee from Starbucks? Is it crazy to buy a brand new car versus one 2 and a half years old for a 30% discount or more? Is it crazy to put your savings on one company’s stock because they read something good about it on the internet?
Shakeology has personally changed my life. I have blood work to prove it! But that’s not the point!!! The point is about the legal or illegal set up of Beachbody as a MLM. By definitions, you would need to go personally buy everything in Shakeology, every ingredient, break it down into a daily amount and then proceed to break down the cost per serving. Once you know that, now it is conceivable that the argument is legitimate. I can go break down the cost of pen very quickly. There are usually three to six running parts and all can be found separately, put together and now I have a pen. I know now how much it cost, it may be $4 or it may be $40000 if I decided to use gold and diamonds for the external components! Same goes for Shakeology. Go find the 70+ ingredients and do it for yourself. I tried…..it wasn’t worth it. It took too much time, it was extremely pricey, in the upwards of $17-20 per serving. I got most my prices from Amazon or other online retailers.
The thing is…..I had the same arguments. I am an OCD person, with a degree in finance, that doesn’t believe it until I break it down myself. I contemplated even commenting, but then thought, what the heck!!! It’s fun!! I love debating and I love how you debate, so why not!
I could go into a lot more detail and for the note, my wife and I are both Emerald Coaches, she has been actively doing coaching for a year now, and we are making money at this. But, it is not a walk in the park and it is about consistently helping others. I would love to hear your feedback and criticism….don’t mind it at all and thank you again for sharing your impressions on all that you do!! I love it! (Oh and I don’t edit very well….so sorry for imperfections in my writing.)
Thanks for the comment, Mat. It was a long one :-)
Let me start off by saying that I love challenge groups and paying people for health. That was the idea by the end of the article with points about SparkPeople (a challenge group) and StickK (a commitment contract). There are probably a dozen more. I’ve written about getting paid for getting in shape before.
I don’t see it as a coincedence that you lost 35 pounds in 90 days of working out.
As you said, “Obviously results are based on much more than a shake per day…” I think that’s really the key. I don’t see anything scientific proving that Shakeology at 10x of the price of other products mentioned per serving. It looks mostly like they are conflating a seemingly good exercise program with an excessively overpriced shake, trying to capitalize on the popularity of one (P90X) to get people to buy the other (Shakeology).
Yes signing up for a Coach can save you 10% on the product. However, I looked on Ebay just now and it looks like you can save over 20% simply buying from there… no Coaching fees.
So who is really paying the retail price of $130 a month? If they don’t have a lot of retail sales to the public (not other Coaches), it would a huge red flag of a pyramid scheme.
As for people signing up as Coaches to earn a discount, I call BS on the whole system. Beachbody can see that people are doing it. It’s not genuine to sign up as a Coach without intentions of coaching someone. MLM companies often use the “signing up for a discount” excuse to hide the people at the bottom who are unable to recruit anyone. It’s impossible to tell from a sales perspective is someone is “signed up for a discount” or “spending hundreds of hours a month spinning their wheels in a satuarated pyramid scheme”… both have zero Coaches below them. Some MLMs solve this by having the “discount chasers” as preferred customers to differentiate them from failed distributors (Coaches).
Beachbody could easily do this and break out the two groups, but they don’t. It’s a major red flag. As an MLM company they should know better. Unless we conclude they are incompetent for not knowing this, we have to assume they are purposely conflating the two groups, which is one of the best ways to hide a pyramid scheme.
And finally, Beachbody wouldn’t want to skew the numbers in their business by accounting for “discount chasers” unless they had a REALLY good reason, right? What would be a good reason other than hiding a pyramid scheme? I can’t think of one.
When you say, “I am an independent representative, a 1099 taxable entity, and it is up to me to tell people how to work Beachbody’s products.” You really shouldn’t be telling people how to use a shake. If you do then Beachbody is doing something wrong. Carnation Breakfast Essentials, SlimFast, Ensure, and GNC Total Nutrition don’t require Coaches. And if you are showing people how to exercise, I’d suggest that be best left to personal trainers. It certainly doesn’t seem like a good idea to give anyone who pays coaching fees a title that presumes they are trained to teach others.
You are right and wrong that you don’t work for Beachbody. You are their salesforce. MLMs make their distributors sign contracts and they can “fire them” at will. They can and have sued distributors for breach of contract when a distributor decides they want to promote another product… even if the product is completely unrelated such as an MLM of coins. In short, you bare all the liability. If you did work for Beachbody, you’d be entitled to such wonderful things as minimum wage. You would also likely receive health insurance, vacation pay, and a bunch of other things.
Beachbody has created a structure that works great for them: limited legal liability, not having to pay minimum wage, not having to pay benefits, not having to pay their share of Social Security as an employer, charging the salesforce for access to sales tools (Coaching Fees), and require purchases or sales to “be active” to earn commissions from the downline.
I looked through the policies and procedures document very briefly and there’s a clause about binding arbitration and waiver of class action lawsuits. That’s yet another huge red flag of an evil company.
I don’t see how the Team Volume Points you describe makes Beachbody legal. It looks like they are pushing people to be Coaches as it is more cost effective to a Coach than a retail customer. More Coaches in a downline and fewer retail customers is a bad thing. Sure, you might take a short term hit if they become a coach vs. a customer, but the important thing is how the distribution is in reality. Kellie Gimenez made it clear to me that the idea is not to have a bunch of retail customers, but to have a bunch of Coaches.
I didn’t realize that the “free” customers were only going to Emeralds. That’s yet another red flag. The rich get richer. The rewards benefit the very few people who are already making money.
Mat, you said, “And remember as an independent contractor, it is my duty to know what I am doing and to help those around me.”
So my question is, why are so many distributors failing in their duty to know what an illegal pyramid scheme is? Today, I spent a few minutes (way under an hour) and found 10 Beachbody Coaches spreading erroneous definitions of pyramid schemes. So what do we do? Beachbody doesn’t seem to policing and firing these Coaches for incompetency.
Mat said, “I may be mistaken, but after a lot of personal research, I believe that Beachbody is purely direct sales and retail. My wife and I support others to do the same. But the Team Volume is nothing more than retail sales of other coaches that are doing the same thing that I am… helping friends and people I have in my sphere around me. They made a system to reward people for helping others.”
As I tried to show in the article, if you replace the word “Team” with “Pyramid” it becomes a little more clear. Team Volume doesn’t necessarily come from retail sales of other Coaches. If it came from people paying the $130 retail price who are not affiliated with Beachbody in any way, I’d say it is clearly legal. However, when those sales come from other Coaches who recruit other Coaches who recruit other Coaches, it is something different. They aren’t retail sales. They aren’t sales to the public (people not affiliate with Beachbody). It’s closer to the Pen Pyramid Scheme. The fact that you support people doesn’t factor into whether it is a pyramid scheme. I could support the people below me in marketing their $100 pens. I could give them daily pep-talks. It really doesn’t matter.
Mat said, “Now, you don’t have to like the price of Shakeology, but I lost 65 lbs in six months. I did P90X, Insanity and the Ultimate Reset, as well as Shakeology everyday.”
Earlier today, I went back and showed how the excessive price of products is actually in the SEC warnings of pyramid schemes. It’s in the FTC warnings as well. So while I don’t like it, I think I have shown that it is excessive and why that is a problem.
Losing 65 pounds depends a lot on starting weight. People seem to be able to lose that on The Biggest Loser in 4-5 weeks. They don’t do anything from Beachbody. My point is that there’s really no secret here. It’s a time-tested tale of exercise and calorie consumption that’s proven successful billions of times throughout history.
Mat said, “Is it crazy to spend $4 per day on a cup of coffee from Starbucks? Is it crazy to buy a brand new car versus one 2 and a half years old for a 30% discount or more? Is it crazy to put your savings on one company’s stock because they read something good about it on the internet?”
Funny that you mention Starbucks, I’m doing a whole week of articles on coffee/caffeine starting Monday. One of the things that I stress is that Starbucks is a restaurant with restaurant overhead (baristas, real estate, comfy chairs, etc.) It’s like comparing the cost of a Coke at store to one at a movie theater – different beasts entirely. Furthermore, 16 ounces of coffee (the average size of a Tall or Venti) is an average price of $2.00, not $4.
Re: Buying a new car vs. an old one. I wrote about this when I bought our cars recently. Most statistics I’ve seen has the average car lasting about 10 years. If you buying a car that is 2.5 years for 30% off you are really getting 7.5 for 70% of the price… or 75% of the time to use it for 70% of the price. I went through this exercise and decided it wasn’t worth buying that used car, because dealer incentives on the new car made it like paying 90% of the price for 100% of the 10 years. You aren’t significantly overpaying either way.
If you are putting all your savings on one company’s stock because you read something good about it on the Internet, it is indeed crazy. I hope that was rhetorical.
Mat said, “Shakeology has personally changed my life. I have blood work to prove it!”
Do you? Does your blood work really show that it was 100% due to Shakeology and not related to any of the exercise programs?
Mat said, “The point is about the legal or illegal set up of Beachbody as a MLM. By definitions, you would need to go personally buy everything in Shakeology, every ingredient, break it down into a daily amount and then proceed to break down the cost per serving. Once you know that, now it is conceivable that the argument is legitimate. I can go break down the cost of pen very quickly. There are usually three to six running parts and all can be found separately, put together and now I have a pen. I know now how much it cost, it may be $4 or it may be $40000 if I decided to use gold and diamonds for the external components! Same goes for Shakeology. Go find the 70+ ingredients and do it for yourself. I tried…it wasn’t worth it. It took too much time, it was extremely pricey, in the upwards of $17-20 per serving. I got most my prices from Amazon or other online retailers.”
Well, I’d argue that the FTC guidelines were pretty clear that it is more about where the sales come from. The pricing of the product is an indicator that consumers can use, because it isn’t clear where the sales come from. It was fortunate that Kellie Gimenez was able to break it down for us. We need more of this transparency. Beachbody needs to show us more of this transparency.
And let’s not forget that what I can buy the ingredients for individually is not representative of the actual cost per serving. There are so many ingredients, I would likely have to buy from many different companies, paying for their profit margins on each and every one. Beachbody buys all the ingredients in bulk at an incredibly low price that you or I couldn’t do individually. I hope you read my articles this week, you’ll be surprised about how much 100mg of caffeine costs in an energy drink vs. in bulk powder. I intend to show that the average person with the average caffeine intake could spend $4600 a year on MLM energy drinks or $13 in buying bulk powder. I show a lot of the in-between such as coffee at home, soda, Starbucks, Monster energy drinks, etc.
All this isn’t to say that such a comparison is not possible. It is, but after spending dozens of hours, it seemed safe to appeal to common sense that $4 shakes at home is just ridiculous… especially when you need to add ingredients to make it palatible. For what it is worth, I did this kind of comparison with LifeVantage Protandim and found I could buy the same quantity of the ingredients on Amazon of a bottle for $4.66. The retail price is $50. The distributor price is around $40. They are easily making at least $33 per bottle sold (leaving some room for error or pricing inaccuracies) to each of their distributors.
Think about multivitamin pricing. The cost of a multivitamin does not reflect the individual costs to buy each vitamin separately. Companies realize they can buy in bulk, combine it and charge a small premium. It’s the same analysis that should be done with Shakeology to see if pricing is “reasonable.”
As best I can tell, the quantities of some of the proprietary blends are unknown and thus we couldn’t attempt to calculate if we tried. Beachbody Coaches would shout, “It isn’t the same Super-fruit blend!” and discount the entire analysis as being inaccurate.
Matt said: “I may be mistaken, but after a lot of personal research, I believe that Beachbody is purely direct sales and retail.”
I don’t buy it. You painted an atypically benign picture of how you allegedly build the business that doesn’t seem to place any emphasis on recruiting, but that’s not the reality of how MLMs like Beachbody typically operate. All the big incentives are contingent on recruiting, and that’s exactly what distributors are encouraged to do to build their businesses. To suggest otherwise seems like whitewashing.
Matt said: “Shakeology has personally changed my life. I have blood work to prove it! But that’s not the point!!!”
Um, wait a second there Matt, you don’t get off the hook that easy when making a claim like that. What you’re doing is making an indirect claim that Shakeology affected some blood parameter, and that constitutes an illegal advertising. That’s a pretty damn important point wouldn’t you say?
Matt said: “The point is about the legal or illegal set up of Beachbody as a MLM. By definitions, you would need to go personally buy everything in Shakeology, every ingredient, break it down into a daily amount and then proceed to break down the cost per serving. Once you know that, now it is conceivable that the argument is legitimate. I can go break down the cost of pen very quickly. There are usually three to six running parts and all can be found separately, put together and now I have a pen. I know now how much it cost, it may be $4 or it may be $40000 if I decided to use gold and diamonds for the external components! Same goes for Shakeology. Go find the 70+ ingredients and do it for yourself. I tried…..it wasn’t worth it. It took too much time, it was extremely pricey, in the upwards of $17-20 per serving. I got most my prices from Amazon or other online retailers.”
Product price comparisons have no direct bearing on whether or not the company is an illegal MLM; it only speaks to whether or not Shakeology is a good value, although the MLM commission structure necessitates that it won’t be. To determine value, the reasonable comparison would be Shakeology versus a product with similar, not identical, ingredients. The Shakeology alternative combination that LazyMan came up with (whey protein, Fibersure, and a multivitamin) was perfectly reasonable; the ingredients were similar enough to Shakeology to make the comparison a valid one. The exact ingredients and amounts may differ, with LazyMan’s version having more of some and less of others, but they’re close enough. The cost of LazyMan’s combination is far cheaper and would save someone hundreds of dollars a year versus Shakeology, and there’s no reason to think that the much higher price of the latter is justified in terms of effectiveness.
It seems very misleading to suggest that someone would have to spend $17 to $20 per serving to make an exact knockoff of Shakeology. Your beverage lacks many of the ingredients or has less of them than LazyMan’s combo, but you didn’t account for that discrepancy in your price comparison. If you had to add the cost of those additional ingredients (especially at MLM markups) to the cost of Shakeology, LazyMan’s combo would beat it even more handily.
Vogel,
In fairness, the combination that I came up with (whey protein, Fibersure, and a multivitamin) admittedly did not have proprietary enzyme, “super-fruit”, non-dairy probiotic blends. I grant that Shakeology has ingredients in those areas, but:
1) Those are not areas that are typically shown to help with weight loss or increased muscle mass (to the best of my knowledge).
2) Given #1, it does not bridge the gap of a $0.50 serving product to a $4.00 serving product.
Granted Shakeology lists a few ingredients that your mix doesn’t have, but the amounts of those ingredients aren’t listed. The bulk of the mix in the chocolate version consists of protein and cocoa. It’s a safe bet that the added value of the so-called superfruit ingredients and enzymes is negligible.
Also, I’m guessing that your mix would probably have more protein and fiber per serving, and that has to be factored into the value proposition too.
But the one overarching attribute of your suggested mix that I find most appealing is that it doesn’t come from a scammy pyramid scheme company. I haven’t seen one yet that isn’t dishonest at its core. They are the last people I’d trust to make a safe reliable good-value product for daily human consumption. Really, I can’t emphasize that point enough. They’d be selling sawdust laced with crystal meth if they thought they could get away with it.
Who knows what kind of low-grade crap they use among that list of umpteen ingredients in Shakeology, or whether its sourced from reputable suppliers. No doubt they chose from among the cheapest sources suppliers on the planet.
I used to be a Beachbody coach and wanna leave my two cents worth.
First off, Shakeology. It does have good nutrition in it. It will help the grossly obese lose weight. It is way better than McDonald’s. Heck, in my office job I used it as a good mid-day snack, we have a blender in the break room, I’d toss in some almond milk and a banana and have a fast nutritious make-shift meal. Better than skipping eating. However, it is WAY WAY WAY overpriced. Cheaper than McDonalds or fast food, so maybe that’s a good excuse. However, there is a product you can get off Amazon called Spiru-Tein that tastes amazing, costs a fraction of the price, and has damn good nutrition in it too. Many flavors and you can also pick it up in some health food type grocery stores. Go with that.
Beachbody gets people convinced to get the home delivery of Shakeology and that it is the answer to all their weight loss needs. Truth be told, sure, coaches do turn a small profit from sales, but a lot of the revenue goes to the elite coach events like cruises and what not. So…..better than McDonalds but there are cheaper options with decent nutrition too, if you’re looking for a shake.
Next. The workouts. I love all their workouts and have a huge library of such. I’m a bodybuilder and I use a lot of the cardio workouts to this day instead of mindless running on a treadmill or stairclimber. The workouts have a lot of research behind them, they are fun, and effective. To me they are worth the price because you can use them over and over for years to come and they have so many to choose from for any type of workout preference and fitness level. In fact, P90X and Body Beast were the programs that got me started on my bodybuilding.
Supplements. Don’t bother. WAY overpriced!! As an example, the Body Beast supplement creatine…..they have that priced about five times what you can buy it on amazon. Creatine monohydrate is creatine monohydrate. Period. Huge mark up. So do your homework and buy supplements elsewhere.
Fast detox programs. Save your money. They do work but you’re just gonna be on a highly restricted diet and drop some water weight. Maybe you need to make that purchase to have all they guidelines and stick with it…..if so, maybe it’s worth the pricetag? But I say don’t bother.
As for being a coach….I did it for the discount and I didn’t kid myself into thinking I was going to make money at it. I do know a few people who make great money at it but they are convincing everyone they know to be coaches and buy shakeology. So if you’re popular or pester people to death, great! But realisticly, I know many, many more people who dump more money into Beachbody than what they get out of it and kid themselves into thinking it’s a retirement option.
Final thoughts…..if you wanna buy a workout, just buy it. If you use it and follow it’s outline and menu guide, you will probably have fun and see some good results! Don’t bother being a coach, don’t waste your money on supplements, and check out Spiru-Tein or some other shake that is mentioned on this thread instead of paying out a ton of money on Shakeology. Better yet, just cook all your own food with good ingredients.
Oh yeah, one last thought on the conferences. I went to two and the first one was a lot of fun. The second one was very disappointing. Any “classes” or “workshops” or “presentations” are all brainwash tactics to get you to recruit more coaches and sell shakeology. I had high hopes of learning nutrition or fitness or how to actually help people who need to lose weight….how to ask and answer questions….how to help people with health conditions so you don’t recommend products that aren’t right for them….etc. Nope. Instead they had classes like “How to never take no for an answer when trying to sign on new coaches” or “How to not take no for an answer when selling shakeology”. There was also a couple pep rallies where they emphasized very hard how BeachBody is NOT a pyramid scheme. OK, whatever. They also pushed everyone to purchase all the new products they had to offer for weight loss…..because if a coach is familiar with them, it will be easier to sell them. Beachbody makes most its money off coaches. If you are still interested in conferences, find a coach who is attending and obtain a guest pass so you can attend the whole thing for free and don’t pay the registration fee. My suggestion is that if you are interested in fitness….find a REAL fitness conference and attend that.
So….all in all….their products are what they say they are but very overpriced. Workouts are good but don’t bother with the rest. Save your money.
Shasta,
Thanks so much for your comment. It was exactly what I was thinking when I was writing the article. The workouts are fine, but there are workouts everywhere. It’s about pushing the vastly overpriced shakes by hiding what appears to a pyramid scheme and calling it an MLM.
Yeah, great comment Shasta. Seems like we’re all on the same page: good workouts; the shake is OK but overhyped and overpriced relative to other comparable products; the business opportunity is a joke and the distributors are annoying as hell, as they are with all MLMs.
So just a few very very brief comments. In full disclosure, my wife is a coach and signed up in mid 2014. I have actually been fairly blown away by her progress.
A few things to note that aren’t immediately obvious.
First, there are around 230,000 coaches. However, only about 10% of those are actually people working the business. My wife signs up all retail customers as “coaches” (they call them discount coaches) because it does in fact save them around $20 a month compared to the full retail price. In her downline, that 10% number stands- about 1 in every 10 coaches are actually people working the business.
The other 9 are people who are happily paying the coach price for Shakeology (the $97 plus the $16 coach fee plus tax) just because they love the product. A lot of them do it for just one month, some stick around for several months, and a couple go even longer.
So, here is some math. Beachbody hit $1 billion in revenues in 2014. I was curious, how much of that came from the Coaches?
OK, so let’s say that every coach gets Shakeology every month for $113 (coach fee + shakeology discounted price).That’s 230,000 * 113 * 12 months = $311 million in revenue for Beachbody.
That means that 70% of the revenue that Beachbody is generating is through actual non-coach customers. Now of course this is a back of the napkin calculation, coaches may buy other products like fitness programs also. And this is keeping in mind that of the 230,000 coaches, only around 10 – 20% of them are actually MLM distributors working the business. So it’s more like $50 – $100 million from the “MLM” component, which is about 5 – 10% of the revenue of the company.
Another thing on that club membership – at least in the downline my wife is in, they encourage everyone who is not actively pursuing the business side of it to cancel the club membership (the $2.99 per week thing). But, it does in fact pay for itself if you are hit certain milestones. You get Shakeology customer leads which pay an instant 25% commission on their order. My wife has had three of those this month, for a total of $90 in commissions, just in January. So in 1 month she has paid for 6 months worth of the club fees already. But yeah, if you aren’t an “active” coach, then it’s pretty worthless, at least now.
anyway, just wanted to drop some of the things I thought about. Before she joined beachbody I was the world’s biggest skeptic. we agreed if she couldn’t make her money back in 2 months she would quit but so far she has done really well for herself.
If there are people signing up for the discount, it reinforces that it is a pyramid scheme. It shows that there are no real retail sales. It doesn’t make sense to pay retail price.
I’ve seen this with dozens of MLMs. A while back, MLMs realized that if this makes it impossible for anyone to reasonably evaluate the business opportunity. Are 220,000 of the 230,000 distributors or are 10,000 of them distributors? Is someone failing to recruit or are they a customer not interested in the business opportunity at all? One can’t tell for certain due to the situation that the MLM has carefully created.
It’s worth noting that this creation makes the math of the business opportunity look terrible, which is certainly not in Beachbody’s best interests. I think one should question why they’d purposely shoot themselves, and their distributors, in the foot unless they are covering up a pyramid scheme?
When you say that Beachbody hit a billion in revenue, is that overall or per year. It makes a big difference. Also which auditor has verified this claim? MLMs are notorious for claiming that they are bigger than they are to give themselves an air of legitimacy.
As I tried to point out in the article there is a somewhat legitimate site to Beachbody’s business, the selling of workout videos. The extremely high-level distributor that I mentioned in the article was fairly clear that wasn’t how to make money. It seemed to me that she stressed the sales of Shakeology, which I focused on as being part of the pyramid scheme side of the business.
Let’s assume that McDonalds buys something that we all agree is a pyramid scheme tomorrow. It would likely be a very small percentage of the overall revenues. I wouldn’t say it is no longer a pyramid scheme.
The club membership is another red flag of a pyramid scheme. They are getting distributors to pay every month to be eligible for customer leads they don’t deserve. Think about what you wrote, they are paying a 25% commission to someone who didn’t make the sale, right? Does that make any sense?
Yeah, there is no denying it’s pretty complex. What i know for sure is what is in my wife’s downline which is several hundred coaches and about 11% of them who are “active”; the rest are strictly customers. They can be signed up as retail but as long as they get shakeology longer than 1 month, it doesn’t really make any sense.
Ironically, signing the up as coaches is actually less lucrative for a coach. As a customer, the coach gets commission on every single purchase. But as a coach, you only get volume. So for comparison’s sake, someone who gets shakeoloy every month, would net a coach a $30 commission as a retail customer. If they are in as a coach, you get 90 Volume points, which as long as it’s balanced out, is worth about $6. So you do in fact make about 5x as much signing them up as retail customers.
What I do know is that my wife who was previously a teacher has been able to quit tutoring and she has never earned less than $2k (after her shakeology costs) per month doing this business. Now, I recognize she is an outlier – but it’s entirely from her own effort that she has put in . She works her ass of for this – like 4+ hours a night – but it works. Her organization is growing and every single one of her downline active coaches is at least making enough to pay for their own shakeology (which for some of them, that is their only goal). The business model may or may not appeal to everyone. I mean when she brought this up to me I wanted to stick needles in my eyes. But I can’t argue against the impact it has had on our bank account. With her staying home with our kids, it’s been legitimately a financial turnaround for us; and not just that but with beachbody we have also maintained our weight for the longest time I can recall. Hell, I only gained 5 pounds this entire holiday season – usually its at least 15 – 20. And on top of that, we have gotten into reading more personal development books, not even MLM related. I’m reading books on self confidence that I hadn’t even thought about before and i’ve seen major improvements in my own performance at my job, because of the motivation my wife has brought into our house. It is definitely a lot of pom poms and rah rah’s, but I get that at my regular job also.
Regarding this:
They are getting distributors to pay every month to be eligible for customer leads they don’t deserve. Think about what you wrote, they are paying a 25% commission to someone who didn’t make the sale, right? Does that make any sense?
You become that customer’s coach, which means more than just commission. My wife reaches out to them adn runs free clean eating groups, free fitness groups that don’t require any purchase at all. She also works with them on what programs to get involved with and puts them into facebook accountability groups. It’s a lot more than just a sale and walking away. The lead wheel works on a rotating basis – just starts at Coach #1 and works up to Coach #230,000 and everyone who meets eligibility criteria get that lead.
I’ll research more into the billion dollar question, it didn’t even occur to me that could be aggregate. it was definitely phrased as “annually” but I’m going to try to find it now. I’m a numbers guy, through and through. When my wife wanted to do this originally the first thin I did was take to the internet to find successful coaches and see what was involved.
Anyway, I’d be happy to come back and report how things are going six months, a year, etc. from now.
Good article anyway. skepticism and caution is always good, but Ive been thrilled with how things have worked out, at least for our family.
I want to explicitly thank you Nick, as I’ve literally responded to tens of thousands (yes literally that many) and there are only a handful of objective comments. Most don’t even attempt to have a reasonable discussion of the article or business and resort to calling me a “hater” and not worth reading.
Nick said, “Yeah, there is no denying it’s pretty complex.”
Indeed. I think it is important to highlight that as another red flag of a pyramid scheme. I believe a legitimate company would distance itself from being a pyramid scheme.
CNBC has an interesting article Why Spotting a Pyramid Scheme Isn’t So Easy which cites an FTC document (this PDF) that states, “‘Identifying a pyramid scheme masquerading as an multi-level marketer requires a fact-intensive inquiry.’ It ‘entails a complex economic analysis including an in-depth examination of the compensation structure and the actual manner in which compensation flows within an organization.'”
I keep coming back to the thought of “Why risk the entire company and multiple long jail sentences by walking the line?”
I certainly wouldn’t risk my business on such a thing.
I’d simply say that if 11% of several hundred “coaches” are “customers”, there’s something fundamentally wrong there. I think given that A) the complexity of the compensation plan as you stated and B) the complexity in determining a pyramid scheme… categorizing customers as coaches should scare any objective person away.
I’m not sure I follow your logic about signing up coaches being less lucrative. I think if we were talking about a single-level affiliate program it makes sense. When you look at the top earners in any MLM/pyramid scheme, it has never been the case, to my knowledge, that they made a majority of their money selling product to customers. I don’t think I’ve ever read an MLM compensation plan centered around the payment to people selling product to the public as opposed to those who are affiliated with the company.
I completely understand how you’d focus on your own situation. I think 99.99% of those involved in MLM do. I urge you to go back and read the Pen Pyramid Scheme that I highlighted in the article. Putting a great effort into selling outrageously overpriced pens (or shakes, in this specific case) doesn’t necessarily make it right (or legal).
Since you said that you are skeptical, when you use the word “organization”, have you thought about interchanging it with the terminology of “pyramid scheme”? Is that fine-line clearly addressed? From the expert testimony of one the highest coaches, it clearly seems to be more of a pyramid scheme. I put a great effort into analyzing how Beachbody coaches are marketing and it seems that they clearly don’t know what a pyramid scheme is either.
I understand that this appears to be the transition to you going to self-improvement. Ten years ago I read Rich Dad, Poor Dad and it (in part) inspired me to look at money and start this blog. However, I’ve subsequently realized that Kiyosaki’s arguments don’t make sense… and his organization seems to be built around scamming people out of money according to the Canadian news network that I cite in the article.
I like to think that you can get into self-improvement without getting into pyramid schemes.
If you get “a lot of pom poms and rah rah’s” at your regular job, I’d ask if your regular job’s compensation is directly related to recruiting people. I imagine that Nike gets their employees to root for the company. In this discussion, I want to make sure that we aren’t talking about them recruiting others and compensating people on that basis.
Responding to the customer leads… I don’t mean to diminish the amount of attention your wife gives to those in her organization/pyramid. I would equate that to someone making sure that everyone’s pens are functional in the pen pyramid scheme. That’s actually/probably a poor example since fitness groups is not related to Shakeology.
From a personal finance perspective (which is what this website is about), is there clear “coaching” from Beachbody “coaches” to buy Vega One or Spiru-tein instead of Shakeology? Financially, that is clearly the smart move. (Note: I wrote this article before I heard of either of the products.)
I know this is super old but I just have to add the “not making sense” to remain a retail customer and sign up as a coach for the discount sounds worse to me. Yes the coach gets less if they sign them up but everyone agrees that’s why they sign up. The incentive to be the coach and to recruit is in that discount for the consumer, not the seller. Once again, the seller doesn’t matter so long as it ads to Beachbodys bottom line. Also the discount confuses me a little, so if someone could explain. If you make less and that’s less than the difference for the discount, Where’s that extra money going?
Great read, thank you for posting. Have you ever done something g similar for Isagenix? We have an Isagenix cult currently flowing into our community
I haven’t, but I probably should. There are hundreds of such pyramid companies out there.
I’m a former Coach. I didn’t last very long; I was out in less than six months. Thankfully, I didn’t make two mistakes that a lot of people who get sucked into MLM’s do: I didn’t lose thousands of dollars, and I didn’t alienate anyone I cared about. I ticked off two total strangers on the Weight Watchers boards and one or two other total strangers on Facebook, but no family, friends, neighbors, or anyone I actually knew.
There’s a stereotype that people who get involved in MLM’s are looking for fast easy money. I certainly did meet people like that, but the majority of people I met were like me: the victims of a decimated economy. I had a B.S. in Math & Computer Science and years of work experience, I was enrolled in an MBA program … and I couldn’t get hired at Pizza Hut. I didn’t want fast easy money. I just wanted a job, or at least an opportunity to work hard and see financial results. Sadly, a lot of the people I met in Beachbody were even worse off than me. Some of them were on welfare. Others were in some stage of foreclosure. Some of them had been unemployed for a couple of years and lived in areas that were even more economically depressed where I’m living (think places like Michigan and Ohio). I wasn’t styling, but I didn’t hand Beachbody my last nickel in a desperate attempt to save my house. Some of the people I met did, and I don’t like to think about what likely ultimately became of them.
This is the biggest reason why I really MLM’s. The economy is in tatters, and MLM’s are thriving because of it. Beachbody and other MLM’s are no better than scam “We’ll keep you out of foreclosure” places. They take advantage of desperate people and sell them false hope.
It’s a shame that Beachbody got into the MLM business, because while Shakeology is overpriced garbage, their workout tapes are great. The ONLY quality product this company makes is workout DVD’s. They should have just stuck with selling the DVD’s via the infomercials, their website, and maybe (as someone else suggested) an affiliate program, and everything would have been good. By instituting the MLM scheme, Beachbody has alienated itself from a lot of potential customers. I’ve seen many people online say they would never buy one of their DVD’s simply because they hate coaches and MLM’s so much. That’s a shame, because they are great workout programs.
My husband and I own P90X and Insanity. We’ve done both programs, we had great results from them, and we still use them for cross-training (we’re distance runners). My advice to anyone who is interested in the workouts is, instead of buying them from the 800 number or a Beachbody site, buy them on Amazon or eBay. That way, you won’t be “assigned” a sleazy coach who then pesters you to join their team and buy Shakeology. Do not buy Shakeology, any of their other supplements, or their fitness equipment.
My advice to anyone who is financially desperate is to steer clear of Beachbody and all other MLM’s. You will not make any money through an MLM. You will LOSE money, and if you’re not careful, you’ll also alienate all of your family, friends, neighbors, and everyone else you care about … people who might actually be able to help you get out of your situation if they don’t hate you because you’ve been hammering them to “join your team” and pour money down a black hole.
If you need money, go apply for a job as a car salesman. I did this for awhile. Car lots stink, but at least THEY DON’T MAKE YOU PAY THEM FOR THE PRIVILEGE OF HAVING A DESK THERE. They pay you. Go put an ad on Craigslist offering to walk dogs, shovel snow, rake leaves, or haul junk. ANYTHING but an MLM.
Excellent comment Nightcrawler. One of the best I’ve read in thousands of comments on MLMs.
In the amount of time you’ve taken to write this ridiculous article and multiple comments, Lazy Man, you could have accomplished quite a bit… doing something that is actually constructive. Are you just out to bash anything that goes against your screen name? I’m confused as to what your motive is. Are you sponsored by Beachbody competitors? I certainly hope your readers are intelligent enough to know this article/blog is entirely unfounded…but then again, why would they be subscribed to a blog such as yours in the first place if they did have half a brain? I have so many questions…
Thanks for the comment Tess Smith. I’ll try to get to all your questions.
I don’t know if you realize it, but pyramid schemes are a huge form of financial fraud causing an estimated 50 billion of financial fraud to Americans each year. I don’t know how constructive your hobbies are, but I’m going to take a stab that you don’t prove that according to the FTC’s guidelines big companies are operating illegally. I think the typical American watches reruns of Seinfeld.
You should probably take a few more minute and read my about page and my website before you make erroneous assumptions about me bashing things. I’m out to bash fraud. When I see fraud, I write about it and explain in as plain and simple language as possible why it’s fraud.
My motive is to help people avoid get defrauded out their money.
I’m not sponsored by Beachbody competitors. I explained why I wrote the article at the beginning. I’m a big fan of Nick Loper’s Side Hustle Nation except for his unfortunate blind spot when it comes to understanding pyramid schemes.
Why would you or anyone else think this article/blog is unfounded? Did I misquote the top distributor in the podcast? Did I misquote the FTC? Did I misquote the 10-12 people who lie about what a pyramid scheme is? Please point to the specific pieces of information that you feel are unfounded and we can discuss them. Don’t just broadbrush it by saying, everything is trash. Give the article a real critical review and we can work to make it better.
If you have more questions, please continue to send them along.
So, for everyone who likes to hate on spelling and grammar, get your pitch forks.
I think it is a funny idea to judge a product without using it.
I have to reevaluate my entire life every time I read something like this. I buy Shakeology, and I would pay full price. I have major weight loss to accomplish, and have made huge progress.
Originally, I was skeptical of a shake that’s under 200 calories. I am a lazy clean eater, and have tried to find the most simple/quick way to “eat right.” I add stuff to my shake, not for taste, for calories. I wanted to say that with most of the workout programs the recommendation is to eat 5-6 times a day, and then they give you a calorie target. For me to hit my calorie target each meal needed to be between 300-400 calories. A large banana is 100 calories on myfitnesspal, 1 tbsp of pb2 is about 22 calories, and raw honey or raw nuts to fill in the rest.
When you look at the “clean eating” market, like non gmo, and organic food, you will probably see a lot of other outrageously priced products. I bought 8oz of organic maple syrup from TJ for about $7, and 1 can of organic pumpkin is $2. Shakeology is marked GMO free, and its supposed to be all natural.
I don’t think this article makes me any less in love with the shake. I think that if something is working, I don’t care if its rainbows and unicorn. I want to ride it until the wheels fall off, because motivation is fickle. I think if someone finds hope in me, and Shakeology is their talisman, I’m fine with that. There are worse things like HCG, and xenadrine that are out there.
As for the business, it is what you make it. I think that is what the coaches have said. I have met people who want to help others, and I have met people who out to squeeze every penny from unsuspecting hopeless people. I have seen the same difference in my 9-5. I think humans are the problem there, not the business.
That said, I bought in.
Thanks for your research.
If anyone has a problem with spelling and grammar, please be the first to volunteer to be my editor. I tend to write 4-5 articles a week, and this ones like this take a couple of dozen of hours of research before the writing begins. If someone has a problem with a couple of typos an article that is typically 12 times as long as my usual articles, then they don’t deserve the benefit of my extensive research.
It seems like a funny idea to judge a product without using it unless you understand nutrition. If you brought it to licensed nutritionist, would he/she respond with, “I need to try this product to tell you if it’s any good?” No of couse not. Chemo doctors don’t have to get chemo to know whether it is useful. People don’t have to jump off a bridge to determine if jumping off a bridge is good idea.
I don’t want you confuse your progress in losing weight with Shakeology. It seems like you are doing that. The nutritional label is the nutritional label. I pointed out several products in the article that have similar nutritional labels for a fraction of the price. Your claim sounds like someone saying, “I like to pay $10 a gallon at XYZ gas station, because I’ve noticed my car runs well with it.” Well, the entire history of human research shows it would work just as well with the $2-ish gas at any place in your neighborhood.
Sara said, “When you look at the ‘clean eating’ market, like non gmo, and organic food, you will probably see a lot of other outrageously priced products.”
Perhaps, but there are some well-priced products that are in that category as well. As I mentioned in the article: Nature’s Plus Spiru-Tein High Protein Energy Meal and Vega One available on Amazon.
There are probably more, but you have two options that will save you 75% off of Shakeology, so you shouldn’t need to look further.
If you want someone to find hope in you there’s is a great free online forum called SparkPeople. You already mentioned MyFitnessPal that has great forums as well. The MyFitnessPal community is pretty clear: Avoid Shakeology!
When you say there are worse things out there like HCG and Xenadrine, it tells me that you completely misunderstood the article. I’m not saying the product is harmful. I’m saying that you are being sold a Honda Civic for $200,000 and that the pricing is due to it being a pyramid scheme according to the confession of a top distributor and the FTC guidelines.
You can do what you want with your money, but this website is about helping people make better decisions. I’d rather see them pay an appropriate amount for an equivalent supplement and use the leftover money to subsidize a personal trainer, a gym membership, healthier food (not shakes), etc. If you have Bill Gates money, perhaps price doesn’t matter. That’s very rare and I doubt Bill is reading this.
The business is definitely “not what you make it.” The minimum pricing of Shakeology is set by Beachbody. The compensation plan is set by Beachbody. If you meet someone who really is interested in helping others, they will NOT recommend Shakeology… they’ll recommend one of the many equivalent products for a quarter of the money.
My guess is that your 9-5 is not something that the FTC warns is an illegal pyramid scheme as I pointed out in the article. If it really was just the people and not the business, Beachbody could solve all the pyramid scheme questions in 24 hours by announcing that the commissions will be single level, based on sales, no recruiting into a pyramid. Many, many legitimate companies operate this way.
It’s very, very telling that Beachbody does not announce this change and continues to associate itself with pyramid schemes.
A few more comments below!
Nick said, “Yeah, there is no denying it’s pretty complex.”
Indeed. I think it is important to highlight that as another red flag of a pyramid scheme. I believe a legitimate company would distance itself from being a pyramid scheme.
I should say that while it is certainly complex and has a lot of parts, it IS fully and 100% understandable and learnable, if you do the research. I would say it took me about 2 – 3 months to fully understand the way the business operates and how you earn income, but now that I do I fully understand the compensation plan and how it works. I can predict to the dollar what next week’s paycheck will be given the information available.
I’d simply say that if 11% of several hundred “coaches” are “customers”, there’s something fundamentally wrong there. I think given that A) the complexity of the compensation plan as you stated and B) the complexity in determining a pyramid scheme… categorizing customers as coaches should scare any objective person away.
I don’t know why you think it’s “fundamentally wrong”. First off, Beachbody is ambivalent themselves to which way distributors sign people up (coach vs. customer). As a matter of fact, the word “Discount Coach” doesn’t appear anywhere in the policies and procedures. It’s a term used by coaches for a practice that has been found to help them optimize their incentive plan. Coaches are motivated to put other people in the system as “discount coaches” for a few reasons –
1) It makes the products cheaper for people which is attractive
2) If that person wants to recommend someone or sign someone up, even if it’s just a friend, they are already in the system as a coach and can do that
3) Coaches earn Rank by meeting certain criteria below them and that includes requiting a number of coaches in the downline
Now you may or may not think this is logical or the way you would operate a business, but I don’t know how you can say it’s “Wrong”. It’s just a way of doing it. No one is obligated to do anything and as I said before, 80 – 90% of people in fact don’t do anything! And that’s totally cool!
I’m not sure I follow your logic about signing up coaches being less lucrative. I think if we were talking about a single-level affiliate program it makes sense. When you look at the top earners in any MLM/pyramid scheme, it has never been the case, to my knowledge, that they made a majority of their money selling product to customers. I don’t think I’ve ever read an MLM compensation plan centered around the payment to people selling product to the public as opposed to those who are affiliated with the company.
Let’s assume someone comes up to my wife and says I want to do P90X and get Shakeology, and I do NOT want to be involved with the MLM at all. My wife has two options – sign that person up as a customer, or as a coach.
As a customer, my wife would get a 25% commission on the sale and a 25% commission on each subsequent sale (say, Shakeology). So, she would make $30 a month as long as this person kept purchasing Shakeology.
If my wife signed this person up as a coach, she would get an initial Bonus (usually $40 – $60), but that’s it – no more recurring commissions. What she would get is volume which is used for the cycle bonus portion of the income. Shakeology is 90 volume points, and every 300 volume points, a coach gets $18 as a diamond coach.
So she would make way less money monthly signing them up as a coach – AND – the person buying it is paying about $25 more a month vs. becoming a coach.
Now, people in the upline don’t care. This counts for them as volume either way. But the point I am making is that, for any individual coach, generally speaking, it is more lucrative for them to sign up their Personally Sponsored people as customers.
I completely understand how you’d focus on your own situation. I think 99.99% of those involved in MLM do. I urge you to go back and read the Pen Pyramid Scheme that I highlighted in the article. Putting a great effort into selling outrageously overpriced pens (or shakes, in this specific case) doesn’t necessarily make it right (or legal).
This is totally in the eye of the beholder. Is Shakeology more expensive than other products? Sure, it’s more expensive than other products. But a LOT of people are willing to pay the price for it, and it’s marketed as a premium product. I mean, what is the difference between designer jeans and Levi’s? Not much, other than the price. This is a value proposition that only the purchaser can decide for themselves.
Also, I would say that when you buy a challenge pack from a coach, if they are a good coach :), you get a lot of value beyond the shakeology for the price, you get a coach for free, for LIFE. My wife easily spends 1 – 3 hours per month with every one of her clients. Even AFTER they quit shakeology! She provides them with recipes, adds them into groups for any workout programs they bought, and she generally keeps up with them on their fitness & health journeys through and through. Now, not all coaches are like that – a lot them, especially dabblers, might sell a product and then disappear, and that’s unfortunate for the person looking for help.
Most people who are strict customers seem to stay on Shakeology for anywhere from 2 – 3 months. Some stay longer, she has a few that have been on it for seven or eight months now since she began coaching.
And how is it not legal? Beachbody can set their own pricing like you can for the ads on this site (by the way, I also run a community website with advertising). If you want to charge $50 CPM for a 125×125 box, you have the right to do that. And if someone finds value in that, and they buy it, then OK.
Since you said that you are skeptical, when you use the word “organization”, have you thought about interchanging it with the terminology of “pyramid scheme”? Is that fine-line clearly addressed? From the expert testimony of one the highest coaches, it clearly seems to be more of a pyramid scheme. I put a great effort into analyzing how Beachbody coaches are marketing and it seems that they clearly don’t know what a pyramid scheme is either.
Why would I change out a word? I don’t expect to sway you (at all!), but I just don’t see it as a pyramid scheme any more now that my wife has been involved with it and I actually understand the business.
This business is more entrepreneurial than I originally thought. Here’s the thing – success isn’t a gamble. It’s not a roll of the dice if you succeed or fail at Beachbody. Just like it’s not a roll of the dice if you succeed or fail when you start a business or a blog.
How about this- 95% of blogs are failures, according to this New York Times article. Would you tell someone that starting a blog is a scam or a scheme?
My wife has succeeded in Beachbody because she puts in 35 – 40 hours of focused, dedicated time per week into it. When someone wants to be a coach, she tells them – you reap what you sow. You get out of it what you put into it. Many people sign up and do literally nothing. They don’t make connections. They don’t talk to people. They don’t even try the products themselves. They just expect that money will start coming in. It doesn’t work that way, and any honest coach will tell you that. And I think most of the top coaches do say that, because they are top coaches BECAUSE they do the same thing – work hard and make sacrifices to make their businesses succeed.
I understand that this appears to be the transition to you going to self-improvement. Ten years ago I read Rich Dad, Poor Dad and it (in part) inspired me to look at money and start this blog. However, I’ve subsequently realized that Kiyosaki’s arguments don’t make sense… and his organization seems to be built around scamming people out of money according to the Canadian news network that I cite in the article.
I like to think that you can get into self-improvement without getting into pyramid schemes.
Oh, don’t get me wrong – my usage of personal development WAY predates Beachbody :) I read Rich Dad, Poor Dad myself when I started my first business, a web design company ,in 2004. Then I started a real estate business in 2005, that folded in 2006. I have also run a mobile payments startup (that also failed), my online community I mentioned earlier, another community forum that failed. But, as I got older and had kids, and responsibilities mounted, that stuff ended up taking a back burner. And that’s on my shoulders – my fault. But the drive for personal improvement that Beachbody pushes has helped me rekindle a flame I had almost forgotten about. I love that. Even if my wife didn’t succeed at the business, I would have left it having learned a lot about myself.
From a personal finance perspective (which is what this website is about), is there clear “coaching” from Beachbody “coaches” to buy Vega One or Spiru-tein instead of Shakeology? Financially, that is clearly the smart move. (Note: I wrote this article before I heard of either of the products.)
Why would a Beachbody coach recommend a competing product? Would you hire someone to work on this blog that recommended you go to another blog? I mean, I get the point – this is a personal finance blog, like the simple dollar, and the point here is to help people save money and make smart financial decisions, so I can totally understand you probably have a visceral reaction to the thought of overpaying for something (anything).
But everyone has their own value propositions. Speaking of PD, I was listening to the audio of “Start with Why” this morning, and in it Simon Sinek touches on this – talking about how he is an early adopter for technology and his sister is an early adopter for clothes, and neither can understand the other person. He doesn’t understand why she will overpay for clothing, and she doesn’t understand why he will overpay for a new piece of technology that is overpriced and untested. It’s all about each individuals perspectives.
If someone can’t afford Shakeology – my wife asks them if they want to join a clean eating group so she can help them reach their goals, even without Shakeology. That’s time of hers she is giving up with the expectation of nothing in return.
This business is WAY more entrepreneurial than people think. A lot of people do come into thinking it will be easy, or that they can make a million bucks in a year, and that’s garbage. Succeeding takes hard work – like anything else. It’s interesting to me because there are people that express interest in the business opportunity, but then they come in and act like employees and not business owners – People like that – who need supervision and management and a “boss” – can NOT succeed in this business or I’d gather any MLM.
The compensation plan may be understandable after 2-3 months of being fully immersed in it, but proves my point. It is so complex that it can’t be adequately and easily explained to a new person quickly and easily. If you are running a pyramid scheme you make it complex like Beachbody. If you are running a legitimate business, you make it easy for people to understand.
At some level, the information isn’t available. As we found out in the article one of the diamonds is running a pyramid scheme according to the FTC and doesn’t seem to know it or at least admit it. Numerous coaches seem to misunderstand what a pyramid scheme is.
Whatever Beachbody is coaching about running the business, they aren’t doing an effective job of warning them about not becoming a pyramid scheme by recruiting more than selling product to people outside the scheme. It should be highlighted in big bold letters on the home page and in every distributor communication. No excuse from Diamond level executives to be confused by the VERY first thing they should learn and have drilled into their process.
MLMs have created discount coaches and discount distributors to hide the nature of the pyramid scheme. This way you can’t tell if someone is failing to recruit or if they are simply not trying. Most MLMs don’t formally address this situation that they purposely create with their pricing. They know going in that if they price something at 1000% (10x) mark-up, they can get people to say, “What a bargain at 25% off!” So someone is only paying 7.5x what they should be.
Nick said, “Coaches earn Rank by meeting certain criteria below them and that includes requiting a number of coaches in the downline.”
This is essentially admiting that it is a pyramid scheme. It’s fundamental in in the FTC’s guidelines about recruiting being the pyramid scheme and selling products being safe. If you are recruiting a discount coach, you are no longer selling products to someone outside the pyramid, but you are recruiting into a pyramid scheme. It may not seem like a big difference, but it is.
It isn’t wrong as in “a way of doing it”, it is “wrong”, because pyramid schemes are illegal.
Nick said, “No one is obligated to do anything and as I said before, 80-90% of people in fact don’t do anything!”
They are obligated to be on autoship or pay to play to earn commissions from the pyramid. And of course in any scam that tricks people out their money, people aren’t obligated to give it to them.
Your scenario about your wife signing people up a coach vs. customer is further evidence of the pyramid scheme. It might be initially worth more signing up someone up as a customer, but not in the long haul.
As you said, “What she would get is volume which is used for the cycle bonus portion of the income.” Now combine that with what you said about “Coaches earn Rank by meeting certain criteria below them and that includes requiting a number of coaches in the downline.”
Now look at the Beachbody disclosure statement and see who is making the money. Is it people selling to customers? The Diamond in the article acknowledged that it was about building the team/pyramid. She should know because she’s the one making the bulk of the money. The one sale is nice, but the volume points/money is in recruiting people who recruit people. Obviously a coach trying to spread the word can lead to more volume than a single (even reoccurring) sale.
Generally speaking the upline is going to be incentivized to push their team/pyramid to recruit because that’s going to lead to the most volume points which translate to dollars.
Nick said, “Is Shakeology more expensive than other products? Sure, it’s more expensive than other products. But a LOT of people are willing to pay the price for it, and it’s marketed as a premium product. I mean, what is the difference between designer jeans and Levi’s? Not much, other than the price. This is a value proposition that only the purchaser can decide for themselves.”
I’ve debunked this dozens of times over the last 7 years when I first heard about MLM.
The question is whether a LOT of people are paying for it, because they are obligated to be in the scheme or not. Often that’s the case… since they are required (pay to play) to buy the product they do. Are coaches falsely pushing the product as something beyond what it is? I’ve seen this on numerous blogs. I pointed out a couple of MUCH CHEAPER substitutes that are premium, organic at the top of the article. Are coaching generally interested in their clients? If so, they should be recommending these very much equivalent products instead of Shakeology.
Designer brands are often about showing off a status that the owner has obtained. Women love the Christian Louboutin because they are instantly recognized as something that costs hundreds of dollars. It shows a signal of success like a nice designer suit. That is something that people will pay more for (aside: I think they are chumps in most cases).
Shakeology is not fashion and it doesn’t convey status with the general public. The other bad argument people make is comparing pricing of Starbucks (with overhead, baristas, and such) to making coffee at home. They are also apples and oranges.
This is where I challenge companies to sell their products on a WalMart shelf at the price point they’ve chosen to sell distributors. They never do it. They know that they simply can’t compete at the price point without the business opportunity tied in.
Things that absurdly priced (like Shakeology) is yet another red flag for being a pyramid scheme. See the Pen Pyramid Scheme as I outlined in the article. Once again, if you are going run a legitimate business why would you purposely choose all the red flags of a pyramid scheme? What kind of idiotic corporation would do that?
As for the “coach for free for life”, it’s worth noting that most of these coaches have no certifications. They are simply people who signed up for a business opportunity. They aren’t qualified trainers or nutritionists (typically). It is little more than the buddy system, but with a complete stranger. You can get that from SparkPeople.com… for free… for life. And let’s not forget, it clearly isn’t free… the price is more than baked into the “premium” of buying Shakeology.
As for “running a blog”, I most certainly don’t recommend people do it to make money. I’ve written about it a few times.
What makes things a scam or a scheme is the FTC’s guidelines showing that it is because of the recruiting and how the money flows (in the form of excessive product pricing) from the bottom to the top. When someone starts a blog, there is no recruiting of paying people funneling money to the top in any way. You are making a very bad analogy.
I’m sorry that you can’t see it as a pyramid scheme even when the FTC guidelines clearly show that it is. It sounds like you are trying to talk yourself out if by focusing on the failure of blogging or other things.
Nick said, “My wife has succeeded in Beachbody because she puts in 35-40 hours of focused, dedicated time per week into it. When someone wants to be a coach, she tells them – you reap what you sow. You get out of it what you put into it.”
This sounds true, and to some extent it is, there’s a lot wrong with it. With MLM, there’s no tie to supply and demand… see this great article. MLMers will sign up more distributors than there are people to sell to. It’s the equivalent of McDonalds letting everyone open one up very cheaply on every corner of every street in the US. Obviously, many of those McDonalds would be set up for failure simply because of circumstances… too much supply and not enough demand.
MLM has the same problem. With every person that signs up, there is more competition to make sales to customers, and this competition ensures the high failure rate… no matter much effort people put in.
When I covered MonaVie’s pyramid scheme before it imploded, a knowledgeable writer covered this beautifully It’s not a matter of effort, it’s a mathematical certainty.
Nick said, “Why would a Beachbody coach recommend a competing product? Would you hire someone to work on this blog that recommended you go to another blog? I mean, I get the point – this is a personal finance blog, like the simple dollar, and the point here is to help people save money and make smart financial decisions, so I can totally understand you probably have a visceral reaction to the thought of overpaying for something (anything). ”
I take guest posts for free where people recommend other blogs. I recommend The Simple Dollar in my blogroll myself.
The point is if you are going to position yourself as a coach, you are there to help people. That’s helping them make the smart decisions. It shouldn’t be, “How do I get this person to overpay a thousand dollars a year, so I can get a portion of the proceeds for myself?” Is that what you want from your financial advisor? Do you want him to recommend his overpriced index funds or do you want someone who recommends the low expenses of Vanguard or Fidelity?
I really, really hate when people take advantage of others and hide it as if they are helping them. It’s pretty low.
OK haha – I can’t help myself – I have a few more comments to add in.
First, about this –
*****
The Kellie Gimenez case
Kellie made it clear in the Side Hustle Nation podcast that she makes $4000-4500 a month and that $500 comes from direct sales. The rest comes from commissions from her downline. Here is what she says at the 17 minute market of the podcast:
”A majority of your income isn’t going to be coming from the products. The majority of your income, as you grow a team, is going come from your Coaches and the volume they sell. Because you can only sell so many workouts a month… If they aren’t drinking Shakeology every month, I mean, they can buy one workout and never buy anything else from you.
… When I first started as a coach and didn’t have a team underneath me, I was making about $500 selling products. That’s not bad. It paid for our groceries. It paid for gas. It was a good income, but it’s definitely not something that could be a successful side hustle.
She’s clearly making more from recruiting than from sales to the public. Kellie is essentially saying this is how it is designed. She even is negative on making sales to public.
*****
Your statement, “She’s making more from recruiting than from sales”, is false. All the volume being generated that produces that $4000 – $5000 per month that she is earning on is in fact product sales, made by her and a team underneath her. These are actual products shipping to actual people. You don’t earn a single penny in Beachbody just by “recruiting someone”.
Oh and by the way, the billion dollar was annually.
Last thing – the reason I’m here on this blog and even writing is because I can so relate to the way you think about it, because that was me x100 literally 10 months ago. I couldn’t see it from the outside and refused to believe it because I too grew up thinking pyramid scam about all MLM’s. But it’s crazy how insanely rewarding this has been for our health, our family, and for our finances.
I’ll leave you with this. Here are actual , 100% unsolicited quotes from people my wife has worked with (customers who are signed up as coaches, by the way ;) )
** “I will say that the program was helpful in many ways. It taught us both to be more conscious of what we eat and for me, how much water I am consuming – which was by far not enough. We love the shakeology! It’s very tasty!Thanks for your support;)
** “Officially down 20lbs!!! Ya for yoga and Shakeology! Thank you for being such a great coach!!! “
** “You sent me that message at the perfect time just when I was ready to take a leap into a more healthy lifestyle.”
** “I finally feel like I found something that I enjoy and have time for….so thank you for that!”
**“I love being a mommy! Thanks for giving me a chance to be there for her! I had seen beachbody so many times three other friends sell it and I was mildly interested you convinced me. Thanks for changing our lives”
** “Just wanted to say thank you for getting me back on track! I was eating crap and feeling like crap. Thank you for believing in me! I love the chocolate vegan shakes!”
**“Just wanted to let you know that outside of motivating people to reach their fitness goals, you inspire people in other ways! The quote on your new page struck me and gave me the push I needed to re-enroll in school. I was already re-admitted and planned to register within the next year, but those words for whatever reason made me decide today was a much better plan than a year from today. Keep doing what you do!
Nick on the Kellie Gimenez case said,
“Kellie made it clear in the Side Hustle Nation podcast that she makes $4000-4500 a month and that $500 comes from direct sales. The rest comes from commissions from her downline.”
I think I made this clear in the article, but let’s review what the FTC says about that exact situation:
“Not all multilevel marketing plans are legitimate. If the money you make is based on your sales to the public, it may be a legitimate multilevel marketing plan. If the money you make is based on the number of people you recruit and your sales to them, it’s not. It’s a pyramid scheme. Pyramid schemes are illegal, and the vast majority of participants lose money.”
I added some bolding so you can see that when I say “money from recruiting” it is short-hand for “money made based on the number of people recruited and sales to them.”
Again, it goes back to the Pen Pyramid Scheme above. Yes product is being sold and money is being made based on product sold, but that doesn’t matter.
I understand that it may be rewarding for you, but that’s only because you have recruited other people to vastly overpay for products. If instead you’d just tell your team/pyramid to buy the cheaper identical products you’d all save a ton of money. You can all be involved in a pen pyramid scheme where some people (in this case you) at the top make the money with the rest losing money… or you can do some simply math and see what would happen if you just bought pens at Staples.
Again, you are too focused on seeing what it does for you and not seeing what it does for the people at the bottom of the pyramid.
By the way, there’s a good video on this here: https://www.youtube.com/watch?v=VVUUbEw_Pm8
“There are many, many complaints about Beachbody on general fitness websites such as MyFitnessPal. “
So having run internet communities for years now and being very familiar with how they work, there are a few things to keep in mind. Forums are always targeted towards people complaining. It’s human nature – when we have a problem we want to vent. Beachbody or any company isn’t immune to both a) screwing up and b) having unhappy customers. But, a few threads on MyFitnessPal or Sparkpeople is hardly “evidence” of “many, many complaints” in the scheme of things.
I mean hell, Amazon.com has a rating of 2.1 by consumers looking to complain. Duh.
I still don’t get this, either:
I’m really looking forward to your response on the Kellie Gimenez case and the other things you brought up previously. It seems like when you get proved wrong, you move the topic to another tangent (in this case the enthusiasm of new recruits).
I didn’t change topics, you brought up the complaints about the people “at the bottom” so I was addressing that.
Here, let’s cover it:
“Not all multilevel marketing plans are legitimate. If the money you make is based on your sales to the public, it may be a legitimate multilevel marketing plan. If the money you make is based on the number of people you recruit and your sales to them, it’s not. It’s a pyramid scheme. Pyramid schemes are illegal, and the vast majority of participants lose money.”
As I said before, the money you make is almost entirely (like, 85% +) based on volume of sales to the public. In my wife’s downline, for example, there are currently 350 “coaches” – but 325 of them are just in it for the discount and are in fact “customers”. I don’t consider them as “losing money”, because they are purchasing the product at the published price and are happy to to do so. This would be like saying that everyone who buys a T-shirt at The Gap is “losing money”. I don’t know about other products like MonaVie but the article you shared says that “Therefore for every 1 person in the “opportunity” who breaks even, 20 must be cash flow negative. What is true for one individual “tree” is true for all. There is no way for anybody to make money without 20 people losing no matter how much effort or what system you are plugged into, it is a simple case of mathematics. except, at least in Beachbody’s case, the profits that pay coaches are coming from customer sales – so it’s not a matter of people “losing” money. Of my wife’s ~20 active coaches in her downline, only one has not broken even. Everyone else has earned at least $100 or more per month.
So again, the money you make is based almost entirely on sales to the public. And as I mentioned before, less than 1/2 of the revenue Beachbody produces comes through the Team Beachbody (the MLM arm) of the company.
Regarding building a team – yeah, you get compensated for building a team. Just like you make more money if you are a district manager vs. a sales rep in any other company. As you grow and help your team succeed you earn more. Lots of people are happy to earn $200 – $300 a month selling to 6 – 10 customers and that’s it. Other people want to grow teams that earn residual income.
Here are a few things that I was in the dark on, before my wife became a coach, that I didn’t understand about MLM’s that make a lot more sense now:
1. Market Saturation – I always figured if you joined later, you had no chance to make money, and you were only benefitting those above you. This was completely wrong! First off, this chart is completely wrong, at least when it comes to Beachbody, (not sure about other MLM’s) although that is how I always thought all MLM’s where before also. Beachbody has a binary leg system – so you have a left and right leg. You can join at any point in time and still earn money, and you don’t end up at the “bottom of the pyramid”, you end up at the bottom of whoever signed you up. This could theoretically even be really high up in the pyramid. But every single person is a new layer, so it’s not flatlined like the chart shows. My wife’s organization, for example, is 73 layers deep No two people are on the same layer. The other thing is that there is a lot of turnover! People do the workouts and shakes for a few months, then quit. Then they join up again later. Saturation is no more an issue for Beachbody than it is for any other company selling products to a limited amount of global citizens. And BB is always releasing new programs and products so there is always new things for individuals to buy – just like any other company.
2. Coaches have income caps. I always thought that you earned from everyone below you and therefore it was impossible to sustain a business model like this. With BB at least, a coach can only earn $12k a week in a business center on cycles. While that is a lot of money, it does mean there are practical limits so the business doesn’t go insolvent. 12k per week is approximately 10,000 people in a downline. Some early coaches have 50,000, 60,000 in their downline. Well guess what, everything over 10k provides no additional benefit to them.
3. Roll of the dice – before I joined I had always read you might as well go spin the wheel at the casino. Well, it’s not like that. My wife has the same opportunity that anyone else does, if you want to go for it. Most people don’t have the wherewithal to stick with it or put in the required effort. But you can join today and be six figures in 2 – 3 years, or 1 year if you are incredibly aggressive and put in the time. It’s not easy, at all; but it’s doable and it will still be doable five and ten years from now.
4. Money comes from customers – before I joined I thought all MLM’s made all their money from coaches. It’s just not true (again, with Beachbody at least). I already explained this above but the vast majority of the sales are from regular customers signing up to get into challenge groups to improve their health and fitness. In any given month my wife might sign up 15 people – and typically 13 or 14 of those are customers and 1 or 2 are people interested in actually coaching and earning an income.
5. People at the bottom can outearn anyone above them- I did not think this was true at all, but it is! My wife is already earning more than the 50 people above her. It has to do with the binary leg system, again which I did not understand at all before she started doing this. Now it is clear as day and makes perfect sense, but it’s so key to understanding it.
Anyway. I know I”m sort of wasting a lot of time here typing all this out as I’m pretty much 99.9% positive it won’t even put a dent in your opinion or views but I’ve always loved to have a truthful, non-bitter and honest conversation, so here it is. For what it’s worth.
Have a great night :)
Oh, and to Nightcrawler, sorry it didn’t work out for you. It’s not for everyone, that’s for sure. Especially if you don’t like the products!
The MyFitnessPal forums are not places for people to complain or vent. They are places for people to talk about health and nutrition. It is like WeddingChannel or TheBump forums helping people with weddings and pregnancies. Forums like PissedConsumer are obviously geared towards complaints, so that’s a bad example.
If I had linked to BeachBodyScam forums, you might have a point, but MyFitnessPal is completely unbiased and that unbiased general appears to generally HATE Beachbody (seriously, “rather drink their own urine” bad).
“As I said before, the money you make is almost entirely (like, 85% +) based on volume of sales to the public. In my wife’s downline, for example, there are currently 350 ‘coaches’ – but 325 of them are just in it for the discount and are in fact ‘customers’.”
If they executed a “coach” contract, they are by definition not sales to the public. Those are sales to recruited people in a downline. You are trying to call people something they are not by putting quotes around them.
“Of my wife’s ~20 active coaches in her downline, only one has not broken even. Everyone else has earned at least $100 or more per month.”
And that’s the thing, who is to say what active is? The definition of “active” according to income disclosure statements are usually people who have recruited people. It could be 300 people who are just unable to recruit people (it’s very common in MLM) and 25 who are just trying to be customers or the other way around. Some MLMs make this clear for people to see by calling discount customers, preferred customers. It’s yet another red flag for Beachbody not to have this designation.
Let me illustrate how much money is being lost here. I am going to estimate that each person is paying $100 a month on Beachbody. It might be $90, it might be $110, but I think that’s pretty fair. Feel free to correct me if I’m significantly off. At 325 people, your wife’s organization is paying $32,500 each month. However, Nature’s Plus Spiru-Tein High Protein is less than $12,000. The product is extremely high rated and undoubted loved according to the overwhelming reviews on Amazon.
So why on Earth would your “team” want to pay $32,500 when they could pay about 1/3rd at $12,000? No coach should be purposely making bad decisions for their “team.” But hey, if you are getting kickbacks to throw the team under the bus I guess it makes sense?
Nick said, “And as I mentioned before, less than 1/2 of the revenue Beachbody produces comes through the Team Beachbody (the MLM arm) of the company.”
If McDonalds buys the Pen Pyramid Scheme tomorrow, the majority of their revenue would still be from selling hamburgers, sodas, and fries. It doesn’t make the Pen Pyramid Scheme any less of a pyramid scheme. Again, bad logic to try to explain it away.
Nick said, “Regarding building a team – yeah, you get compensated for building a team. Just like you make more money if you are a district manager vs. a sales rep in any other company. As you grow and help your team succeed you earn more.”
If you are a district manager or sales rep in any typical company, money isn’t earned by recruiting people and selling product to them. Also sales reps and district managers are never coerced to buy product to earn their salary/commissions.
The Wikipedia chart that you cite is not supposed to be inclusive of all types of pyramid schemes. It is designed to show one type in its simplest form.
There’s a good explanation of how a binary leg pyramid scheme works here: https://www.igolder.com/glossary/pyramid-scheme/. Again, this another complexity designed to make it more difficult to see the pyramid scheme.
Nick said, “The other thing is that there is a lot of turnover!”
No sh!t there is. It’s true in every MLM I’ve looked at. That’s because people are getting in the business failing and moving on. The people at the top are not turning over, because they are living off the fat of the people at the bottom. The people at the bottom start to realize that paying $100 is garbage when they can go on Amazon and pay $30-35. Without the lure of the “business opportunity” many people leave.
This is explained in great detail using as an example Herbalife. It’s the same principle for every MLM though.
I cover MLM and the Reality of Saturation here. You are right that every company may have saturation in the number of products it sells, but when it reaches that point it stops hiring salespeople and paying them money. MLM tells every salesperson that they can be as profitable as they try… without ensuring that there is product demand to meet the number of salespeople. It’s telling everyone who wants a McDonalds franchise that they too can be rich and they should open them up on every block. It doesn’t work that way, because not everyone wants hamburgers, and the more McDonalds that exist, the fewer customers each one will have. Fewer customers mean more McDonalds will fail and go out of business.
This is a very easy concept to understand.
Regarding the 12k per week on 10,000 downline… are you kidding me! Clearly the bulk of these people’s money is coming from sales to people in a downline and not from a Beachbody/lemonade stand. It couldn’t be any more clear cut of a pyramid scheme.
When you suggest that it is simply hard work, it ignores the fact that mathematically only around 32,000 people in the United States could reach the 10K downline level before everyone in the country was in Beachbody. That’s not a very large town. It gets worse when you say that there are 50,000 people in a downline. The limit of 10,000 is absurdly high.
Nick said, “Roll of the dice – before I joined I had always read you might as well go spin the wheel at the casino. Well, it’s not like that. My wife has the same opportunity that anyone else does, if you want to go for it.”
Not true. The opportunity gets worse as more and more people get in. The people at the very top are usually handpicked from other MLMs in a pre-launch. There are also other factors at play. I know some people who run mommy blogs who have a bunch of faithful readers who will buy whatever is being sold. These people are not on equal footing with someone who does not have an audience. (I don’t know your wifet to know what her thing is.) There are studies that more attractive women and better sell to guys and girls… so that can be an advantage that someone else doesn’t have. You wife might have been the first in a geographical region to get involved, where someone else might have picked up those people.
Kellie Gimenez said on Side Hustle Nation that she uses Facebook ads, but if you are going to try to the same, you are going to have to compete against her. The opportunity constantly gets worse.
Nick said, “People at the bottom can outearn anyone above them- I did not think this was true at all, but it is!”
MLMers like to say that something can’t be a pyramid scheme, because you can earn more than the person who recruited you. That’s true, however it isn’t a test of a pyramid scheme! You won’t see the FTC or any regulatory body say any such thing. It’s an irrelevant piece of information that people feel like saying to justify running a pyramid scheme, probably because they don’t understand what a pyramid scheme is.
An “active” coach is someone who buys Shakeology (or ~$100.00 of another Beachbody product) each month. If you’re not buying anything, you aren’t “active” and cannot earn any commissions.
Perhaps people who’ve never worked in sales would fall for Nick’s nonsense about “it’s like any other company.” But I spent four months selling cars.
* Sales managers at dealerships don’t make ANY money simply from “recruiting” salespeople. They make money when their sales staff sells cars, accessories, and service contracts. That’s it.
* Managers aren’t encouraged to hire just anyone. While high turnover is expected (car sales is brutal), a manager who *routinely* hires completely incompetent salespeople will find himself unemployed.
* Salespeople are not required to buy cars, accessories, services, or anything else in order to keep working at the dealership and earning commissions. New hires are given a ~12-week stipend to get started, so at least they earn *something* while being trained.
* Salespeople get commissions only from selling cars, accessories, and service contracts. They are not told to get all of their family and friends to come in and sign up to sell cars “under” them.
* There are only so many sales slots in each dealership. When a dealership has enough salespeople, they don’t hire more.
It is absolutely nothing like Beachbody or any other MLM. If you want to try sales, go apply to sell cars, bang on doors for Terminix or Tru Green Chemlawn, or even sell online ads over the phone. All of these jobs stink, but at least you have *some* chance of succeeding, and you’ll be paid *something* for the time you spend trying it out.
Another thing I’d like to note: I remain friends with several people I met in the car business. All of them are at least moderately successful, and two of them are very successful. Almost none of the people I met through Beachbody (other than the shysters at the top of the pyramid) are still with the company. There are one or two people who are hanging on, making no money but hoping that someday their luck will change. Eventually, they’ll learn.
Regarding:
Again, you are too focused on seeing what it does for you and not seeing what it does for the people at the bottom of the pyramid.
Here’s the thing. we DO see what it does to the people at the “bottom”. And they are ecstatic. They all love the programs and love the products.
This is probably one of the reasons why complaints about Beachbody are so far and few between.
That’s true of every MLM. You can go back 5 years and read tips on how to get brainwashed people out of such schemes.
I’m really looking forward to your response on the Kellie Gimenez case and the other things you brought up previously. It seems like when you get proved wrong, you move the topic to another tangent (in this case the enthusiasm of new recruits).
There are many, many complaints about Beachbody on general fitness websites such as MyFitnessPal.
Here is are some quotes from the front page:
“Once you’ve lost weight or run out of money to keep buying it, you have to figure out how to go back to eating real food while either maintaining or losing. Your best bet is to figure out how to eat without using meal replacement shakes.”
“It’s garbage and a waste of money, ‘coaches’ will say differently but they are pretty ignorant on the product themselves”
“This. Avoid.”
“Keep it simple, eat a well balanced nutritious diet and maintain a modest caloric deficit. You don’t need gimmicks or shortcuts.”
“Yeah…let’s not talk about Shakeology.”
“Shakeology is expensive (even with the Coach discount I had) and I couldn’t stand the taste.”
“You say ‘Shakeology?’ I say ‘No thanks. I’d rather drink my own urine.'”
Complaints “few and far between”? You’d have to work hard to get more complaints.
I maintain what I said in my previous comment: Beachbody’s workout programs are great, or at least, P90X and Insanity are. I love them.
However, Shakeology and everything else they sell is overpriced garbage.
I am glad I got out of “coaching” before I lost tons of money, and without alienating anyone I cared about.
If you want to try your luck at sales, go apply at a local car lot. Most dealerships will hire people with no sales experience, especially right now; they are all gearing up for their busy seasons. Granted, car sales wasn’t for me, but at least (1) It isn’t a scam that involves “recruiting” other suckers to “join your team” and sell cars “under” you and (2) They’ll pay YOU for working there; you won’t give them a dime.
My brief foray into “coaching” didn’t “change my mind” about MLM’s. It made me despise them even more.
I am a Beachbody coach and although I don’t agree with all of your points, I do agree that the top coaches are profitng from their downline sells. However, if I never recruit a coach EVER, if I sell 5 Challenge packs a month my profits will continue to grow, which includes my commission and residual commissions. So Beachbody may have elements of a MLM but you can honestly make money just marketing the programs.I became a coach because I really believe in the products and they have changed my life. However, I am always hesitant to share the coaching opportunity with people because I know that if you want to see BIG numbers recruiting is involved, but that’s not my goal. I am happy with my $500 and growing extra every month.
There’s usually the opportunity for a few people to run an MLM in a legitimate fashion. For example, if you weren’t selling the grossly overpriced Shakeology product that puts the spotlight on the pyramid scheme.
However, it looks like the challenge packs are a way to package the Shakeology product, which is what you are really marketing, not the videos/programs.
I would hope someone reading this would say would be smart enough to say, “Hey, I can buy the products mentioned in this article with the videos and save myself a fortune while avoiding a pyramid scheme.”
In any scenario, I can’t see why anyone would want to support a pyramid scheme. There are thousands of other options available. If you really want to be a health coach, why not get a personal training certification?
“In any scenario, I can’t see why anyone would want to support a pyramid scheme. There are thousands of other options available. If you really want to be a health coach, why not get a personal training certification?”
You call it a pyramid scheme, I call it capitalism, which is how most big businesses are set up since well the Industrial Revolution. I am not going to knock anyone, nor Beachbody for using this age-old profit system for making money. Whatever label you decide to put on it, it works and as long as everyone involved understands the compensation plan, more power to them! However, I not sure if the factory worker from China who made the shirt or pants you are wearing, would agree with me.
Like I said, you make good points but just because someone (like you) has put a label on something doesn’t make it accurate. There are alot of labels I can use to describe your blog, but does it make it true??? Of course not.
Btw, I am in school for nutrition and nursing. Go me! Lots of love.
I guess Bernie Madoff and Enron called their scams “capitalism” too. I would urge you to go back to the article and read the FTC definition of MLM and pyramid schemes. Click on through and read the FTC’s guidelines on the matter.
Businesses since the Industrial Revolution are set up as hierarchical organizations which are legal and are not based on recruiting and have no pay-to-play aspects to them. Clearly hierarchical organizations are not illegal according to the FTC the way pyramid schemes are.
You say “it works”, but clearly it doesn’t work if you look at the compensation plans of dozens of MLMs (including Beachbody as I have). When you see that 99% of people lose money, and understand the Pen Pyramid Scheme as explained in the article, I don’t see how you can compare it a factor worker in China.
I know what you are saying about putting a label on something doesn’t make it accurate. What makes it accurate is showing the official government definition for the label and a top person in the scheme describing their business as matching that definition.
So if my label is not accurate, please explain why… and please use official definitions from organizations like the FTC, SEC, etc… not your own label.
ok, I saw this article.
I guess, people here are confusing and arguing two different things. Lazy Man says that this by definition is a pyramid scheme and others just say how great shakeology is. Here are my 2 cents worth.
I have been a “coach” for a while now. I don’t actively participate, I only order shakeology for my family. If someone wants to order through me – great, if not, I don’t ask anyone. Lazy man stated a few things that after my 2 years being a “coach” I have not experienced. I have an upline coach that I belong to – I never had a speech given to me about How to take no for an answer or ANY of those things. Everything I hear is only how GOOD it is for your health and what results and great experiences people are having by using it. So to me that part of your report is not true. I am sure some people are getting that training – however that’s not different from any other training. Second, I researched the ingredients for example your suggested cheaper alternative for Vega One. It looks like it’s really good, but it is 20 servings for the price and it is lacking a bunch of ingredients contained in shakeology. I would say I took your post seriously at first. But I see a few wholes. Using your analogy, I would say shakeology is like a pen that can write upside down, no other pen can, it is sold at a premium price (to justify the technology), but it really should be worth much more, so beachbody is actually giving away some of it’s money (to coaches that promote it) to have people spread the word and share the profit. Unlike some stores that have a sale of 70 % on items – and they still make money – I always ask there – how overpriced WAS this clothing in the first place?
Every time I try to find an alternative to shakeology, I am disappointed either by the taste, or by lack of ingredients available in Shakeology, or cheaper versions of comparable ingredients. Like I bought second highest rating of one of the shakes after shakeology, and I still have one tub sitting at home, I was disappointed it uses soy protein. Can’t bring myself to take it (although the taste is decent) and it was only 40 buck.
There is always someone who makes more money on something. It’s fine. I just find some of your findings to be not really findings based on my experience dealing with this company. I make no money on it. But I enjoy discount on other fitness products. So, don’t get all worked about the pyramid scheme. They do produce a superior product.
And YES, taste matters – you should try the alternative ones and this one yourself…
Sharon,
There are different conversations that can be had amongst any MLM. Most of the experts in pyramid schemes I’ve talked to have said that it isn’t even worth talking about the product, because it takes the focus away from the illegal activity of the financial fraud.
I don’t believe I said that Shakeology isn’t “GOOD” for your health, so I don’t know why you are saying that part is not true. If you talk to unbaised registered dieticians they are likely to advocate eating real food and not shakes over the long term. Of course, if you just listen to the Shakeology salespeople in your upline of course you are going to hear how GOOD it is.
The two products that I mentioned, especially the Spiru-Tein one, have AMAZING reviews on Amazon from people who AREN’T salespeople. So whatever great experiences you have with Shakeology, you can have them with these products as well.
Vega One is indeed only 20 servings, but it is a much cheaper price per serving. Just buy two and you’ll get more product.
There is not going to be an exact replica, which is why I said that Vega One is “extremely similar (and better in some ways).” One looking at it from the other way could be disappointed in what Shakeology lacks compared to Vega One. Maybe you could tell me which ingredients you consider important and list exactly how much of it you are getting your Shakeology. Just because the ingredient is on the label, it doesn’t mean that there’s enough of it or that it has significant value in the first place.
When you get to that level of comparison, you can’t see the forest from the trees.
It isn’t like a pen that writes upside as you suggest. That would be extra functionality. Shakeology has no extra functionality that Vega One lacks. It’s not like Shakeology gives me the ability to fly. It isn’t significantly nutritionally different in terms of core components (protein, fat, etc.)
In a previous comment, I referenced a bunch of people who weren’t hand picked that didn’t like the taste. If you listened to the podcast that was a catalyst for this article (linked at the beginning of the article), the person trying it says it is bad and the Diamond-level person didn’t disagree, but suggested mixing it with other foods (strongly implying that you should cover-up the taste.)
There’s nothing wrong with making money, and that’s what this whole website is about (hence the word “and money” in there). There is something wrong with running an illegal pyramid scheme
I eat real food. When I do make a shake, I don’t buy something preprocessed. I simply use whey protein, Greek yogurt, and frozen berries. Tastes great to me. My kids love it too. (Of course this isn’t relevant, but that’s why I’m not going to spend a lot of money on it.)
Well, yes, there is a purpose for every product. I don’t believe that shakeology is a meal replacement. It is basically a supplement mix. Is there a category like that that it can be sold under? I don’t believe in eating shakes as a meal replacement either. There is no such thing. And even beachbody does not advocate that. They usually say no more than one a day except for some short term things, which is legit.
I know that eating any food liquefied (even the one you just prepared from wholesome ingredients) is not good for you. Health aware people should know that. Even one of the beachbody programs basically kind of snubs it a little (they really struggle to find a place for it in the program – Body Beast). I don’t know if there is a prohibition to charge a higher price (even ridiculously so) if there are us willing to pay it. and honestly sales pitches are no different than ANY OTHER COMPANY.
I don’t like the structure of this either. I would prefer to pay 80 or 60 (or any less amount) for it and cut out all that “coach” bs. I agree with you there. But beachbody is so much more than just this one product – (if they even have a pyramid on a side :). I know I wasn’t lured into a scheme by high profits – I never saw profits there for myself. I don’t know how people do. In anything like this only select people benefit…. There are companies that are NOTHING like a pyramid schemes, with high sales turnover rates especially for the new associates.
I mean if your blog helps expose a truly illegal activity, that’s great. But right now it’s neither here nor there. Although I do admire the work that you did for this post… you should change your nickname :).
Glad that we are on the same point as it not being particularly healthy. That’s why I think trying to go through the 73rd ingredient is silly. If you go to Subway, do you ask for a list of ingredients in the bread? Would you pay a $20 footlong if someone changed a few ingredients in the bread in a Subway sub? That seems to be the kind of argument that you are making for Beachbody here.
The question is how many people are willing to pay it without the MLM/pyramid scheme/business opportunity around it. I realize that you speak for yourself when you say that you would. I’m sure there are others too. It isn’t going to 100% and 0% the other way. Sounds like your smartest move would be to buy it on Ebay and getting rid of the “coach ‘bs'” as you put it.
It goes back to the Pen Pyramid Scheme as detailed in the article. It makes a case common pen being sold for $100. It is intentionally extreme so you get the point behind the math. It even says “if you look at the world of MLM, there are some pretty big name companies out there that somewhat fit this mold on a less cut and dry basis.”
It appears like this is selling $30 canister for $100 or a $120. The sales pitch is very different than other companies. No one goes out of their way to pitch Carnation Instant Breakfast or Slimfast.
It is true that there are other companies that aren’t pyramid schemes, but I don’t see your point there.
Sharon said, “I mean if your blog helps expose a truly illegal activity, that’s great. But right now it’s neither here nor there.” What do you mean by this? I think I showed in great detail why it is illegal. Can you explain in ANY way why you think it would be legal? … especially given the information I’ve supplied?
Glad that you appreciate the effort that went into this. I got very little sleep over a 3-4 day span.
Lazy Man,
I am in a limbo state with a friend and her husband who are coaches. I am in the FB group they run for accountability, but I have only ever purchased the sampler pack through the BB website. She understands that I cannot afford the cost of the shakes, and because we are friends, lets me stay in the group.
The husband is kind of pushy, and tonight was a great example. I posted my meals for the day, and for breakfast I did have a shake (a brand I found on my own, which I much prefer), and the comment from him was, “What else is in it?” besides the 19 grams of protein I mentioned. I know where THAT conversation will go, so I will do my best to outwit him with my superior English skills…
But, on with it. I read your entire article, and all of the comments. Your links are helpful, and I somehow enjoy the technicality of the government/legal explanations, so thank you for that.
Here’s what I truly, truly cannot understand: How can some people see the brainwashing and the illegality of the company, and some cannot? I suppose I answered my own question there: Brainwashing would erase the ability to see the truth.
I like my friend, and I like the FB group, I mean, not so much that I couldn’t live without it, but still. I bought P90X3 and other programs on eBay, split the cost with another friend, and we share. And guess what? No one has taken advantage of me, but better still, I have not LET anyone take advantage of me.
BTW, the vegan strawberry Shakeology is nasty and tastes like old-school pink penicillin, and the chocolate is pretty chalky and lackluster.
I have actually found two options that work better for me (I use them maybe 2-3 times per week, not daily), and both have higher protein, fewer ingredients (which is important to me), and are vegan, and soy- and gluten-free (also important to me). Also, they are about $1.50 per serving.
As for the billion or so ingredients in Shakeology, they are not necessary to survive, nor are they necessary for good health (which I believe to be through eating whole foods and exercising), but this magnitude of exotic ingredients is often the launch pad for the argument that Shakeology is a superior product. Well, no, not if you don’t NEED those things.
Ok, that’s all. Bravo on the article. You keep spreading truth to the sheep!
Jenna,
I’ve covered MLM products for 7-8 years and I have seen few comments as good as yours. Most are salespeople for company and attack me because their business is based on recruiting others.
You asked, “How can some people see the brainwashing and the illegality of the company, and some cannot?”
The best answer I have is: Cognitive Dissonance. I encourage you to read up on it, but here’s an example from that Wikipedia page: “A snake oil salesman may find a justification for promoting falsehoods (e.g. large personal gain), but may otherwise need to change his views about the falsehoods themselves.”
In other words, people change their beliefs based on their benefit. They may not know they are doing it. There is also the brainwashing as you mention. One could point to Groupthink.
If there was no sales component I have to ask if people would be willing to “fight” in the same way for either of the much cheaper products that I mention in the article.
It seems like they would not. I can say that I never have had a friend ask, “What else is in it?” or critique my meal choice at all.
That just seems bat-poop crazy.
Thanks for your reply, Lazy Man.
As soon as you mentioned snake oil, my mind immediately jumped to pre-Civil War America, when this nation was swept by quack “doctors” and ads that promised ridiculous results. And, since I mentioned the time period, Mark Twain injects a lot of this mentality into his writing (both Tom Sawyer and Huck Finn) in many characters: They believe either in the power of religion or voodoo (essentially), whichever is appropriate in the situation.
I honestly think I am going to get out of the group soon, only because of the underlying pressure that exists to BUYBUYBUY Shakeology.
I am sure I can find a way to exit gracefully, and not grandstand my arguments to what they are peddling, but it won’t be too hard for me.
Maybe I am just a realist, but maybe my parents actually did teach me how to think for myself ;)
Have a great day!
Yeah, the whole purpose of those “challenge groups” is to get you to (1) buy Shakeology and (2) sign up to be a coach yourself. If you look closely at the member list, I guarantee most of the members are coaches. They all join each others’ groups to make them look full and active. All those people you see posting selfies of themselves drinking Shakeology? Coaches.
There are plenty of bona fide workout groups on Facebook where nobody is selling anything. I’m in two very active running groups where selling is strictly forbidden; anyone who tries to market to group members is given Das Boot.
Nightcrawler,
I kind of have a feeling about who the coaches are in the group, but out of the 27 people in it, I wonder if there are more than that. Interesting.
To be honest, I am only in the group because the person who started it was my friend outside of the group. I have no idea if she was a “coach” when we met or not. I enjoy the support from her, but again, it’s not necessarily something I need to do what I’m already doing with my health. There are times when it gets a little lovey-dovey-shakeology in there, and when that happens, I just take a couple of days off from posting or interacting with others.
This obsession with ONLY do things the BB way is what drives me bananas. I am a very rational person, and I try to look at all sides of a situation. When I decided to do the P90X3 program, it had nothing to do with the fact that it was a BB program. I did research online on quite a few programs, and ultimately when with that, and purchased it for the least amount of money I could, because as a consumer, that takes precedence for me, not where I get it. I can happily say no to whatever someone is selling, especially if they are a part of a scheme like BB.
Oh, I remembered something that I was told when it was found out I bought P90X3 elsewhere. It was something to the effect of: You know, if you want to be a part of this group, you need to buy stuff through us, because the accountability is a part of the coaching job, and just think of it as supporting a small business (the couple).” I said, “fair enough,” because I own the programs I want, and if I wanted another one, I would purchase it in the free market as I did before, and most likely won’t be in the group anyway.
No, a small business is what my dad runs: he sells a product to a customer, he has his employees make it, customer get the product, customer pays him.
But of course, I bit my tongue.
I am on board with what you are saying. I am very skeptical of the business format of team beach body. I am currently signed up as a discount coach with 2 personally signed coaches in my down line. I am not actively persuing growing “my” business because of my skepticism. With all that you have analyzed and the comments you’ve received from some employees (current and former) have you reported your findings to the SEC?
I’m considering it, Kristin.
There’s a lot of talk about MLMs being pyramid schemes with what is going on with Herbalife over the last couple of years. Millions of dollars of research has gone into exposing that and the SEC is well aware of it. The SEC was also made aware of the Bernie Madoff’s scheme long before. Good book on it No One Would Listen by the whistle-blower.
I think it is hard to get action against these companies, because they are allowed due-process which means they can sue the SEC. Government agencies have limited funding (we have a huge financial deficient) and such lawsuits can eat up the funding very quickly. It would be one thing if the SEC could recoup the money it wins in the lawsuit, but the money goes to lawyers and people who were harmed in the pyramid scheme first (I believe), so I’m not sure that the SEC would even want to act on any of this.
Update
After receiving some information from someone that ordered shakeology through a third party and having it shipped to them from team beach body at a cheaper rate than my “discount” (yes I have proof no I will not disclose more on this on here) I have cancelled all of my coaching membership associations with team beach body. That along with this blog (the actual article, comments, and the fact that none of my “up line coaches” had any good answer to my questions regarding where the membership fees and such are going (besides to the website hah) and other questions I posed) only pushed me over the edge of my skepticism.
I still think it is a good idea to report it to them whether anything happens or not. If you seriously consider this. I am on board to report it to them also.
I should have went with my gut in the beginning but at least I jumped ship before too many fees were acquired. (I requested refunds on the ones I was charged) I can definitely see where some of the beach body people are defending it (It can be a substantial paycheck every week) however I don’t think they are looking at the whole picture objectively.
Thanks Kristi, I think you stumbled on a great point at the end:
“I can definitely see where some of the beach body people are defending it (It can be a substantial paycheck every week) however I don’t think they are looking at the whole picture objectively.”
Everyone I see involved in MLMs are looking at their own pay and not looking at what it costs their team/pyramid. I point out similarly priced products so everyone can see that it costing people an extra $70 a month… essentially for hype. The people with 100 people in their team/pyramid may make a thousand dollars, but they collectively pay $7,000 more than they should.
It is easier to see the pyramid scheme when evaluating the whole system rather than selfishly looking at what is going in your own pocket. And if your upline doesn’t have very good answers to that… they haven’t offered them here… it’s a real problem.
Yes I can clearly see your points in everything you have articulated. No offense to anyone but I’m not drinking the kool aid so to speak.
As soon as my friend (who was just signed in as a coach before me) asked me to join I was skeptical but wanted to make healthier choices in my life so I joined to get the “discounted” rate and challenge pack offer. I from the beginning had an uneasy feeling about being a “coach” especially when the phrase you never have to really even coach anyone kept getting thrown around.
The week after I signed up my friend “my direct up line coach”s told us about a meeting at her house to go over te program and that people from our “team” would be there to explain everything. I’m thinking awesome they can answer my questions about the program and meal planning etc. NOT and I repeat not the case. All the “up line coaches” did was talk about how to “grow your business” by recruiting other coaches.
The person in charge of our team stressed that with his 4000 a week paycheck only a mere fraction of that was from direct sales (an outside customer not affiliated with team beach body coaching) and the majority was from his teams volume below him. He said to us you can choose to sell shakeology to customers or you can focus on growing your business by growing your team. Ummmm ok I was very angry at my friend for this.
I even asked the head guy of our team at the end (mind you we were almost 2 hours in and I could feel my blood boiling the longer this went on) I asked him so which products do you use from beach body. He told me NONE again ummm what? He said all he takes is shakeology. He goes to the gym so he hasn’t done any of the actual workout.
Again my skepticism was through the roof day 1 and I’m glad I decided to not put the rose colored glasses on and start downing the kool aid. To each their own but I’m all set.
I will say I have seen amazing results being on the workout program and eating plan plus I am drinking shakeology but I am definitely going to research out a cheaper comparable shake option.
You got out more quickly than I did. It took me nearly six months to quit, although I stopped buying Shakeology about four months in.
The workout programs are great. I still own P90X and Insanity, and I still recommend them to others. However, I always add this caveat: Never buy anything that Beachbody makes except for their workout programs. Their supplements, shakes, equipment, etc. are all overpriced. Additionally, I tell folks to get them from Amazon or eBay, so they aren’t assigned a “coach” who will then proceed to pester them.
I went to a couple of those “meetings,” too. They talked about nothing except pestering other people to sign up. At least you–like me–got out *without* alienating everyone you know. As I mentioned above, the only people I alienated were a couple of strangers on social media, no one I knew or cared about. Others aren’t so lucky; by the time they leave, nobody wants to speak to them because of how they behaved when they were part of the MLM.
Yes I did get out pretty quickly. Like I said I was skeptical from the word go. That initial “meeting” definitely didn’t do anything to remove the sour taste in my mouth. The one difference is that I did sign 2 people below me pretty close to me. (They both have cancelled as of today also) there are just so many questions that no one can seem to come up with a legitimate answer for other than some watered down answer because they are also drinking the kool aid and clearly don’t want there money funnel to end. As I stated to each there own everyone has circumstances they need to deal with. I just can’t sleep at night knowing I might be duping someone into something unde false pretenses.
I again do fully believe in the workout programs they have especially the ones that offer a way to show you how to meal plan and portion control along with it. I personally have seen great results as a result of following the 21 day fix program. (5lbs and almost 6 inches total lost is not too shabby considering I’ve never worked out a day in my life.) I just can’t wrap my mind around the “business” structure/pyramid scheme of recruiting coaches below me. If I want to try a different program I will gladly pay full retail to sleep at night.
FYI I was also told that people who shop through Amazon are redirected to beach bodys website to purchase it from them. That is what apparently helps feed the “customer lead program” where you are given those free customers Based on meeting the criteria to qualify for those first.
One last thing I forgot to mention is that in all of this I am pretty sure (I haven’t researched this enough so I could be wrong) that beach body and team beach body are 2 different companies. Team beach body is the coaches part of beach body.
I don’t really care what you think about Beachbody or any other MLM really but you should really educate yourself on what exactly a “pyramid scheme” is. A company that sells a product is not a pyramid “scheme.”
That’s completely false as I’ve shown the Federal Trade Commission says otherwise and they have successfully shut down pyramid schemes with products.
I’m curious about something…
If Beachbody coach compensation were tied ONLY to retail sales directly to the public and the retail sales of a coach’s downline (again, directly to the public), and excluded any purchases made by a downline coach in the calculation of any compensation earned, would you still call it a pyramid scheme?
That would be a good question for the FTC, Tim. I’d like to see a company implement it. I don’t know of any that do it. As I wrote recently (here: Is Every MLM a Scam?) I don’t think a company would survive very long as their distributors would just jump to another shake company.
For sake of argument, I had written a couple of years ago, How An MLM Can Show It Isn’t an Illegal Pyramid Scheme. One of the things I suggested was what you wrote… commissions only paid on sales to public.
The other thing was that there should be no required minimum purchases to earn commissions. If you want to be Nike salesman, you don’t have to buy $X of Nike products every month. This suggestion is tied to the FTC’s wording of modern pyramid schemes using required minimum commissions.
This is what I wrote in that article, Is Every MLM a Scam?:
Let’s say that Beachbody pays based on both coach and retail purchases. At what percentage of Team Beachbody revenues attributable to non-coach purchases would you be satisfied that Beachbody isn’t an illegal pyramid scheme?
The FTC posted: “Not all multilevel marketing plans are legitimate. If the money you make is based on your sales to the public, it may be a legitimate multilevel marketing plan. If the money you make is based on the number of people you recruit and your sales to them, it’s not. It’s a pyramid scheme. Pyramid schemes are illegal, and the vast majority of participants lose money.”
I interpret this to mean that making sales to the public is good and that making money via recruitment is a pyramid scheme. That’s the only two ways to make money in MLM that I’m aware of.
So it sounds like you are asking what percentage of pyramid scheme is okay. I’m going to go with zero.
Also, as I interpret the FTC’s statement, if there’s a person who makes a million dollars, they better be selling at least $500,000 of product directly to people outside the company themselves (not from coaches) or else he/she running an organization is a pyramid scheme. In this case the MLM company itself would be aiding and benefiting from the criminal enterprise, which in itself would be illegal.
Again, this is my interpretation of what the FTC has written. I am happy to take other’s interpretations as long as they are consistent with organizations like the FTC.
So what you’re advocating is the following story, I suppose:
Welcome to Lazy Man MLM Company!
Mr. MLM Distributor meets Ms. Product Customer and Mr. Distributor sells a product to Ms. Customer. This product is shipped directly to her every month.
Ms. Customer uses said Lazy Man product. LOVES IT. She uses it for three months.
At this point, Ms. Customer finds out about the opportunity to become a distributor with the Lazy Man company. She reads about it on the company website, and she’s intrigued. She would love if people hand an experience with the product like she has had, and she wouldn’t mind getting a referral commission in case someone wants to buy it through her. She’s also going to keep using her favorite product, of course, and she wouldn’t mind getting a discount on her monthly order. She signs up. Doesn’t even tell Mr. Distributor about it until he receives an email from the company saying that he has a new distributor on his team.
So now Ms. Customer is a Lazy Man MLM distributor. She has no real plans to build a business. She carries on like she did her first three months and gets her monthly product order. Her fee for being a distributor is offset by the discount she gets on her product purchases, and that’s alright by her, because she’s still saving money.
Fast forward to today, nine months later. Ms. Customer has now ordered, used, and loved this Lazy Man product for a year. She has no plans to stop using it. Maybe she’ll refer someone else. Maybe not.
Because Lazy Man MLM is a legitimate MLM, Ms. Customer’s purchases do not accumulate purchase volume in Lazy Man’s organization. He loses the benefit of her continued use of the product and her remaining a faithful user of the product.
********
Are you really advocating that Mr. Distributor should receive ZERO financial benefit from Ms. Customer’s purchases simply by Ms. Customer’s unilateral decision to become a distributor with the company instead of remaining a retail customer?
Are you really interpreting the FTC’s statements and the past case law to mean that any time a distributor receives a financial benefit from a non-required product purchase by a distributor in his downline that this automatically places the plan in the category of an illegal pyramid scheme?
Really?
I’m not advocating any MLM, Tim. I think you need to re-read the article that I presented before: Is Every MLM a Scam?
If you want to pay people for referring others there are single-level commission structures that don’t require minimum purchases. For example, I wrote an article about Progressive International’s Lettuce Keeper, which is a product that I love. If someone reads the article and clicks on the link and buys it, I get a small one-time commission from Amazon. There’s zero chance of it being a pyramid scheme, because there’s zero recruiting and everything is a retail sale.
This is how a legitimate company can safely offer a referral program with fear of it being a pyramid scheme. It’s a fair system and Amazon has hundreds of thousands of associates. It’s free to join and you don’t have buy a product to refer it.
Also, if I recommend Kind bars (as I have in the past), I don’t expect to get a commission every time someone buys them. If I recommend a restaurant, should the restaurant pay me a commission each time someone eats there, even 9 months later? I don’t think that makes any sense.
In your scenario, you touched on a few of the issues:
1) Mr. Distributor is not really a “distributor” as he doesn’t distribute… the product is shipped from the company directly to Ms. Customer. Mr. Distributor is a misnomer to start with. I realize it is nomenclature, but it is somewhat important. I’ll call him Mr. Referer
2) I wouldn’t design a system where Ms. Customer has a huge financial incentive to become Ms. Referer. Such a system means that there aren’t likely to have ANY retail sales. There’s no reason why any intelligent person would pay retail prices as Ms. Customer if they can lie and call themselves a Distributor/Referer with no intent to distribute or refer. If there are few retail sales as Ms. Customer, it becomes quite clear it is a pyramid scheme by the FTC definition… there’s no real money to be made selling product to the public (outside of the MLM) because the MLM purposes prices things to incentivize them to join the MLM.
At a fundamental level, the fake discount for becoming a Distributor/Refer causes all sorts of difficulties. One can no longer statistically determine who is failing at the business opportunity due to it being a pyramid scheme and who is a customer lying that they are Distributor/Refer.
Apple doesn’t have this problem with their authorized Apple reseller program which is akin to being a distributor. It sells products to customers and very few of those customers think, “I’m going to become an Apple reseller to save money on my next iPad.” No one has the confusion of whether someone is an Apple reseller and someone who buys an iPad.
Tim asked, “Are you really interpreting the FTC’s statements and the past case law to mean that any time a distributor receives a financial benefit from a non-required product purchase by a distributor in his downline that this automatically places the plan in the category of an illegal pyramid scheme?”
I’m most certainly not and I’m very sure I didn’t write anything like that. I’m simply saying that it would be trivially easy to remove the required product purchase to earn commissions. Since that is a red-flag of a pyramid scheme even an illegitimate company can easily take that very simple step to at least look more legitimate. When a company doesn’t have that very easy provision, I have to ask, “Why not? Why take the extra business risk?” No one can give me a good to that. Can you, Tim?
Lazy Man raises a critical point. It would be very easy for MLMs to eliminate any ambiguity about who is a true “distributor” (someone intending to work the business angle) and who is merely a retail customer signing up (under false pretenses) as a distributor to obtain product discounts. That solution would be to make distinct categories – i.e., one unambiguous category for distributors and another separate unambiguous category for customers seeking a discount. MLMs don’t do this of course; the ambiguity is built-in by design to disguise the fact that these are thinly veiled pyramid schemes.
What’s really silly and misleading about MLM discounts is that the products are horrifically overpriced even at the discounted rate. It’s an act of deception designed to make people think they’re getting a bargain when in fact they’re being fleeced badly. That’s where the BS claims come in – telling people that these worthless MLM products cure cancer for instance; or that someone has a reasonable chance of becoming financially independent selling the products, which is completely untrue for somewhere around 99% of distributors in virtually every MLM ever analyzed.
MLMs try to hide their abysmal distributor failure rates by asserting that the failures aren’t really failures at all but simply customers who never intended to build the business. But that takes us back to my original point — they create this ambiguity on purpose to deceive people. Classify these customers as customers instead of distributors and this cover story would fall apart at the seams. Product purchases by distributors would clearly be identifiable as wholesale rather than retail purchases, and product purchases by customers, either at full price or the discounted price, would be readily identifiable as retail rather than wholesale purchases.
As it stands, MLMs can’t even offer a reliable answer to a simple question as to how much of their revenue is derived from retail versus wholesale purchases. Again, this is clearly obfuscation by design.
1) Lazy Man writes: “I’m simply saying that it would be trivially easy to remove the required product purchase to earn commissions. Since that is a red-flag of a pyramid scheme even an illegitimate company can easily take that very simple step to at least look more legitimate. When a company doesn’t have that very easy provision, I have to ask, “Why not? Why take the extra business risk?” No one can give me a good to that. Can you, Tim?”
I don’t really know why a company would have a required product purchase to earn commissions. I’m here because this post poses the question “Is Beachbody a Scam?” I’m not really discussing any other companies besides Team Beachbody.
What I know for a fact is this: Team Beachbody does not require any product purchase to earn commissions or bonuses. If you believe that to be the case, you are misinformed.
2) Lazy Man writes: “Again, this is my interpretation of what the FTC has written. I am happy to take other’s interpretations as long as they are consistent with organizations like the FTC.”
How do you interpret the FTC’s position on internal consumption, i.e. purchases by distributors, based upon this letter from the FTC? http://static.mlmmyth.org/documents/FTC-Letter-internal-consumption.pdf
3) Lazy Man writes: “At a fundamental level, the fake discount for becoming a Distributor/Refer causes all sorts of difficulties. One can no longer statistically determine who is failing at the business opportunity due to it being a pyramid scheme and who is a customer lying that they are Distributor/Refer.”
Beachbody’s Statement of U.S. Independent Coach earnings delineates between those who do recruit and build organizations and those who treat the coach opportunity like an affiliate program or simply a discount. http://www.beachbodycoach.com/uploads/fckeditor/mdbody/File/downloads/statement_of_independent_coach_earnings.pdf
Tim, though your initial question mentioned Beachbody, it applied to all MLMs I have researched so I gave a broader answer. The FTC doesn’t usually comment on specific companies (or at least saves it until after they lay down the hammer)
Many MLMs allow people to substitute the requirement for product purchases with retail sales. However, as we covered previously, very few customers would pay retail prices and sign up as distributors. It is my experience that the retail sales is not widely used and distributors satisfy the requirement with their own product purchases. MLM companies do not publish statistics on this.
If you want the specific language from Beachbody’s compensation plan, it is here: “To qualify for applicable bonuses or commissions, Coaches must be at Active Status as defined in the Team Beachbody Coach Compensation Plan until the end of the applicable qualification period.”
There should be no “Active” status necessary to earn commissions. That’s the broad point that I was making.
Tim said, “How do you interpret the FTC’s position on internal consumption, i.e. purchases by distributors, based upon this letter from the FTC?”
I don’t believe that internal consumption refers to purchases by distributors. To me it means who physically consumes the product, whether it is distributors or people outside the scheme. If they meant purchases, I presume they would have used the words “internal purchases” or “commissions earned from purchases by distributors.”
The part about how modern pyramid schemes work is much more important and relevant as it doesn’t rely on who is consuming the product (which is understandably not relevant, especially as some products are not consumed).
Beachbody’s Statement of U.S. Independent Coach earnings attempts to delineate between those who build teams/pyramids/organizations and those who simply by at a discount, but like all MLMs I’ve seen attempting this they fail. If you see the footnote at the bottom they say 14% of active coaches “took advantage of bonuses available for those who help the company recruit.” The way I read this it is Beachbody saying, “we are going to count everyone we paid bonuses to… i.e. the top half of the pyramid those who are trying to build a business. The bottom level of the pyramid… those are all just people looking to earn a discount.”
This simply isn’t reality. Every MLM I’ve studied has a huge churn rate. It’s not just documented there, but also in this Seeking Alpha article. The bottom of the pyramid (new distributors) churn very often. They aren’t churning because they suddenly decided after a couple of months that they don’t like the product like they did in the past. They are churning because they are really trying to build the business, but are unsuccessful at recruiting people (not many people are in joining a pyramid scheme).
As I mentioned and Vogel backed up on, this is how MLMs hide the abysmal failure of distributors in a pyramid scheme. I suggest you go back and read Vogel’s comment, because he hit it perfectly.
Rather than address the entirety of your comment at once, let’s just start with this tiny part:
“I don’t believe that internal consumption refers to purchases by distributors. To me it means who physically consumes the product, whether it is distributors or people outside the scheme.”
From the introductory paragraph of the previously-linked FTC letter:
“personal consumption by members of a multi-level
company’s sales force (“internal consumption”)”
Do you still believe that internal consumption refers to purchases by non-distributors?
Tim, I don’t think internal consumption has anything to do with purchases by anyone, but who physically consumes the product. Not sure where you got the idea that I said it meant purchases by non-distributors.
It’s worth noting that letter appears to a private communication, not officially policy, by an “acting director”, that is over 10 years old. I don’t see any point in wasting discussion space on it, when we have official policy guidelines that are more 8 years newer. If you read the most recent guidelines, they don’t mention the words “internal” or “consumption.”
Given all that, I believe it’s time to move on to topics that the FTC considers relevant. I didn’t see you comment about what’s wrong with a simple affiliate program that removes all questions of pyramid schemes. We can avoid this whole line of questioning very, very easy if Beachbody just wants to show people that they are legitimate.
In your opinion, is there such a thing as a legitimate MLM?
Hmmmm… Tim, I think linked you to my opinion at least twice before. The last time I even suggested you re-read it. Here’s hoping the third time is a charm: Is Every MLM a Scam?
This is not the stand at a court trial, this is a discussion. When you are asked questions you should participate by answering them, not deflecting with a new question.
Here’s are a few very quick follow-up questions for Tim.
Are you a Beachbody distributor? If you are, don’t you believe that should be disclosed in any Beachbody discussions? Some MLMs require it.
If you were a distributor are you familiar with the FTC guidelines on endorsements (that’s a layman’s guide, there’s a more official online too) and have you ever posted a testimonial for the product without “hav[ing] adequate proof to back up the claim that the results shown in the ad are typical” or “Clearly and conspicuously disclose the generally expected performance in the circumstances shown in the ad.”
If you are not a distributor, do believe that sometimes MLMs distributors do not follow these guidelines?
There is actually one MLM I can think of whose products are not horrifically overpriced: Avon. Their cosmetics cost about the same as retail brands like Cover Girl, and the quality is about the same. I’ve bought Avon products in the past, and I’d buy them again.
However, like all other MLM’s, almost nobody earns money selling Avon. I actually did a research paper about their failed “Promise Project.” Notably, one of the reasons that this project–which sought to upgrade their online ordering system–failed so spectacularly is because the company uses an MLM structure. Nearly every Avon “distributor” signs up with Avon because they buy a lot of cosmetics, and it’s a way of saving money on their personal purchases; also, if they sell some lipstick to friends every now and then, that’s a further “discount.” But because of this, when Avon introduced a rather complex ordering system with a severe learning curve, these “distributors” said, “This isn’t worth it anymore” and left the company in droves. The only reason Promise didn’t bankrupt Avon was because they piloted it in Canada; they lost an enormous number of Canadian “distributors,” but it did not impact the U.S. market.
Another item of note is that Avon, as a company, is struggling. They are doing so poorly that they are about to be booted from the S&P 500.
Avon might be best served by ditching its MLM structure and just focusing on web sales, and perhaps converting their “Avon ladies” to online affiliates.
FTC says:
”Not all multilevel marketing plans are legitimate. If the money you make is based on your sales to the public, it may be a legitimate multilevel marketing plan. If the money you make is based on the number of people you recruit and your sales to them, it’s not.”
So this basically affirms that Beachbody is legitimate. The money you make is based on sales to the public, by yourself or by your team. It is not based on sales to the people you recruit.
Nick,
You might want to read the FTC part that you quoted again. It does NOT say that money you or your team make. The Team Volume (TV) in Beachbody’s compensation is based on the number of people you recruit and your sales to them. That Team Volume could have zero sales to the public (the FTC’s definition of people not associated with the MLM).
If you are still confused the FTC words it several different ways for you in the same document:
“Avoid any plan where the reward for recruiting new distributors is more than it is for selling products to the public. That’s a time-tested and traditional tip-off to a pyramid scheme.”
“One sign of a pyramid scheme is if distributors sell more product to other distributors than to the public — or if they make more money from recruiting than they do from selling.”
We can also go back to FTC statements from 1997:
“Legitimate multi-level marketing plans are a way of making retail sales of products or services to consumers through a network of representatives. However, in an illegal pyramid scheme the main focus is not on sales, but on recruiting new representatives into the program. Typically, each new representative must buy a certain amount of products and must recruit a specified number of new participants in order to earn money in the program. In a pyramid scheme there is almost no emphasis on making retail sales of products to persons who are not participants in the program.”
If you want to argue semantics and try to find a loophole amongst all these statements go enjoy yourself elsewhere. The spirit of the guidelines is quite clear considering the number of ways they described the same thing. Remember that the FTC has to write guidelines in such a way that they catch thousands of MLMs who all spin their compensation plans a little differently.
It looks even worse if Beachbody supporters are trying to needle the FTC at the expense of the consumers it protects.
Lazy Man:
I am absolutely an Independent Team Beachbody Coach.
If we were discussing the efficacy of the products sold by Team Beachbody rather than the legality of its business structure (which is what I’ve been trying to discuss, by the way, not whether or not it’s a good business decision for a company to engage in network marketing, which you keep bringing up for some unknown reason, or ), then I think it would be relevant for me to disclose my relationship to Team Beachbody. As it stands, I’m making no claims as to its products, but instead to its legality according to case law around the U.S.
Accordingly, for purposes of this discussion, I believe my status as a Team Beachbody Coach is irrelevant, but I wish I had disclosed it anyway.
I’ll gladly answer any questions you ask of me. If I haven’t before, it’s only because I’ve been distracted (in fact, flabbergasted) by some of your analysis and responses to my own questions, which is why I responded with questions of my own. (Pot, meet kettle, FYI.) I’m deflecting nothing. In fact, as I sit here, I figuratively stand behind everything Team Beachbody does from a legal standpoint.
I am familiar with the FTC requirements on endorsements. First, any marketing that I do, in my opinion, makes it abundantly clear that I have a financial connection to Team Beachbody and the products I promote. Secondly, any testimonial I’ve posted, I believe that results are typical with product use, according to my experience.
I am a distributor.
It’s funny that you mention the concept of a layman’s guide, because the FTC page to which you continually link is exactly that. It lacks nuance and is an overly simplistic explanation of illegal pyramid schemes, to the detriment of legitimate and legal MLM companies. A deeper analysis of the case law as applied to the Team Beachbody business should make it clear that Team Beachbody would not be deemed an illegal pyramid scheme under the appropriate legal standards.
If you would like to hash those out with me and apply them to Team Beachbody, I’ll be glad to do so, but something tells me that there’s nothing short of God Herself coming down from the clouds and declaring to you that Team Beachbody is not an illegal pyramid scheme under U.S. law that would cause you to back off your assertion that Team Beachbody is an illegal pyramid scheme (and that might not even do the job either).
From this point on, if you (or any other commenter) is not talking about the law and its application to the Team Beachbody business, then you’re talking to someone else besides me, because the law is what I’m talking about here.
I’m not sure why you’d narrow your focus of discussion Tim. You broadly ask me about my opinions on MLMs in general, but only want to discuss some aspects of the Beachbody MLM that is the topic of discussion here?
Tim said, “I am familiar with the FTC requirements on endorsements. First, any marketing that I do, in my opinion, makes it abundantly clear that I have a financial connection to Team Beachbody and the products I promote. Secondly, any testimonial I’ve posted, I believe that results are typical with product use, according to my experience.”
The FTC guidelines are not to be qualified with “according to my experience”, but whether there is “adequate proof to back up the claim that the results shown in the ad are typical.” When you say “according to my experience” it does not qualify as adequate proof. In fact, a testimonial is implied to be “according to [your] experience.”
I believe you know what I’m talking about. Or maybe I’m imagining a video I saw. Do you want to talk about it?
I don’t mind you being flabbergasted by my responses. It’s worth mentioning that Vogel gave some similar ones. It’s also worth noting that I’ve cited the FTC’s information for much of my responses. I don’t see what is flabbergasting about citing the FTC.
You’ve asked me about my opinion several times. I hope I’ve made it clear that those opinions are separate from the FTC citations I’ve made. My opinion has no implication of whether Beachbody is legal is not. Why would you ask my opinions on these matters if you wanted to discuss whether Beachbody is legal or not?
I’m fine with the language in the layman’s guide in the FTC document. As I said to Nick, the FTC is here to protect consumers which is all of us. If MLM companies have a problem with it, they can sue the FTC. Go get the Direct Selling Association (DSA), the MLM lobbyist group, to sue the FTC for putting false information forward. And if it isn’t false, then surely it is fair for me to cite it and rely on it.
I’m fairly sure that a deeper analysis of case law would not help out Beachbody’s cause in whether it is an illegal pyramid scheme. It didn’t help Fortune Hi-Tech Marketing. I’m also fairly familiar with most of the case law. In any case, no one making the decision of whether or not to join Beachbody wants to spend years reading the case law. I don’t want to write about the case law, because it makes for a huge, huge article and doesn’t leave space for the other aspects of Beachbody that require discussing.
People don’t want to read case law. I don’t want to write it.
The FTC makes things very simple for us. I pointed out nearly a dozen Beachbody distributors who couldn’t even grasp the layman terms of the FTC document citing things that no relevance to pyramid schemes. If you want to be flabbergasted, look at your uneducated peers. Go to Beachbody and ask why they haven’t properly trained Coaches about pyramid schemes. It is a thousand times worse that (presumably) compensated Beachbody salespeople commonly make mistakes on pyramid schemes.
What’s with the “Pot meet kettle comment?” Did I not answer ANY of your questions? You haven’t offered any of your feelings on my thoughts at all. Even flabbergasted people would say why they are flabbergasted and not just continue a barrage of questions.
First of all, my name is Tim, not Nick.
Second of all, with the FTC statement from 1997, you quoted above what is the crux of what constitutes a pyramid scheme under the case law, although you may have missed it and you quoted no case law, and it’s one of the key elements that would cause no legal authority, i.e., a court of proper jurisdiction, i.e., the thing that actually matters here, to find that Team Beachbody is an illegal pyramid scheme.
“However, in an illegal pyramid scheme the main focus is not on sales, but on recruiting new representatives into the program. Typically, each new representative must buy a certain amount of products and must recruit a specified number of new participants in order to earn money in the program. In a pyramid scheme there is almost no emphasis on making retail sales of products to persons who are not participants in the program.”
The sine qua non of a pyramid scheme is the REQUIRED purchases by participants in order to earn money and whether those purchases provide the income to the upline. Normally this exists with a substantial startup fee or required inventory purchase. If that is present, then you’ve got a pyramid scheme.
Team Beachbody lacks this critical element, this REQUIRED purchase in order to earn money that creates income for the upline, and as such, it is not a pyramid scheme.
There’s no semantic argument there.
But I’ll state it another way:
Courts don’t care that distributors make money based upon the purchases of their downline distributors as long as those purchases aren’t required in order for the purchaser to participate in the money-making. Simply making money from the purchases of downline distributors does not a pyramid scheme make, no matter what the FTC says or has said.
You can’t keep relying on the FTC as authority in this area. They are a player on one side of the argument. They are not a neutral arbiter. They’re giving people their side of the story. You have to rely on the actual laws and legal decisions as they’ve been handed down by courts through the years in order to form an opinion regarding the legality of a MLM.
Solely relying on the FTC for analyzing whether something is a pyramid scheme is akin to solely relying on Fox News to analyze the performance of President Obama.
The other hallmark of a pyramid scheme is lack of retail sales. As far as retail sales go, in regard to actual practice, in Team Beachbody, there is a substantial emphasis on retail sales and such sales are numerous. It’s good retail customers that become good coaches.
If you’d like to see some retail sales, go back and check that Coach Earnings Statement. You’ll see that the top earner at the Emerald Rank earned $238,202 in 2013. What this tells me is that this Coach likely isn’t actively building a downline at all and his/her Emerald rank has resulted simply from some of his retail customers deciding to pursue the Coach opportunity, either to build a business or simply enjoy a discount. That’s beside the point, though.
What is the point?
The maximum amount of money this coach could have earned through team cycle bonuses that year was $13,000. That means that he/she earned over $225,000 through retail sales, likely in the style of your well-above-average internet affiliate marketer. In other words, this coach moved close to a million dollars worth of products that year to RETAIL customers.
No one can claim with any intellectual honesty that Beachbody’s products aren’t salable in the marketplace at their retail prices.
Beachbody coaches sell products to retail customers, period. Present company included.
Sorry Tim, but maybe you missed the comment that Nick made and thought it was directed to you. This is why I addressed him.
Tim,
I don’t have time right now to respond fully to what you wrote in my response to Nick, but I suspect you may be working on the response that I actually wrote to you.
In any case, I did want to get a couple of quick notes in before I have to run.
1) I’m flabbergasted that you’d actually type, “You can’t keep relying on the FTC as authority in this area. They are a player on one side of the argument. They are not a neutral arbiter.”
Have you read The FTC Mission Statement, “To prevent business practices that are anticompetitive or deceptive or unfair to consumers; to enhance informed consumer choice and public understanding of the competitive process; and to accomplish this without unduly burdening legitimate business activity.”?
You are really going to build your argument around taking me to task for relying on the government organization that protects consumers on anticompetitive or deceptive business practices? Seriously. You hate consumers, of which you are one, that much.
2) I’m not a lawyer, but my understanding is that case law is built around cases that go to trial and have outcomes. Time and again, MLMs pay big settlements to keep cases from going to trial. The FTC doesn’t have the funding to take a thousand companies to trial. It probably doesn’t have the funding to take Herbalife to trial.
Simply put, the case law is not very extensive in this area. And when the case law comes down, MLMs simply build in a technicality to get around it. You’ll see this exactly in #3.
3) Can you cite the case law about the REQUIRED purchases? I’d love to read it specifically. Because when I create my Lazy Man MLM, I’m going to put a clause that you can satisfy your Personal Volume (PV) for being active by either purchasing product or by hitting 10 straight hole-in-ones at TPC Sawgrass on the 8th of any given month. That should legally cover me from any REQUIRED purchases.
The point is that creating another opportunity to satisfy the REQUIRED purchase does not necessarily help it not be a pyramid scheme any more. If Beachbody published the number of people who have used the alternative qualifying method, it might be good evidence in a court case, but the existence of a loophole doesn’t necessary make the scheme legal.
4) If you are an Independent Beachbody Coach, you are not a retail customer. You do not buy product at the retail price.
Lazy Man, I’m sorry for all the confusion about names and such. You’re right, I missed Nick’s comment.
Before I respond to your questions and provide pertinent case law, I did want to ask you meant by #4 above and to what you were responding.
I know I’m not a retail customer and that I don’t buy product at the retail price.
I wrote:
“No one can claim with any intellectual honesty that Beachbody’s products aren’t salable in the marketplace at their retail prices.
Beachbody coaches sell products to retail customers, period. Present company included.”
What I meant when I wrote that was that I sell products to retail customers at retail prices and so does every single Beachbody coach I know.
What did you mean when you made your #4 comment?
With regard to #4, I thought you were saying that you including yourself (present company) as a retail customer. I was rushing so I might have parsed the sentence differently than you intended it.
I’m happy for you to go into case law, but it is really going to bog down any useful discussion and MLMers always claim that it is unclear. As an example, Bruce Craig put this wonderful description of existing case law in Seeking Alpha.
An attorney for MLMs responded with: “At some point, critics like Bruce need to be practical. Taking the position that all MLMs are illegal immediately removes you from the conversation. Completely. And without influence, there’s no change. The industry is not going away.”
The point has been extensively made that they are illegal pyramid schemes and essentially the MLM lawyer acts like one shouldn’t take the position to fight illegal acts and we should just accept illegal pyramid schemes as a fact of life.
It goes back to what I was saying comments ago. This has gotten far too complex. No distributor is taking the time to review case law to know if they are getting involved in pyramid schemes. Lawyers with years of law experience themselves can’t even agree on it. A legitimate company wouldn’t take the business risk of getting tied in this. A legitimate company shouldn’t be fighting the FTC’s explanation of pyramid schemes.
There is a very simple affiliate program that avoid the whole issue. Why put money in lawyer’s pockets fighting about it? Why drain the FTC resources we they can be doing other things like guarding consumer privacy. You want to build a business selling Shakeology and workout videos? A simple affiliate program solves everyone’s problem in a way that can hardly be considered fraud by any stretch of the imagination (maybe you’ll come up with one, but it certainly won’t be a pyramid scheme).
I fixed the problem for a thousand MLM companies if they want to go legitimate. We could wipe out a millions of cases of fraud overnight and allow people to still run legitimate businesses.
I’ve probably given Tim enough to chew on, but since I’m going to be traveling tomorrow, I thought I’d add a couple more items to chew on.
Tim said, “The other hallmark of a pyramid scheme is lack of retail sales. As far as retail sales go, in regard to actual practice, in Team Beachbody, there is a substantial emphasis on retail sales and such sales are numerous. It’s good retail customers that become good coaches.”
Can you specific quantify “numerous” for us? This is where Herbalife has difficulties. They shrug their shoulders and say, “We don’t know.” If you are claiming that Beachbody is legitimate, clearly they have the transparency to quantify those numbers, right?
You say there is substantial emphasis on retail sales, but the part that I quoted from Diamond Kellie Gimenez, made it quite clear that it is not. If she were a low-ranking person, you could dismiss here as not knowledgeable of how Beachbody works, but she’s one of the very few people who actually make an income above the poverty line with Beachbody.
With Beachbody, we lack transparency to measure retail sales, just like we lack the ability to who is a Coach only for the discount and who is a Coach failing at the business of building his team/pyramid/recruiting hierarchy. Fortunately, Kellie gave us the transparency about how her recruitment hierarchy works… and from that it seems abundantly clear that it matches the FTC’s guidelines for being a pyramid scheme. Maybe you cite some case law to save her, but there’s probably competing case law to sink her… especially given what she admitted.
So it is worth asking an additional question… “Is it possible for Kellie to run a pyramid scheme under Beachbody’s compensation plan?” If the answer is yes (and I think it is), the next question is, “Is it probable or even definite from what we know?” I think the answer is easily yes to the probably and even yes to the definite (again unless you can definitively save her with case law).
If Kellie is considered to be running a pyramid scheme with her lack of emphasis on retail sales, it follows that Beachbody is enabling and even profiting from that illegal activity. I’m not a lawyer, but I believe that makes Beachbody a target for a racketeering charge.
In any case, it would be much, much worse than Napster enabling people to illegally trade music over the internet for free as they were not profiting form the illegal activity.
My point here is that I don’t think necessarily need to show that the entire Beachbody organization is a pyramid scheme. If we can show illegal activity in any area of it, especially a significant section, it should fall like a house of cards.
Tim said: “I’m here because this post poses the question “Is Beachbody a Scam?” I’m not really discussing any other companies besides Team Beachbody.”
BS! Just yesterday you bored the living F out of us with your page long rant theorizing about a hypothetical scenario involving “Lazy Man MLM Company”. Get your story straight.
Tim said: “I am absolutely an Independent Team Beachbody Coach. If we were discussing the efficacy of the products sold by Team Beachbody rather than the legality of its business structure (which is what I’ve been trying to discuss, by the way, not whether or not it’s a good business decision for a company to engage in network marketing, which you keep bringing up for some unknown reason, or ), then I think it would be relevant for me to disclose my relationship to Team Beachbody. As it stands, I’m making no claims as to its products, but instead to its legality according to case law around the U.S. Accordingly, for purposes of this discussion, I believe my status as a Team Beachbody Coach is irrelevant, but I wish I had disclosed it anyway.”
You are required to disclose it according to the terms of your contract with the company (section 3.2.2 Coach Web Sites and Other Communications Facilities and 3.2.8 Online Conduct & Content). Why is that you should have to be reminded of your fiduciary responsibilities?
http://www.teambeachbody.com/en_US/c/document_library/get_file?uuid=87e5c6e6-897f-4d8d-8313-0e695c20ad3b&groupId=10137
Lazy Man,
I’ll be traveling myself this weekend, so you won’t hear from me until next week, but when you do hear from me, you can expect an infographic/flow chart depicting the key elements of what constitutes an illegal pyramid scheme which will include citations to the relevant authorities, legal and otherwise.
That being said, I’ve enjoyed the civil discourse here over the past few days. You represent yourself and your opinions well by the polite manner in which you discuss them, even though I believe a number of them are wronger than wrong. ;)
I not here to comment on the MLM aspect of BB but years ago, I got an “interview” in response to my interest in a nutrition coach position ad I saw on Craigslist. The “interview” was attending some presentation for MLM (it wasn’t for BB but some similar deal). They ended the presentation part (interviews were taken after I guess) by saying something along the lines of “and all this could be yours if you just pay a fee of $ (I don’t remember the exact amount). I walked out (and was the only one who did so!) once I heard that.
Anyway I went on here because I Googled Shakeology and Ebay. I purchase 3 bags on Ebay (different flavors, different sellers) for $90 each). Even if I paid money to be a coach for the discount, I would still be paying more. People online (coaches of course) are saying not to buy on Ebay due to not knowing if they are authentic. I’ve seen only 1 thing online on Youtube where the girl says her bag is fake (I believe she is a coach though…). My bags look real, back in the Shakeology box, came with the menu, etc. I truly wonder how I can figure out if my bag is fake although I firmly believe it is real. I just have a feeling it came from someone who was a coach who bought in bulk, or a dieter who know longer wants to use it. I’ve thought about calling BB direct but of course if I say I’m not sure if my product is authentic and give the number, they will say it isn’t authentic.
MLMers always like to claim that Ebay has fake product… they want you to buy from them at their prices. Typically, they are just distributors who got tied up in the scheme and are trying to get back a little money on their investment.
This is another great reason to look at the products that I mentioned in the article. There’s no confusion and they are essentially equal at a much lower price than even getting Shakeology on Ebay. Why deal with pricing shenanigans if you don’t have to?
Yep, likely they are being sold by a former coach who is trying to get some of their money back. That’s what I did when I quit BB. I had a couple dozen packets of Shakeo left, and I sold them on eBay. I also sold most of my P90X2 DVD’s there; I just didn’t care for that particular program.
I’ve read that if you really like Mary Kay cosmetics, eBay is a way to get them at a very steep discount, again, from former distributors unloading merchandise at fire sale prices.
Yeah that’s why I checked Ebay first LOL. Easier to deal with someone on Ebay AND save $ versus buying through a coach or having to register as a coach in order to get a discount (I only want to do this for 3 months to lose 20 pounds). $90 on Ebay without having to become a “coach” and I still save money. I just got nervous when I heard people talk about fake Shakeology. I’m hoping it’s just someone trying to clear their inventory or a previous dieter. As far as BB exercises, I don’t really need access to videos… I just do cardio like a normal person lol.
On March 26th Tim wrote: “I’ll be traveling myself this weekend, so you won’t hear from me until next week, but when you do hear from me, you can expect an infographic/flow chart depicting the key elements of what constitutes an illegal pyramid scheme which will include citations to the relevant authorities, legal and otherwise.”
It’s now April 3rd the next week is mostly over. Starting to think he took his ball and went home.
I’m still here, and I understand that the ball is in my court.
I don’t have unlimited time to spend on demonstrating your wrongness.
You mean the FTC’s wrongness, right?
There’s a big difference between showing that I’m not interpreting the FTC’s information correctly (which I haven’t seen you attempt) and attempting to show that the FTC is incorrect (which seems to have been your point in bringing up case law).
When you do have time, I hope you’ll make that distinction clear, so it doesn’t become, “Lazy Man believes this…”, but rather “The FTC states this…” And if you feel that I’ve interpreted the FTC statements incorrectly, then please show, “Lazy Man said this”, but the “FTC instead says this…”
Interesting statement of not having unlimited time when you put in hours and hours of time over a week ago and now don’t have a few minutes to cite much of anything. I’m not looking for an extensive presentation on pyramid schemes. We have a great one here: https://www.youtube.com/watch?v=VVUUbEw_Pm8
Is this MLM an Illegal Pyramid Scheme?
It’s been real, Lazy Man.
Keep fighting your fight against pyramid schemes, but I’d encourage you to stick to the ones that are actually illegal pyramid schemes and to stop attacking legal MLMs.
But what you may want to do in addition to attacking pyramid schemes is start questioning the FTC and asking of them why they mislead people like yourself on what makes a pyramid scheme a pyramid scheme. Because what they’ve told you has certainly misled you on what the law actually is, both at the federal and state levels, on what constitutes a pyramid scheme.
In regards to Team Beachbody, I would encourage you to do as the courts do and look at how it actually operates in practice. With Kellie Gimenez, you definitely heard what you WANTED to hear in order to fit your agenda, which was to be able to say something like, “You see? She gets paid for recruiting!.” When she talked about recruiting coaches to her team, and her compensation being based on that, what she was saying was that her compensation was based not only on the sales TO her team, but also on the sales BY her team (both of which are perfectly fine, by the way). She doesn’t get paid for recruiting new distributors. Team Beachbody doesn’t do that. The reason I know what she meant is because I see how Team Beachbody coaches operate in the real world, not just here in the comments of your blog post.
Team Beachbody coaches get paid when products get sold, whether they’re sold TO distributors for their own use or BY distributors to retail customers for their use. None of those purchases are mandatory. That right there is what makes it legal.
All in all, Team Beachbody’s coaches/distributors sell an absolute TON of products to retail customers, because they work, and what truly sets the company apart is the fact that the coaches don’t just sell product, but they actually help people change their lives for the better. The coaches help people actually use the products (instead of them sitting on a shelf somewhere), and when people use the products, they work. When products work, more products get sold to current and new customers, and the company makes more money (and so do the coaches!).
So why should Beachbody have a network marketing arm of the company? Because it will help more people get fit and change their lives than if they didn’t have it. The more lives that get changed, the more their products will be sold, which is a good goal for the business, I suppose.
I’m done for now. It’s time for someone else to engage you. As I depart, I challenge you to not only examine what truly makes a pyramid scheme a pyramid scheme under the law, but in regards to Team Beachbody, now that you should understand its legality and that the ends DO justify the means, I challenge you to find another MLM that makes more of a positive LIFE impact on the people it touches, whether those people are its customers or the distributors in the business. I doubt you’ll be able to find one, but hey, go ahead and surprise me.
Hmmm, so Tim puts together a flow chart and that suddenly clears it all up… except the chart overlooks quite a bit.
For example it doesn’t address my TPC Sawgrass loophole to sidestep the “requirement” to purchase products to participate. That’s one of the problems with MLM, instead of just going to a simple single layer commission plan that we both agree sidesteps all pyramid scheme recruitment issues, they try to glue on another piece on Frankenstien’s monster and say, “Hey are we legitimate now?”
You used an “ultimate users” which allows for participants in the scheme to count, when they clearly do not according to the FTC. So I can believe Tim’s flowchart or the very direct words of the FTC. See the problem you have here? And legal cases don’t save you too much because as the FTC said in the settlement with JewelWay: “In a pyramid scheme there is almost no emphasis on making retail sales of products to persons who are not participants in the program.”
It has been reinforced time and again that retail sales to the public is the key. MLMs can’t glue a fix on Frankenstein’s monster with this, so they time and again start to claim that their own pyramid is the public. It isn’t.
In Kellie Gimenez’s case, I heard that most of money is generated from point value in her downline and not from sales to people outside of the scheme. The money generated in point value in a downline is what the FTC says when it says, “If the money you make is based on the number of people you recruit and your sales to them, it’s not. It’s a pyramid scheme.” They clarified it multiple times “One sign of a pyramid scheme is if distributors sell more product to other distributors than to the public — or if they make more money from recruiting than they do from selling.”
Both of these are clearly true in spirit if not letter of what the FTC says. And once again, you fall down a slippery slope if you are trying to fight the Federal Trade Commission, whose mission it is to protect consumers… you and me.
If you think the FTC has mislead people, why don’t you sue them? Why doesn’t the DSA sue them? Why doesn’t Beachbody sue them? They certainly have the money and budget. I’ve read plenty of Federal law and state law, and they certainly haven’t mislead the public of what a pyramid scheme is.
I love when a distributor claims that products work. It’s a protein shake. The product isn’t fundamentally different than the ones I used in the examples. You can compare the nutrition and see that they “work” the same. It’s great that coaches help people use protein shakes. I’m sure many people couldn’t figure it themselves.
It’s sad that you took your ball and left without addressing so many of the points I made when I through considerable effort to cover your points. Once again, everything could be solved with a single-level commission structure with no recruitment rewards of any kind, that would clearly not be a pyramid scheme. You’d get all the “ends” without the “means” and the company could govern itself legally.
Again, the problem is solved… and we can move on. Why don’t take the solution to Beachbody and have them implement it right away.
Tim said: “All in all, Team Beachbody’s coaches/distributors sell an absolute TON of products to retail customers…”
A “TON” eh? That doesn’t sound very precise, and shouting it in caps doesn’t make the claim more persuasive. The reality is that you can’t even begin to approximate how much revenue the company generates from retail customers because Beachbody doesn’t track it (or if they do, they just don’t share the information). That sin of omission is SOP for MLMs, and the uncertainty is created intentionally to disguise the fact that most of the revenue doesn’t come from retail (non-distributor) customers. If it did, they would be brandishing the data and shouting about it from the rooftops to rid themselves of any hint of suspicion. Instead, their silence is damning.
Tim said: “…what truly sets the company apart is the fact that the coaches don’t just sell product, but they actually help people change their lives for the better.”
Selling someone an overpriced protein shake (while trying to rope them into a pyramid scheme) isn’t changing lives for the better. It’s just blatant exploitation. If the “coaches” (i.e., any unqualified stooge who pays a signup fee to become a distributor) truly wanted to change lives for the better with protein drinks, they’d recommend a high quality product that’s a better value than Beachbody’s product. The only real goal of the distributor is to profit at the expense of the people they persuade to buy overpriced protein drinks.
Tim said: “The coaches help people actually use the products (instead of them sitting on a shelf somewhere)…”
Can you hear how inane that sounds? People don’t need help to figure out how to drink a protein drink, and those who become Beachbody distributors (i.e., anyone with a pulse and a checkbook) are about the least qualified people imaginable to provide such help. Funny how Muscle Milk sells just fine at the supermarket, sitting on the shelf quietly, without the need for some brash know-nothing desperado shouting and waving their arms around like MLMs human version of the inflatable tube-man.
Tim said: “…and when people use the products, they work. When products work, more products get sold to current and new customers, and the company makes more money (and so do the coaches!).”
Define “work”. I would venture to guess that Beachbody can’t point to even a single definitive example of their protein drink “working”. If someone loses weight or gains muscle mass, you can be certain that the contribution of the protein drink to those results would be nil. It would be attributable to a reduction in caloric intake and/or increased physical activity. It’s not even a healthy product. It’s heavily processed junk food. What you should be recommending to people, if you really cared about their health more than gouging them for profit, is to eat a high-quality unrefined natural-food diet, exercise, and avoid consuming processed beverages, especially overpriced ones, as a major calorie source.
Tim said: “So why should Beachbody have a network marketing arm of the company? Because it will help more people get fit and change their lives than if they didn’t have it. The more lives that get changed, the more their products will be sold, which is a good goal for the business, I suppose.”
The term is “multilevel marketing”. “Network marketing” is a term used exclusively by MLM companies because they know that MLM has such a bad reputation that to characterize one’s company as such in a sales pitch would be a kiss of death. The MLM model is used to sell pyramid schemes. Overpriced BS products, like protein/energy drinks and snakeoil cure-all elixirs, are used as the bait.
Interesting view of BurnLounge you have Tim. Here’s another from Pershing Square:
At a bare minimum we should be able to agree that it is a terrible idea and completely unreasonable for people seeking business opportunities to have to review and interpret various case law.
Lazy Man (and Vogel),
I just wanted to thank you for making such an in-depth article and comprehensive comments about BB, Shakeology, and MLM’s in general. As each coach questioned your conclusions, you politely and with full citation provided how you arrived at them. It has been educational and entertaining. Thanks.
Thanks Brad. I want to thank you for letting me know that it is appreciated.
Just A Couple Of Points To Share. First I Love Everything Beachbody Stands For You Must Know How The Industry Works Before Making Comment Or Some Drawn Out Blog Post About It. The Products Work And You Don’t Want To Pay For Them Then Ok Don’t No One Is Waving A Gun To Your Head. As Far As The Taking No For An Answer I Was In Sales At A My Last Job At The Bank And Its The Same Way Sales Is Sales No Matter The Company. Pyramid Scheme What Ever Your Opinion Is About, Think About Your Job Place You At The Bottom Left Corner, Your Friend Bottom Right And You CEO At The Top And Connect Them Together And Tell Me The Shape. All Companies About The Same Way With Details In The Middle. Nice Argument Though It Took You Awhile To Write This Up. Have A Nice Day!
Tim, you seem to love capital letters ;-).
I’m not sure how you can you love standing for illegal pyramid schemes. Yes, no one is waving a gun to your head. This is a surprisingly common argument for justifying scamming people. So it’s fine to scam people as long as you don’t wave a gun to their head? Interesting.
Please stop trying to scam people that corporate America is a pyramid scheme. It isn’t. The money is generated by recruited people. You are confusing a hierarchical organization with a pyramid scheme which are two very different things.
It’s disheartening that you feel this way based on the information you have researched or heard.
[Editor’s Note: Umm or the information that I cited from the FTC. And I showed how your view on pyramid schemes is clearly wrong with examples from 10 BeachBody coaches…]
First pyramid is a business structure used by numerous companies in general as I would hope a person of your intelligence would know.
[Editor’s Note: I would hope a person your intelligence would know that some companies do rely on and have hierarchical organization.
The difference between the two is recruiting… never recruit people in an MLM as it may expose it to be a pyramid scheme…]
Second a scheme would be a company that does not produce the actual products and takes money from individuals with no intentions of giving them products or a return on their investment far from the truth about BeachBody and what we stand for and do.
As a prior customer and now a coach I have to say my clients have loved our products and have shared with me their gratitude because my coaching them and supporting them have helped then to achieve their goals. Also I was never pressured into becoming a coach and have never preasured anyone to become a coach nor purchase a product. I care about my coaches and clients and help them definitely don’t “scheme” them. I also decided to go to events and do personal development such as the summit to improve on my business as any entrepreneur would do. Any business owner has to invest in my views to be the best they can????. I would think as an entrepreneur yourself you would agree that any business owner does this to make their business improve.
I am a coach to help people not to sell to them and don’t scam anyone. Now I’m sure as any company their are individuals that manipulate but BeachBody has change my health and my life in an incredible way and I’ve had the honor of paying it forward to others by being a coach myself.
I’m sorry you have been misinformed of such a wonderful company who’s TRUE intentions is to help people become healthier and to value their well being.
Carl our CEO is a wonderful soul as well as the celebrity trainers, upline coaches and customers.
Have you yourself ever tried or actual taking time to KNOW the products personally or just enjoy bashing companies as a way to make your own money and build your own name???
Not here to put you down but it’s a wonderful company and is not illegal or a scheme and trust me in my past I’ve been involved with companies that are so just saying.
I enjoy helping others and that’s what we as BeachBody coaches stand for.
Take a moment to check out my facebook page and maybe it will enlighten your mind as you seem very judgemental and are clearly not informed correctly of what the company is.
Everyone is entitled to their opinion as I am not the JUDGE but be careful where you get your information as I don’t appreciate your misrepresentation of coaching or our company and products.
God Bless and Peace &Love
I am a Beachbody coach. I bought into the whole thing. I hated posting on Facebook to “recruit/get people to buy” but I did. Yes, I had great success with Beachbody programs…love them, but I don’t like forcing anyone to buy the products. Shakeology is their money-maker so I was told to push it. Not for me. I made it to Diamond rank and had a stretch of decent weekly earnings. The “teams” I am part of are cult-like. I am getting out of that business. I can make my own healthy shakes a lot cheaper. And I won’t be forcing anyone to become a coach….that is wrong.
Thank you Sue. Your testimony is another great example of a pyramid scheme. I love your integrity…
As a personal trainer, these are money makers and that’s about it. The ultimate goal for all these “trainers” or “coaches” is too pretend to care about the superficial relationship they have with their clients and the coaches or their “team” go to conferences and jack themselves up with enthusiasm and use it to post pictures of the food they eat and the shakes they drink and the exercises they perform. I encourage people to think about this? Can you do the same thing in your house without spending a ton of extra money you don’t need to spend and also do you see yourself eating and exercising this way for the rest of your life. when it stops the weight comes back. My ultimate advise, meeting people face to face and training them to change the way they live and eat through knowledge and not through a sales gimmic.
where to start here.. there are so many wrong points here it’s pathetic. First off, 50% of coaches don’t earn paychecks because selling isn’t a requirement to be a coach and earn your discount. So, half of coaches aren’t interested in selling so they are not paid.. not because they can’t but because they also have full time jobs or just aren’t working their business. Summit is expensive.. if the coaches actually paid for it. Yes, you pay for your ticket, but for the ENTIRE YEAR before summit you earn money to go and MOST coaches that go not only have their tickets paid for, but also the hotels and extra spending money So Beachbody is actually giving coaches paid vacations.. Shakeology does taste good by itself, but you are mixing powder with water or milk so of course it tastes better if you blend it! lol It costs no more to add fruit or PB to your shake because that is stuff you would be eating anyway. If you are working out and eating healthy you already have fresh or frozen fruit on hand so to add that in to the “cost of the shake” is stupid. I suggest that you get off your lazy butt and away from your computer to actually DO P90X and Shakeology for a month before you try “debunking” it. You keep saying “I guess P90X is ok” or “It probably taste bad” YOU DON’T KNOW! lol
Amanda,
The issue is that if people don’t sell to earn their “discount”, the sales to such people are indicative to a pyramid scheme. You aren’t a “coach” if you are trying to get a cheaper price. Beachbody should never call such people “coaches”
I haven’t written about Summit, but it sounds like that’s part of the scheme… I really hope Summit tickets don’t cost money, because that’s not helping Beachbody’s case. I also hope you aren’t trying to justify it as vacation. People choose their vacation spots… they don’t go to where Beachbody calls a “summit” and it doesn’t seem like such trips are “paid.”
If I’m eating fruit and peanut butter anyway, then I don’t need Shakeology, right?
I never heard of them. I only wish they would accept the fact & quit trying to convince my bank (which is a whole other level of stupid) that I did, indeed, order this crap. Their evidence? A FedEx label showing product was delivered to someone who is NOT ME. charge backed out for 2nd time, but only “conditionally.” Beachbody given another month to respond. Filing complaint with FTC’s Bureau of Consumer Protection.
Yes I do love capital letters and you seen to love bashing companies you know so little about. You have never tried to any of these products most likely aren’t even healthy yourself so you bash companies simply because they recruit and make money oh wait a regular CEO wouldn’t make money without having employees so yes my argument is valid or did you forget that all companies have a model to recruit and sell for money please dude it’s bloggers like you that give great bloggers a bad name. No not every mlm is legit but you are definitely attacking the wrong ones buddy. Stop while you’re behind this ever losing battle. Not everyone is a scam. I make money in bb by myself no team strictly on what I sell so therefore bb is legit. Ask yourself this how would u make money if you didn’t “recruit” people to subscribe to your blog?
Tim,
I have done extensive research as should be evident by the article. You can’t honest claim that I know little about Beachbody. Why would I try the products of what seems to be an illegal pyramid scheme?
There’s a big difference between companies and pyramid schemes. A programmer for Microsoft doesn’t make his money recruiting. In a pyramid scheme people make their money by recruiting others and the people at the bottom are stuck having no available people to recruit. This is why there’s a huge a churn of the bottom of the pyramid. It is explained well here: http://seekingalpha.com/article/1079421-but-mr-ackman-herbalife-is-a-sustainable-pyramid-scheme.
I don’t charge readers money, thus there can not be a pyramid scheme. Also, I don’t have the readers recruit readers endlessly to make money. If Beachbody wants to give away all their product for free and not charge people, we will be having a different conversation.
I’ve cited exactly why BB is NOT legit using the words of their own top level distributor and the FTC. If you want to claim that either are lying, go for it. If you want to explain why my logic is wrong using only that information have at it. Please don’t bring up other irrelevant false analogies like companies recruiting.
I Still Don’t See How You Have The Definition Of A Pyramid Scheme On Here, But Yet Still Don’t Really Know What One Is. Other Bloggers Opinions Don’t Make It True. If You Have A Job Go Up The Chain Of Supervisory Because Most Likely You’re At The Bottom And Then When You Get To Your CEO By The Way In Which Who Started The Company And Now Does Nothing And Makes Money Off Of His/Her Workers. Hmmm How Did He Get There Oh Yea One Word “Recruiting” Hmmm Isn’t It Odd That He Can Start From The Bottom And Make It To The Top But You Can’t At That Job Yopu Have To Stay Put Down At The Bottom. Well Network Marketing And MLM’s Are Designed For You Own Your Own System To Make Money Im Sure You Knew This Though Because You Can Research Anything On The Internet. Advocare, Beachbody, Herbalife Are All Fitness And Health Companies That Help People. Not Some Scheme To Drain Others Of Their Money. Bloggers Kill Me With The Pyramid Scheme Talk The Go Quote And Site Eachothers Work And Try And Convince Themselves And Others That Companies Are Bad Because They Make Money. All tHe Millionaires That I Know Have Told Me That Broke People With No Ambition In Life Say Exactly What You Are Saying About “Companies” Like Ours. Have A Great Day “Lazy Man”
Capital Letter Tim,
Sorry, I missed your comment. I’ve been a little busy. Again a CEO heading up a hierarchical organization is not a pyramid scheme. It never has been and if you want to believe it is true, then go find a lawyer and sue Microsoft, IBM, Google, General Electric, etc. The CEOs don’t make money recruiting.
I recently wrote about AdvoCare and I am of the opinion that it is about draining others of money. Let’s not get into Herbalife being a pyramid scheme, because every regulatory agency under the sun is investigating them for it.
I never say that companies are bad because they make money. I am an Apple share holder and they make more money than anyone.
You probably need to start hanging out with different millionaires… or at least ones that aren’t profiting from you in a pyramid scheme.
FINALLY! A voice of sanity amongst the insanity around this incessant Beach Body hype. I am so sick of it. And equally sick of selfies ad nauseam of before and after shots. Get over yourself people! The workouts are great, but guess what??? You can find them all for FREE on Youtube so why would you spend $65 or more? Or check out Kijiji, there’s always someone trying to dump their Beachbody DVD’s what does that tell you ? And as for the coaches, well they have little or no experience whatsoever other than they have done the workouts and pay the monthly membership fee which entitles them to call themselves a “coach.” Which, by the way, is highly insulting to the folks who have actually been properly educated in the field of nutrition and exercise and have earned that title legitimately. It really diminishes their achievements. Maybe a better term would be “Personal Self-Esteem Boosters” because it seems to me that’s what it’s all about. Building people up, which is a good thing, nothing wrong with that all, but doing it only to rope them into the program so you can eventually syphon off your share of their earnings, well that’s downright predatory! I wonder how many “coaches” would actually care about their clients fitness and nutritious goals if they weren’t making money off them?! Why, why, why would anybody with an ounce of intelligence pay for this system? If you’re looking for a great meal replacement shake, Vega is comparable and with less sugar. Not plugging Vega, it’s just one shake I’ve had great success with. I’ve tried Shakeology at first I thought it was OK, passable, but then one day I had used a packet that was only one day past it’s expiry date and I was physically sick to my stomach. That was enough for me! The whole sourcing of their products is sketchy! Nothing has been approved. You have no idea if this food was grown beside a mercury dump in China, yet people willing ingest these ingredients assuming they’re safe and at a ridiculous cost! More money than brains I guess! Furthermore, we need to chew our food, it’s all part of the satiation process. Most people find themselves still hungry after liquid meals, because we were designed to actually chew our food, real whole food, not drink some watered-down over processed version of it. I see friends and family giving this Shakeology to their kids and I want to scream…what the hell are they thinking?? Give them real fruits and veggies and if they don’t want to eat them, make them your own smoothie with FERSH, LOCALLY-GROWN veggies and save your hard-earned money! Not to mention, who knows if it could be linked to future health problems down the line. Don’t play Russian Roulette with your kid’s health, it’s just not worth it. BeachBody, like all MLM scams will eventually go the way of the dinosaur, I just hope people are smart enough to do their research and stay far, far away from this so called “business.” And PLEASE STOP the INSANITY WITH THE SELFIES!!!
Stumbled upon this out of curiosity over a friend who began selling. I am a natural skeptic and wanted to ensure she was getting into something legit.
First, this was a terrifically researched and well thought out post. I mean, seriously. You presented absolute and irrefutable facts, coupled with some personal thoughts and opinions that were deduced from those facts. Bravo.
What is incredibly disappointing are the coaches themselves who have posted on here. Not a single one has attempted to refute your fact and evidence based claims, yet all are happy to tell you that you are wrong and leave it at that. PROVIDE EVIDENCE. It is that simple. Otherwise, to those of us without a rooting interest in this fight, you look very foolish and immature. Those coaches who have posted on here have done absolutely nothing to dispel your claims; if anything, they have confirmed, thoroughly, many of the doubts I already had. I will be sending this post to my friend immediately. Thank you!
A lot of valid points there in Marianna’s post. Paragraphs would have been a nice touch though.
I am a coach (well, for like 4 weeks), currently exiting “the business”. I performed a social experiment to witness, for myself, the scam that is Beachbody so that I could effectively write up an expose from the insider PO (Screenshots, the whole nine.) Wow….what I thought I knew, what only scratching the surface. Will be publishing more on this very soon. Glad to see this post.
Remember that you signed up, you may have agreed to a non-disparagement agreement in the contract. I’d check with your lawyer before going live. Also, I’d appreciate it if you let us know here what you find out.
I agree that this blog probably only scratches the surface, but at some point it becomes, “Is an interested person in this going to really read a whole book about it?” I tried to give them the bulk of the information that they can digest in 15 minutes.
This blog is great. I wasn’t referencing your blog post in any fashion. I meant what I knew going into my “undercover boss”. ;)
I have no problem if you reference this blog. I’d love it personally. However, I’d settle to just read your report, so I hope you let us know when your report is available.
I don’t want Beachbody to sue you as a former coach now disparaging the company. There’s usually fine-print in becoming a coach that says you won’t do that.
Taking an educated guess, based on reading several MLM distributor contracts, is that no binding non-disparagement clause would apply once the distributor has left the company. They’d have a hard time getting anyone to sign up if the fine print said “you can never say anything bad about us — EVER!”
An MLM may have some recourse if an active distributor disparages the company — they can threaten to kick you out (a blessing really), but beyond that, nada.
I had a quick look at Beachbody’s policy and procedures document, and the non-disparagement clause is utterly toothless.
http://www.teambeachbody.com/en_US/c/document_library/get_file?uuid=87e5c6e6-897f-4d8d-8313-0e695c20ad3b&groupId=10137
Mind you, that doesn’t rule out the possibility that the company will file a frivolous SLAPP case to intimidate and silence a critic.
Yes, it is the frivolous SLAPP that I’m referring to these days.
Thank you so much Lazy man! I just had a meeting with a BB “Coach” yesterday, she posted something on our neighborhood facebook group, I thought it sounded interesting, I mean, helping people achieve their fitness goals, consume a healthy product AND make money? I thought about giving it a shot. First off, I didn’t know about shakeology, but when she started to explain the business program I wasn’t really sure, it sounded like a pyramid scheme! but of course they make it sound awesome. I was trying to do my research online but found only positive comments about it (of course from BB employees) I am so grateful to have found your blog, you made it very clear and used FACTS. And after reading the “coaches” immature comments I can tell they’re pretty brainwashed. It is sad and I’m happy I didn’t fall for it.
How much does the premiere coaches: Horton, Shaun-T, Chalene Johnson, etc figure into the overall deception of the company. Sure, their products are awesome, but they also preach and sell (in their own way). Surely, they are all millionaires and they don’t have to continuously push the “junk products” on their personal websites. I get a little tired of these folks talking the company up and many of their posts display more narcissism than actually helping people. By the way, how much “help” do people need? Are people really that lazy?
As a coach I MAKE NO MONEY AT ALL off of the coaches that sign up below me. I make money from the Beachbody company itself based on how well my team is doing.
This meams it is up to me as a leader to develop my team and see that each individual is doing well for themselves also as “people at the bottom” who earn nothing or go nowhere doesnt help me or my team at all……. nice try.
That is an outright lie Rachel. You make no money off the coaches YOUR upline fills your downline with…but you get team volume. You absolutely make commission ad residual on every challenger and coach you sign up. Nice try. Stop sipping the koolaid and lying about BB. I was a coach and telling you, you are lying.
Except that the Beachbody company bases the money you make on your “team/pyramid” including the volume of sales in it.
Let’s review the From the FTC, “Not all multilevel marketing plans are legitimate. If the money you make is based on your sales to the public, it may be a legitimate multilevel marketing plan. If the money you make is based on the number of people you recruit and your sales to them, it’s not. It’s a pyramid scheme. Pyramid schemes are illegal, and the vast majority of participants lose money.
So if your money is based on sales on to the public and not tied to the volume of sales to people you recruited, you are probably okay. If you are building a “team/pyramid”, it looks like you are in trouble.
It means it is up to you as coach to sell products to the public not trying to build a “team/pyramid/recruitment hierarchy.”
There’s always going to be people at the bottom. The only way to help them not to be on the bottom is to get them to recruit exponentially more people to be on the bottom. It really sounds like you are trying to justify perpetrating a pyramid scheme and suggesting it is your job to grow it.
Nice try.
Rachel S.
There is really no point you won’t get through to this guy. His name says it all “Lazy Man” he will never know how businesses are run obviously he only goes by what he reads and then misconstrues it to be whatever he believes. But we are the brainwashed ones lol. He doesn’t know the difference between mlm and pyramid. One offers products (mlm), one doesn’t (pyramid) so the facts are there oh well Rachel keep being successful Beachbody is awesome I love it. This post has actually risen my sales. Thanks lazy man you put up a good argument but results overpower words and our products work and people are happy with them so “ciao” maybe next time!
Tim,
Even the NY Times doesn’t know the difference between an MLM and a pyramid – http://www.nytimes.com/2015/01/10/opinion/joe-nocera-riddle-of-the-pyramids.html.
As I showed in the article, offering products can still be a pyramid scheme. In fact, the FTC shut down Fortune Hi-Tech Marketing which offered Dish TV, vitamins and other things.
Results of the FTC shutting a company down overpowers selling overpriced shakes in a scheme.
You are being lied to if you believe that pyramid schemes don’t have products. Your sources are wrong and clearly conflict with the FTC and the US law that got Fortune Hi-Tech Shut down. Loving something doesn’t give you permission to spread lies about it.
Results don’t lie FTC this FTC that aren’t you tired of only having one point of argument. Products work people love and buy them on their own. No scam there sorry I’m not being lied to because I also research everything I do, eat, and drink. I just don’t have the same mindset as you do to look at the negative at every chance you get. I give products away as gesture of gratitude. I don’t recruit I could and I probably will one day but rest assure Beachbody is not a scam and you sure won’t be able to convince me otherwise. Its not brainwashing either.
I don’t think you need to have a second point when you have the FTC documentation on pyramid schemes and it matches Beachbody. What else do you need?
Let’s see if people buy Shakeology at it’s pricing without the MLM attached. There’s a reason why their kits include that instead of just workout videos… it is the high-priced high-margin subscription item that they can get you hooked on.
Sorry, but your research here is lacking Tim. If you knew my website, you’d see that I have a very positive mindset, except for the very negative effects of pyramid schemes on people.
So you pay $100 a month to give away products as gratitude? No normal person does that for any product. I LOVE the new Avengers movie, I don’t go to the movie theater and just buy people’s tickets for it. No, you aren’t brainwashed at all… lol. You might want to send this link to a friend who isn’t Beachbody: http://skeptoid.com/episodes/4187
Tim,
Interesting that you keep arguing with someone that you claim to be lacking in research, negative, pessimistic, etc. I have a few co-workers who are beachbody coaches and they are constantly on the defense. Um…why??? I agree that the workouts sell on their own, but without them, the other stuff is questionable
I make money when I sell products to customers. I get bonuses when my team sells products to their customers. you are trying to tell me that hypothetically, if i were a sales manager, and my team were to meet a goal for sales, and I made a bonus from my company for meeting that goal, it would be considered a pyramid scheme. I dont think so.
I love when people get upset about other people being successful at something.
If only these people could see what we actually do on a daily basis. It isn’t even about the money. At the end of the day I could really care less what I have made. If I can touch one person, and in some way help pull them out of what ever dark place they are in, and help them to become the person that they wish to be, then that is more compensation then I could ever ask for.
Beachbody has saved my life, and has given me myself back, and I LOVE being able to now help other people do the same.
Also, in regard to the shakeology not having enough calories, anyone who has ever followed a Beachbody program would know that it isn’t a ‘meal replacement” It is a supplement and you are encouraged to continue to eat real food, unlike Herbalife, where you drink more meals than you eat. That is why it has fewer calories, so you can get the nutrition that you need and still fuel your body with the food that it NEEDS to function and perform.
I’m almost starting to think that maybe everyone on here who are such haters couldn’t benefit from Shakeology, maybe some super foods would help get your brain’s chemistry functioning properly and you would have better things to do with your time then hate on a good thing!!!
Rachel S.,
There’s a difference between being a sales manager at say Nike where your team sells Nike to the public and you get mostly a salary and maybe a single-level commission for the sales made. In MLMs, the majority of the sales are to people who are in the MLM and not to the public, with multi-level commissions passed up to people who potentially had nothing to do with making the sale.
It’s a very complex thing, which is I why I pointed to the FTC documentation in the article. Don’t try to poke holes and come up with hypotheticals, because recruiting people for a business opportunity of recruiting and selling to the public are very, very different things. Beachbody (and MLM in general) rewards sales of recruiting people for a business opportunity, which is a big, big difference.
If it isn’t about the money, then get the heck out of something that looks to be an illegal pyramid scheme and sell an equivalent supplement for a quarter of the price. You can still help people. Just don’t pretend to be helping them by burdening them with expensive products.
I realize that Shakeology is a supplement, but it is being marketed as a meal replacement. The price of the product is equivalent to what some people spend for their whole meal. Your argument only serves to highlight how ridiculously priced it is. And as we’ve covered before ridiculously priced items in an MLM look like pyramid schemes.
Maybe taking Shakeology slows your brain down and prevents you from understanding the FTC documentation? Two can play this game.
I wrote a review on Shakeology vs. FLP protein with Aminotein awhile back (check out pocono foothills on HubPages). Both are relatively expensive, but Shakeology is exhobitantly so ($129.95 + shipping for a 30 serving supply). I tried three of the Shakeology flavors before I wrote my review, and they were all pretty bad tasting in my opinion. Protein drinks in general are highly overpriced. Even the ones sold at WalMart and GNC are super expensive, and they don’t even come close to comparing nutritionally to Shakeology OR FLP Protein with Aminotein.
I’ve researched dozens of MLMs and all their products are exorbitantly expensive. I gave some examples in the article that are far less expensive.
I am not a coach, just a member of the general public. I have recently ordered Shakeology and I did my research on it, so I’m excited to see how it tastes. I am not a user of any of the beachbody workout programs, however, I was intrigued because I follow a beachbody coach on instagram. I have a history of doing fitness competitions which can be costly when you factor in meal prep, supplements, and overall costs associated with presentation (bikini,tan/ travel costs). I don’t compete anymore, however, I do train and eat healthy. I wanted to try Shakeology because I’m not getting the nutrition I used to because my eating habits are much different now (still healthy though). I noticed though that even when I was competing I probably could have used something like Shakeology because it is dense with nutrition. Besides Vega (which was disgusting) I don’t really know of any other shakes that seem to pack in the nutrition. Protein shakes alone don’t have the nutritional value, trust me I’ve tried a bunch (Gaspari, Optimum, Allmax, etc). And most of them are packed with crappy ingredients. To get all the nutrients I need from food, I would have to spend more than I would like, and then it probably wouldn’t be enough because our soil is so filled with pesticides that many nutrients are lacking still in our food (and would still need a multivitamin). I figured the cost associated with buying enough food to pack in the nutrients could be offset by getting Shakeology. So that was my reason for purchasing. Like I said I just ordered it so I can’t personally say if I like it yet, but that was my justification for ordering. And again I would consider myself to be an above average gym goer (if that makes sense) so I need the extra nutrients. Hopefully I made the right choice!
There’s a lot of false information around about soil and suggesting that we don’t get enough nutrients. Research on hundreds of thousands of people show that we are getting plenty of nutrients and multivitamins may be harmful.
From the review that I mentioned at the beginning, the podcast host said it tasted terrible and the coach agreed that it takes getting used to and even covering up with other ingredients.
It’s not wise to compare nutrients from food with nutrients from a supplement.
Just curious do you get paid for recommending Scrivener?
No, Steve I don’t get paid any money for recommending Scrivener. In fact, I haven’t used it in a few months. Still seems like great software, just trying to get it to work in my workflow…
Also I think you implied that “proving that according to the FTC’s guidelines big companies are operating illegally” is a hobby of yours. And also that people should feel free to volunteer as editor.
My hobby happens to be editing the shit out of basic grammar and spelling mistakes. (Not kidding). Anyway if you are serious about the editor thing I could probably do a thing or two to this article. Not a lot, but it could make a difference.
It’s not really about big companies operating illegally, but companies claiming that they are MLM when they really appear to be pyramid schemes. It’s not just that, but all the things that come along with it. I was amazed when a juice called MonaVie was sold for $45 (25 ounces!) by people. Many of the people claimed it helped with many medical conditions. It came out later that the creator said it was “expensive flavored water.” MLM/pyramid schemes make people do crazy things, especially because they often go after the most desperate of people to start.
Anyway, I find so much about it very, very fascinating. The most fascinating is that some people actually convince themselves to ignore the FTC, the company that helps consumers, and work for below minimum wages (on average) where much of that money is spent buying product from big business at excessive prices. If I tried to sell that script to Hollywood, they wouldn’t take it… reject it on an unbelievable premise.
I’m happy to implement any editing fixes that anyone wants to give. Rather than leave them in comments here, I refer you use my contact form here.
Queen bee, I’m not being defensive this is a healthy argument. The workouts sell themselves as well as all our products so before you go saying that they are”junk” you should try them and “Lazy Man” yes I do give them away reason being because I know they will came back asking to buy. I give before receiving. I purposely buy samples for people then they decided what they like and what they don’t. So hey they are happy I’m happy. Only people like you won’t understand what it means to give first unless its negativity. This business has not broke any guidelines who cares if the products aren’t in your price range they still work.
Tim, I have no problem with the workouts. I differentiated that in the beginning. Even Kellie Giminez said that selling people on the workouts doesn’t work very well, because they buy one and they are done (paraphrased). Making money comes from the subscription to Shakeology. And as I showed, that’s the product that’s grossly overpriced.
It doesn’t matter if you are happy and they are happy… if that is the result of the misleading sales tactic or misinformation. I’m sure they wouldn’t as happy if they learned they could pay a lot less money. Several ex-Beachbody coaches have expressed that opinion to me.
I don’t doubt that you give first Tim, but if you aren’t making money and giving away product that you presumably paid for, for free, then you’ve really got a very difficult problem in explaining Beachbody as a “business.”
No one is saying that products don’t “work”, but the definition of “working” is loose. It is limited to the nutritional panel on the back, which can be directly compared to other products to determine, “working.” The idea of supplements “working” in fitness is difficult to prove anyway. How has Shakeology been shown to be more effective than whey protein? Is there a controlled clinical trial involving a few thousand people that is properly placebo controlled that you want to tell me about?
I think you have taken an overly narrow view of the FTC statement because you are reading it from the predisposition that ALL network marketing opportunities are pyramid schemes.
Before I get into the FTC quote, I want to quickly bring up something. What does the FTC do? They protect consumers.
A real pyramid scheme is so called because it defrauds participants. It transfers wealth from one participant to another. The money at the top comes from the people at the bottom.
This is not Beachbody. The vast, vast, vast majority of the sales volume comes from customers. I know in my wife’s downline, on a week with 10,000 in sales volume, 9,000 of it is coming from customers who are using the products and are not associated with the sales side at all. In this case, there is no defrauding occurring.
Back to the FTC quote. Here it is, yet again.
“Not all multilevel marketing plans are legitimate. If the money you make is based on your sales to the public, it may be a legitimate multilevel marketing plan. If the money you make is based on the number of people you recruit and your sales to them, it’s not. It’s a pyramid scheme. Pyramid schemes are illegal, and the vast
majority of participants lose money.”
Important to note: the quote says nothing about recruiting being illegal. It says if your INCOME is based on SALES TO those you recruit, it’s a pyramid scheme.
The FTC even has a page that talks about recruiting in MLM’s being OK. They define Multilevel Marketing (of which Pyramid Schemes are an illegal subset) as “distributors earn commissions, not only for their own sales, but also for sales made by the people they recruit.”.
Note it says sales made BY THE PEOPLE they recruit, not TO THE PEOPLE they recruit.
Oh yeah Queenbee wouldn’t you be defensive if someone were to speak negatively about your kids. So you can’t blame your co workers for defending something they believe in just because others don’t see it the same way. I’ll always defend what I believe in which is why I’m comfortable making a good living from home with my kids and others have to get up and be told what to do all day!
There are plenty of scholarly articles that can either refute the use of multivitamins or support them. And we can go back and forth with scholarly material all day….. but really? When it comes to wisdom, do you really think that the integrity of our food supply is upheld by those who are more concerned with profit? Private label, third party verifications, standards? Not every company is transparent.
I am looking forward to trying Shakeology and will arrive at my own conclusions about it. I’ve noticed a difference in my own health through the use of multivitamins and healthy eating most importantly.
For me wisdom is acquired through experience and I would like to experience it for myself. You do make great points though.
http://www.nutritionj.com/content/13/1/72
D (could you please come up with a better name than a single letter?),
The scholarly article that I cited was a meta-analysis of scholarly articles… which is considered very good proof. There’s simply nothing like that on the side of vitamin or mineral supplements, unless it is for someone with a known deficiency. Our best understanding is that it is like a gas tank… you have enough and you are good. Don’t get to empty. Don’t overfill or it spills out. The average person gets enough as vitamin deficiency diseases are extremely rare.
By definition “organic” has a high degree of integrity. They aren’t impacted as much by profit, because they can’t add chemicals to do anything.
D said, “I’ve noticed a difference in my own health through the use of multivitamins and healthy eating most importantly.” Most people do. Some of that is due to the healthy food itself, but a majority may be from the satisfaction of doing something healthy. Just be careful of that, because people tend to take that healthy feeling and use it as a reason to do something unhealthy. This is called self-licensing and here’s the link to the vitamin version of it.
I understand acquiring wisdom, but you don’t need to experience jumping off a bridge to acquire wisdom about it. Be careful of experience… it isn’t always best. Psychology shows that outside perspective can be more important. Also you need to be aware of the placebo effect and understand that sometimes your brain is telling you what you want to hear… which isn’t exactly what is going on.
Also on the Kellie Giminez thing from the original post. I read the show notes and she said she has 160 coaches underneath her and she is earning $4500 per month.
160 coaches, assuming they are ALL active coaches attempting to make an income and buying Shakeology, would produce 90 Volume * 160 = 14400 volume points per month. 14400 volume points at 300 volume per cycle is 48 cycles at $18 a cycle is $860 in income from distributor’s own purchases.
So even in her case, out of her $4500 in income, the income coming from customers and not distributors is $3600, over 80%.
Nick you seem to be confusing MLM with network marketing. It’s a common mistake in the industry. Network marketing is how ABC, NBC, Fox, and CBS derive revenues from commercials… it has nothing to do with selling through levels as in MLM. The MLM industry got a bad reputation and tried to change their name to obscure the truth. They do the same with “direct selling”, which best describes sales on Ebay, which are oddly prohibited in almost all MLMs.
Nick said, “A real pyramid scheme is so called because it defrauds participants. It transfers wealth from one participant to another. The money at the top comes from the people at the bottom.” This appears to be a fair description of Shakeology sales. A review of the income disclosure report shows that very few people at the bottom make money… and this appears to come from the overprice Shakeology product.
Beachbody does not properly subtract sales to people in your team/pyramid, so we know that people are getting rewarded for them. If Beachbody wanted to be legitimate it would just do a simple commission sale to people who are not Beachbody distributors. It solves their pyramid scheme problem very easily. The fact that they don’t use a safe commission model is indicative to me that it is likely a pyramid scheme.
You referred to the same FTC article that I have in the article. Your version of it is just prettied up with formatting.
For full clarity the FTC article is here and here are the relevant parts, which extend beyond the first reference I made (I presumed everyone would read the whole thing and not just take the quote and try to paint it in a different context):
Nick, your math seems to be wrong in the Kellie Giminez case. You can go back and listen to the podcast and her sales to people outside were around $500 as she stated. Thus around $4000 came from her “team/recruitment hierarchy/pyramid.” I expect that some of this earning bonuses based on the volume of that which are not tied to her direct sales to the outside public as the FTC says.
I can’t even believe I was considering joining the beachbody coaching team, because now I know this definitely is a pyramide scheme and I am kinda ashamed that I almost fell for it . Gladly I did some reasearch before I made the mistake of buying expensive Shakelogy that I did not even want to buy but I would be required to buy it to start their so called ” business”. People need to wake up and not call this their business because this is no business whatsoever. I have to say it does not help for people that are desperate to earn money to see “inspiring” facebook, instagram statuses about how this business changed their life and posting how much money they make (which is probably not even real). As some of the people already said in their comments : if coaches would really care about other’s health they would not be promoting shakes, but they would be promoting fitness and organic food not supplements. So I will tell you my honest motive for wanting to join which is like everyone else’s -the money I could potentially get. Of course I did not really know I would be making a profit from people under me trying to get more people to sign up (they would probably never get anything out in the end). After I did bunch or research i came to the conclusion that this company is taking advantage of people and so do the people who are joing to be coaches (even if some of them are not doing it intentionally). But so called coaches (that mostly are overweigh anyways and not in great shape) will never admit that this is a pyramid scheme because they get profits and they don’t care about anything else.
—— it does not help for people that are desperate to earn money to see “inspiring” facebook, instagram statuses about how this business changed their life and posting how much money they make (which is probably not even real). As some of the people already said in their comments : if coaches would really care about other’s health they would not be promoting shakes, but they would be promoting fitness and organic food not supplements. So I will tell you my honest motive for wanting to join which is like everyone else’s -the money I could potentially get. Of course I did not really know I would be making a profit from people under me trying to get more people to sign up (they would probably never get anything out in the end). ——
And, in all likelihood, you would not profit; see my first post on this blog. I, too, joined because I was desperate for money. I wasn’t greedy. I didn’t want FA$T EA$Y CA$H. I wanted a job. I couldn’t find one. I didn’t know what else to do. Unfortunately, I didn’t earn any money; I ended up LOSING money.
There’s a blog about MLM’s written by a guy in India. Apparently, MLM’s are a big problem there because of rampant poverty. People are desperate and have no idea what else to do. The MLM’s prey on their desperation.
If you are desperate for money, you’re better off signing up for an account on Upwork (formerly oDesk) or a similar freelance site and selling some sort of service. Or, if you want to try your hand at consumer sales, go apply at a local car dealership. They’re always hiring. While car lots have a high turnover rate, too, at least they’re not scams; they’ll give you a “rookie stipend” while you try it out, not make you pay them, and it is, at least, possible to succeed. It didn’t work for me, but I have several friends in that business who do well, or at least okay (better than they’d do in a scam MLM).
Well said, Nightcrawler. MLMs essentially trumpet the pyramid scheme, “See what this person makes!” to get others involved in a fraudulent “business opportunity” where most people lose money.
You don’t have to go any further than the highlighted case in this article, Kellie Giminez has created a “business” that earns “4K a month in an hour a day.”
It’s billed as FA$T EA$Y CA$H as long as everyone is paying the excessive prices of Shakeology to play.
Again, using your same quote:
“If the money you make is based on the number of people you recruit and your sales to them, it’s not”
It’s not based on sales TO them. However, there is nothing inherently wrong according to the FTC in the linked article with sales through distributors that you recruit UNLESS your income is made primarily from sales made TO those distributors.
In the Kelly Giminez scenario again – my math is not wrong. If you want to have call so I can explain the compensation plan so you understand it. She has 160 coaches in her downline according to the interview she gave. That produces, at MOST (i.e. if every single one of them is active and buying shakeology each month, which is extremely unlikely) – $800 per month in cycle bonuses. If she is earning $4500 per month and $500 comes from her personal retail sales to her own customers, then it means her $4500 breaks down (approximately) like this:
1) Personal retail sales – $500 (direct sales to her customers)
2) Coaches personal orders – $800 (from purchases that coaches, i.e. distributors, are making. The volume cycle bonuses paid out on the 160 coaches she has in her downline).
3) Other coaches in her downline’s sales to RETAIL customers – $3200 (the balance of her income).
The vast majority of her income is coming from her coaches sales to their own customers. This clearly doesn’t violate the FTC statement of “the number of people you recruit and your sales to them.
Nick, you are only using part of the quote and missing the context of the whole message. The FTC repeatedly makes the distinction between selling product to people outside the scheme (the public) and money earned from point values in a downline. They don’t specifically say it that way, because if they did, companies would call it something other than a downline and claim to be legal that way.
You are trying to circumvent the spirit of their words by not addressing their full words. The reason why they use the words “TO them” is that, historically, in Amway the products would get physically moved through the downline. You’d buy “from” your upline. It is the same thing, just that MLMs try to do things different to escape the issue.
I don’t really care much about your attempt at the math, she made it clear that $500 came from her sales to the public and the bulk was from the downline. Now, the coaches may also sell to the public so that her money wasn’t all from coaches’ purchases. I’m sure they sell some to the public as well. However, the important thing is that her income comes from her recruiting efforts and not her sales to the outside public. This is how EVERY MLM COMPENSATION PLAN I’VE SEEN WORKS. The most money is always made from people who make a bulk from recruiting and not from their sales to the outside public.
If you need to move to “Avoid any plan where the reward for recruiting new distributors is more than it is for selling products to the public. That’s a time-tested and traditional tip-off to a pyramid scheme.” Clearly her reward for having recruited 160 coaches is clearly more than what she gets for selling products to the public.
Also keep in mind that these are guidelines for consumers attempting evaluate a business plan. They aren’t intended to be picked apart word for word. A consumer simply isn’t going to do that. They certainly wouldn’t be privy to the data and math that you are trying to provide here.
You simply aren’t being in objective in looking at this from a consumer protection point of view. Remember we are all consumers… that is always the first priority.
I want to point out again that the FTC does not say anywhere that you cannot earn commissions based on sales made by people you recruit.
https://www.ftc.gov/tips-advice/business-center/guidance/multilevel-marketing
In the definition of MLM (also called Network Marketing by the FTC), they say, “Typically, distributors earn commissions, not only for their own sales, but also for sales made by the people they recruit.”
That’s the business model the article talks about.
THEN, they go on to say – here are some flags it is illegal. The biggest ones they identify are
a) making money primarily from the activity of recruiting (which is not the case with beachbody).
and
b) making money primarily from your sales to your recruits (which I already disproved in my last comment for the coach that you pointed to in your original article.
Again – at the end of the day the FTC is protecting consumers when it comes to pyramid schemes – people who PART with their money so that it benefits those upline. this does not happen with Beachbody. Coaches choose to buy shakeology because they love it and yeah it’ shard to sell a product if you don’t believe in it yourself – but Beachbody has no requirements. You can be a coach for $15.95 a month and a $40 startup cost. NONE of this counts towards volume for an upline coaches’s income so there is ZERO benefit to anyone in the upline from this.
The FTC uses the network marketing term so as to not confuse consumers. The industry has used so many terms for the same thing… MLM, network marketing, direct selling, Community Commerce. If the FTC exclusively calls it MLM, then people involved in MLM will say, “We aren’t MLM, we are network marketing…” It’s already happened. It’s moved on from to “We are MLM or networking marketing, we are direct sales.” And again companies have used “Community Commerce.”
It is doublespeak and the most accurate term… the only one that mentions the levels is MLM. So if you are going to be an honest person, you’d stick with that. If you are going to be dishonest, then continue to try to obscure the reputation with a variety of other terms that mean exactly the same thing. If you want to be honest, then just be straight-up and call it what it is… MLM.
I think you want read the first two paragraphs of the FTC article together:
When you use the full context you learn that not all MLMs are legitimate. This includes their earlier broad description of “Typically, distributors earn commissions, not only for their own sales, but also for sales made by the people they recruit.”
They are essentially saying (paraphrased), “A description of MLMs is this, but not all MLMs are legal… some are pyramid schemes.” So don’t take the “description of MLMs is this” part of the statement as something that is deemed legal.
There are numerous red flags. One of them is making money primary from recruiting which top-level Kellie Giminez admits to. So you’ve failed. You also failed to mention that the pricing guidelines that it mentions… which Shakeology fails as well.
Nick said,
As many ex-coaches have commented they don’t love Shakeology too much… they like the products I suggested more. Even Kellie Giminez in the podcast wasn’t complimentary of the taste.
You seem to be making a case like this Washington Post article on MXI, where the person becomes so enamored with the business plan that they convince themselves to buy a ton of product. As he said, “There’s something that happens to you, where you start to believe your own [sales pitch].”
It’s very, very easy for Beachbody to eliminate these problems. As I said before just make it a single-level commission.
Oh and being a coach for $16 is ridiculous… close to twice my Netflix subscription. There’s no reason to pay a monthly subscription to be a salesman for a company’s product. That’s just more indicative of the pyramid scheme.
I’m going to cease comments for the night, because it seems our replies are crossing. I disprove one of your comments, but you have a comment in the queue that doesn’t acknowledge it.
I’ll look again tomorrow… and start fresh with what you have here, but I urge you again to address the bulk of the FTC quote that is about:
1) income from sales to the public
2) income from the downline
There is no 3) income from downline’s sales to the public (which obviously the distributor would have no control over).
You are cherrypicking the FTC quote to suit your agenda.
The math shows Kelly Giminez’ income breaks down with over 80% of her income coming from sales to the public. She has 160 coaches in her downline. That produces at most $800 a month in income from the sales TO them. Read the coach policies and procedures, learn how cycle bonuses work, and you will quickly realize this. The remainder of her cycle bonus generated by team volume is coming from retail sales produced by her team.
The FTC in the article I linked to specifically defines MLM’s as a company where you earn income “not only on your sales, but also on sales made by people you recruit”. The FTC says that!
Note the HUGE difference between the statement the FTC makes in terms of sales made BY people you recruit vs. sales TO people you recruit.
It only makes sense that Beachbody would want to incentive those that build teams of people who help move the business forward. i get that you don’t like the model but whether you like it or not doesn’t make it illegal.
I want to expand on this just so it’s clear:
“The math shows Kelly Giminez’ income breaks down with over 80% of her income coming from sales to the public. She has 160 coaches in her downline.”
Beachbody coaches downlines extend infinitely. So when she says 160 people in her downline, that is actually the full accounting of every distributor (active AND inactive) in her downline. There are no more levels or hidden distributors there. The balance of the cycle bonuses she is getting is based on retail sales volume.
If you need to understand this more, the compensation plan is out there and is very clear on how this functions. If you need me to send you a spreadsheet or something, send me an email and I’d be happy to draw it out for you ;)
$16 is not ridiculous at all. You pay for hosting this blog. Beachbody handles all the administration on behalf of it’s coaches (not all MLM’s are this way). They have a call center with over 700 employees. They handle packing, shipping, returns, product issues, email support, etc. The coach doesn’t have to do any of that. What other business can you engage in where you can get all this done for $16 a month?
Again, if you are talking about doublespeak, you are cherrypicking from the FTC statement that you quoted.
“In multilevel or network marketing, individuals sell products to the public — often by word of mouth and direct sales. Typically, distributors earn commissions, not only for their own sales, but also for sales made by the people they recruit.
Not all multilevel marketing plans are legitimate. If the money you make is based on your sales to the public, it may be a legitimate multilevel marketing plan. If the money you make is based on the number of people you recruit and your sales to them, it’s not. It’s a pyramid scheme. Pyramid schemes are illegal, and the vast majority of participants lose money.”
Paragraph #1 defines MLM – MLM is where individuals sell products to the public. Distributors earn commissions for their own sales & sales made BY people they recruit.
Paragraph #2 breaks down if that MLM is illegal. It does this by saying the money is made by your sales TO the people you recruit. Again, this is patently NOT the case with Beachbody and the math in the Kelly Giminez case you are attempting to use as an example of this disproves it by itself.
Why would the FTC even acknowledge that some mlm’s are legal if any sales made by a distributor automatically make it illegal? They would just say on their website if you get commissions based on sales by a distributor you recruit it is illegal. But they do not say that. They say if the money you make is based on the Recruiting activity and the sales TO those people WHY does the FTC say that? Because in this case you are defrauding the recruit of their own $$ to benefit those in the upline. Even if the recruit buys products, in this case it is a shill. In Beachbody, this isn’t the case. Kelly Giminez, and the coaches she recruited ,are selling products to consumers. According to the math I already demonstrated based on the compensation plan, nearly 80% of her income is coming from CUSTOMERS entirely not associated with the distributor network.
I pay to host this blog, but I have a very customized site. As a software engineer, I can tell you that it doesn’t Facebook, Tumblr, or even WordPress.com $16 per person to host a website. It costs fractions of pennies.
There’s a cost in creating the digital product in the same way that it costs a lot of money for Microsoft to create Windows.
My point is that if you are selling a company’s product, you shouldn’t pay them that. If I’m a salesman for Nike, do I have to pay a fee for human resources or foot the bill for Nike.com? Of course not. I don’t have to pay for a call center of 700 employees. I earn my income for making sales… and I get benefits such as vacation pay and health care.
What do you think Beachbody should be spending its money on? They most certainly should handle packing, shipping, returns, email support, etc. This is all baked into the excessive price of Shakeology… and more. As I said in the article you can buy equivalent product from Amazon for a lot less money.
You know what Amazon and those company handle for a LOT LESS MONEY? Website, packing, shipping, returns, product issues, email support.
Nick, again you are trying to over-analyze the FTC website to create a situation where a pyramid scheme appears to be legal. Don’t break it down by paragraphs. Don’t pick out specific words.
The FTC has to acknowledge that some MLMs are legal because they have a limited budget to do their work. The Direct Selling Association (DSA), a lobbyist group of MLMs, could sue them if they were to make the claim that all MLMs are illegal. Yes, the FTC can get sued. And yes the FTC’s budget isn’t large for all they do… it is far less than what Herbalife makes in a year. Once such a thing goes to court, it gets very, very expensive.
Kellie Giminez admitted that recruiting is what makes the real money. She downplayed sales to customers saying that isn’t where the money is. This is supposed to be one of Beachbody’s top mentors/leaders and this is what she is telling people.
Also, regarding this:
“Well said, Nightcrawler. MLMs essentially trumpet the pyramid scheme, “See what this person makes!” to get others involved in a fraudulent “business opportunity” where most people lose money.
You don’t have to go any further than the highlighted case in this article, Kellie Giminez has created a “business” that earns “4K a month in an hour a day.”
It’s billed as FA$T EA$Y CA$H as long as everyone is paying the excessive prices of Shakeology to play.”
I have yet to find one coach that says it it is FAST EASY CASH. I’m sure they probably exist, but like anything those are the bad apples. Coaching is a lot of WORK. it takes dedication, persistance, and motivation, just like any other entrepreneurial endeavor. That is why most people quit after 1 – 2 months. Kellie Giminez joined Beachbody in April 2013 according to her blog. The original article was in October 2014. So that means it took her 18 months to get there. That is hardly insignificant. Most people quit after 1 – 2 months. A year and a half of spending 1 – 2 hours every single day is significant amount of work. You could build the same income building a blog or as Nightcrawler said, working on oDesk for 1 – 2 hours per day for 18 months.
Umm, Kellie said that she bought Facebook ads… basic arbitrage.
I’m not going to justify the “WORK” statement because it doesn’t mean it is productive. Remember that MLMs create competition by letting anyone with a pulse sell the same product for the same price.
The significance of people quitting is that they are losing money buying product and not making money because they need to recruit exponentially more people.
Again to go back to Kellie’s business, it is from recruiting people in an obvious pyramid.
You keep saying this:
“Kellie Giminez admitted that recruiting is what makes the real money. She downplayed sales to customers saying that isn’t where the money is. This is supposed to be one of Beachbody’s top mentors/leaders and this is what she is telling people. ”
You are misinterpreting her statement, most likely because you do not understand the compensation plan. It isn’t inherently the recruiting that makes money. As a matter of fact, just recruiting someone produces no money at all (that is, 0$). However, if that person you recruited then makes sales to a customer, then you get volume from it and can get “cycle bonuses”.
So restating – it’s not the recruiting that makes the money; it’s the volume produced by sales in the organization. The recruiting in and of itself does nothing.
Again, in Kellie’s case, 80% of the income she is making from Cycle Bonuses (the “recruiting” money) is coming from CUSTOMER sales to people who are NOT distributors. No one is defrauded. There is no transfer of wealth. there is nothing illegal happening here, according to the very own definition by the FTC that you have posted.
Nick, if you are coming from the angle of “recruiting makes no money”, you’ve shown that you really don’t understand the issue at all… and don’t understand what the FTC has written.
Please re-read the article again about the Pen Pyramid Scheme, and understand that sales volume in a pyramid is still a pyramid scheme.
Recruiting, by itself, does not make money. Sales volume by and from distributors in a downline does; but no where does the FTC say that indicates a pyramid scheme. It says it is a pyramid scheme if the money you make is based on sales TO those distributors.
The Pen example is a perfect example of a TRUE pyramid scheme, where the only people buying pens are distributors in the hope of recruiting more distributors so they can earn money (as you said, “The only real reason people are paying $100 for a pen is for the opportunity to make money off the sale of pens”). In other words, it’s not really about the pens at all. They are a cover up. And it ties directly in with the FTC’s warning where the money you make is based on sales TO distributors, and their distributors, and their distributors.
The Pen example doesn’t hold up with Beachbody though, since 80%+ of the people (in Kellie’s situation that you use in the original post) are buying Shakeology and are NOT distributors. They don’t appear in anyone’s downline at all. They are simply customers, who are using the product for themselves with no intent of earning income or selling to anyone else. They just want the products. And as such, the income made by uplines is earned on legitimate product sales.
You should know that people go to Beachbody.com and buy Shakeology directly through the website (i.e., not through a coach) to the tune of 10,000 sales per WEEK. This would never happen in the pen example. But clearly, whether you find it a good value or not, a lot of people find Shakeology to be something they want to pay for completely independently of the desire to start a Coach business.
I didn’t say anything in the Pen Pyramid Scheme, it is someone else’s example that I borrowed (just to be clear on that).
The Pen Pyramid Scheme does hold up to Beachbody… especially with regard to the pricing of Shakeology. Again, equivalent product sells for around 1/4th the price. It is important to note the end which is, “This is an extreme example, but if you look at the world of MLM, there are some pretty big name companies out there that somewhat fit this mold on a less cut and dry basis.”
Again, if the product can sell at its price without looking like pyramid scheme, why do it? Give coaches a straight sales commission and no pyramid, right? It’s the easiest problem in the world to fix.
Nick you are clearly drinking the Koolaid and that is ok. This blog is to help inform people of the potential of beachbody being a pyramid scheme and lazy mans opinion of it after his research (being a free country everyone is entitled to think or form their own opinion)
I too was signed up as a coach for less than a month. I joined (because I was recruited by my friend to be a coach) because the lure of saving money on my monthly shakeology purchase. I was told I would be saving approx. 40.00 a month. I thought ok that sounds good I’ll do it. (Shame on me for not researching more and going with my gut which told me not to do it) all is well I sign up get my challenge pack and begin. Now mind you in not knocking the workout program in anyway or even shakeology I actually love both.
Second month comes along and what I wasn’t informed of (yes it’s in the fine print, no I didn’t read it entirely, again shame on me) was that you have to pay 17.00 a month for a “business” center fee and 40.00 every three months for some other fee I can’t remember it’s name. 40/3= 13.33 a month. So the 17.00 + 13.00= 30.00 a month in fees just to be “a coach” so all in all I was only saving 10.00 a month on shakeology unless I started recruiting people below me who also paid all these fees, because remember you have to be at least an emerald status before you start seeing any money from your down line of people below you. Emerald means 2 personally signed coaches and you have to have 90pv (which your own monthly shakeology purchase covers)
So without getting too much more involved because clearly you know the business better, I thought to myself why am I doing this? Why am I paying all these fees? Oh and the better question is if beachbody can essentially offer shakeology to its “coaches for 97.00 a month why on earth does it cost their customers 140.00??
So I cancelled because after reading the entire (yes I said entire) coaching policies and procedures and finding this blog I decided in my opinion my gut was probably right.
I do believe the point of the FTC statement was this if the majority of your income comes from your own personal sales to the general public it is probably a legit MLM. If the majority of your income comes from the sales from the people you recruited in your downline (they don’t care whether the sales in your down line are to distributors or the general public) then it is probably a pyramid scheme due to the emphasis on recruiting below you.
Anyway to each their own. I’ve read the policies and seen how it works and it seems sketchy to me.
Enjoy!!
Hey Kristin,
I have no problem with his opinion, at all. I’m in the comments sharing my own view and don’t begrudge him his views at all. However; I do think it’s pretty clear based on the FTC statements and the information in his original post that Beachbody doesn’t fall into an illegal operation.
I’ve read the full policies and procedures and I said earlier it took me a while to fully understand the compensation plan but at this point I am in complete understanding of basically every detail of the plan. I did that because; before my wife signed up, I too thought this was going to be a complete scam, until I invested the time to learn exactly how this operates.
Your comment on the FTC statement:
“I do believe the point of the FTC statement was this if the majority of your income comes from your own personal sales to the general public it is probably a legit MLM. If the majority of your income comes from the sales from the people you recruited in your downline (they don’t care whether the sales in your down line are to distributors or the general public) then it is probably a pyramid scheme due to the emphasis on recruiting below you.”
This is where I think you (and Lazy Man) are mistaken. By it’s very definition an MLM has multiple levels and involves recruiting salespeople and earning commissions on their sales. That is the business model; whether you personally like it or not. To say that an MLM that has Multiple Levels is illegal makes no sense at all.
The intent of the FTC is to protect consumers. There is nothing inherently wrong with recruiting. Where it becomes illegal is when the recruiting is done to take money FROM the people who are being recruited to move it upline. At the end of the day, the question the FTC answers is, where is the $$ distributors are earning coming from? If it’s coming mostly or almost entirely from other distributors in the downline; that is a clear pyramid scheme, or rather a Ponzi scheme, which is just wealth transfer. If it’s coming mostly from actual customers using products, then it isn’t. Beachbody coaches make the vast majority of their income from sales to customers in challenge groups. It’s the very first thing they teach you as an active coach. Sign people up for a fitness and weight loss group. Those people signing up are not coaches, they have no desire to be coaches. They pay the money with no expectation of income. They do it to buy a program and usually also Shakeology. They might stay on for 1, 2, 3 months; and then cancel. Or some people stay longer. Lots of people sign up, then cancel, and they sign up again later.
Think about it. If having a business model where you signed up distributors and earned commissions based on their sales were illegal, then the FTC would just say that and every single MLM would be illegal (as Lazy Man implies). But they don’t say that; why? Because the FTC protects consumers and in the case of Beachbody and other MLM’s that have legitimate products that are sold on a regular basis to customers that drive the majority of the revenue of a company; individuals are not being taken advantage of.
Also, I just want to clarify this as some of this is incorrect and I want to make sure readers don’t perpetuate incorrect info:
Second month comes along and what I wasn’t informed of (yes it’s in the fine print, no I didn’t read it entirely, again shame on me) was that you have to pay 17.00 a month for a “business” center fee and 40.00 every three months for some other fee I can’t remember it’s name. 40/3= 13.33 a month. So the 17.00 + 13.00= 30.00 a month in fees just to be “a coach” so all in all I was only saving 10.00 a month on shakeology unless I started recruiting people below me who also paid all these fees, because remember you have to be at least an emerald status before you start seeing any money from your down line of people below you. Emerald means 2 personally signed coaches and you have to have 90pv (which your own monthly shakeology purchase covers)
1) Your coach definitely should have told you the fees. As I said before, not all coaches are great at this, but getting surprised by costs sucks for sure, even though it’s in the terms when you sign up, my wife always sends an email that outlines everything that is going to happen when you sign up as a coach
2) The fee is $15.95 plus tax as a coach. In MA, where I live, it’s $16.95 after our 5.xx% tax rate. As a coach you get 25% off products so the Shakeology goes from $129 to $97 (plus, sales tax). Shipping is $2. So the total in MA comes to around $119 for Shakeology as a coach. If you purchase it as a customer, it’s around $145, so you save about $25 a month depending on your sales tax situation.
3) The $40 fee is the Club Membership. The biggest benefit of this is that it gets you On Demand access – so you can stream a whole lot of programs for free. Also, any programs that you bought are available to stream. So for example, if you bought the 21 Day Fix and are a club member, you can stream it through the On Demand access. This however is in no way a required fee.
4). Emerald does not require 90PV. It requires 50PV which can be obtained by selling to customers. You don’t need to buy Shakeology at all. You can just pay the $15.95 per month, and make one sale per month, and you meet the requirements for emerald.
5) Emerald means you qualify for Cycle Bonuses which is the commissions you earn on all the volume in your organization, as you implied. In the original post, this is how Kelly Giminez makes the majority of her income (the majority ~80% of which is coming from her organization’s RETAIL sales).
6) You can still make money by strictly retailing and signing people up as customers. Some people do that. Usually they are people who have some friends who want to do it with them or a spouse or something. But yeah Emerald is required for Cycle Bonuses.
Hope that helps clear some stuff up for others reading this.
Nick, the FTC can’t say that every MLM is illegal. They’d get sued by every MLM. Herbalife makes more money that the FTC’s annual budget… they FTC simply couldn’t defend itself in the court of law due to lawyer costs.
Also for many years the head of the FTC was actually one of Amway’s lawyers. I’m not a fan of politics, but there’s a lot going on and you can’t simply say, “The FTC would say they are all illegal” if you’ve done your research.
Because the FTC can’t do this, they’ve put the onus on consumers. However, even the FTC admits that consumers can’t really do it. This NY Times article revealed a quote from them, “identifying pyramid schemes ‘entails a complex economic analysis.’ The report added that ‘there is no bright line disclosure that would help consumers identify a fraudulent pyramid from a legitimate [multilevel marketing company].'”
Again, none of this is necessary. Simply have a straight commission sales program and the problem is solved. If you aren’t running an illegal pyramid scheme, you’d have no problem with this. You’d even be in favor of this because this would help Beachbody stay in business if/when law enforcement does come knocking.
You’re not going to win any friends with the cost of fees being hidden in terms. It is already an unnecessary complex compensation plan (see previous paragraph), so I can’t imagine that people are digging through for the terms. Even if a coach tells them, it a piece of information that isn’t likely to be digested because of the complex compensation requires all your focus.
Just wanted to say Thanks also to Lazy Man for allowing me to engage in some reasonable discussion here for the benefit of others reading this to get some differing viewpoints.
There is no denying there are really crappy, horrible MLM’s out there that are legitimate pyramid schemes. And it definitely sucks because the business model of MLM can be used for extortion and theft. But; so can regular businesses (Enron? etc.). There are bad apples in every bunch and they sour it for the rest of us. The danger is when you start painting with a broad brush without looking at intent.
At the end of the day, the expression, “Follow the money” applies. And that’s where I feel good about Beachbody, because when you follow the money what you find is people signing up for programs and Shakeology and dramatically improving their health for themselves and their families. I posted a whole slew of quotes before, but just in this past 2 months the following things happened to people in my wife’s challenge groups, this is 100% unsolicited feedback from CUSTOMERS.
[Editor’s Note: Removed a bunch of testimonials here, because MLM Testimonials are pointless due to the bias of the compensation plan and other factors pointed out in that article. The Huffington Post agrees MLMers make crazy, nonsensical claims. The article includes links to nutritionally-equivalent, non-pyramid scheme products, that have off-the-chart reviews, at a much, much cheaper price.]
I don’t know what else to say but that these programs are doing enormous good. Could these people have done this without Shakeology? Sure, but just like how some people succeed at Weight Watchers, and some succeed in the Gym, and other succeed with Personal Trainers, for some people, the combo of a fitness program + shakeology (even if it’s too expensive in your eyes) really does produce amazing changes for these people. And all of it has absolutely NOTHING to do with business structure of the company.
Have a great day everyone!
Nick, your comment slipped by me there for a couple of days.
The article includes links to nutritionally-equivalent, non-pyramid scheme products, that have off-the-chart reviews, at a much, much cheaper price.
So why would you want to include Shakeology when you can clearly combine a fitness program with something that is clearly, objectively superior?
Don’t make it about me not agreeing with the business structure of the company… make it about the FTC’s guidelines showing that appears to be an illegal pyramid scheme. You might as well say that I shouldn’t be against the Boston Bomber because I don’t like his character. It misses the point entirely.
You’re wrong about the way Beachbody’s business structure works. While there’s a multi-level component to it, it’s entirely possible for any coach to grow their business to huge numbers without their upline coach making a single dollar. It happens all the time. Some of the most successful coaches in the biz, millionaires, have upline coaches who don’t operate their business center as a business and, therefore, don’t get paid. Also, some coaches choose to run businesses only selling products rather than growing coach teams to also sell products. In 2012, for example, the most successful Emerald coach in the business made over $260,000 while still remaining Emerald, which means that you have only two coaches down the line from you. If anything, Beachbody is a “Direct Marketing” structure. Initially, I became a coach because I loved the products and wanted to get them at a discount. I had been buying Shakeology from Ebay for months at an inflated price before I figured out that coaching was a thing. As a discount coach, I got amazing results from the products and people around me, seeing what I had done for myself, ASKED ME to show them what I had done. I had no intention of selling products OR actively growing a team and I certainly didn’t do it to get paid. I have a full time job that I like. Now, however, I also have a Beachbody paycheck. No one scammed me. I’m 37 years old an fitter and healthier than I’ve ever been before. That’s what I signed up for.
I’m not sure it is even possible for someone to not make a single dollar while someone below them makes “huge numbers” as you describe. If it “happens all the time”, please give us 5 or 6 very specific examples with names and numbers.
If you look at the 2012 numbers again, you’ll see that some Emerald coaches earned as low as $14 a month… which don’t even cover coaching fees as some have pointed out here.
As was pointed out a few comments ago, being a discount coach isn’t much of a savings due to those fees… so better off to get back on Ebay and get the discount than to paying fees just for a being a coach… and being a coach to try to save on money.
Nick, your comment slipped by me there for a couple of days.
The article includes links to nutritionally-equivalent, non-pyramid scheme products, that have off-the-chart reviews, at a much, much cheaper price.
So why would you want to include Shakeology when you can clearly combine a fitness program with something that is clearly, objectively superior?
Honestly, debating the product value is pointless because you either find it worth your money or you don’t. It’s based on the individual. You might find the same nutritional quantities on the FDA label but that doesn’t give the entire picture of what the product contains. On top of that, some people don’t mind splurging on premium products. Even consumables.
Take shampoo, for example. I happen to think $100 dollar bottles of shampoo is crazy but clearly 270 almost 5 star Amazon reviews beg to differ; and even then most research shows there is no difference between expensive and cheap shampoos.
The point is, people pay for it and they are happy to pay for it because they find value in it. I think Shakeology is a good value. You do not. That is OK. I’m happy to pay for it, and so are tens of thousands of other customers who buy it either through a coach or directly from the website (or on occasion eBay, which is still usually in the $90+ range)
Let me ask it this way; at what PRICE does it become fair in your view? Who is to say Vega One isn’t overpriced? I use Isopure protein powder when I am in a weight lifting program and it lasts me about five weeks and costs $100 at Amazon.
One more note on this comment:
I’m not sure it is even possible for someone to not make a single dollar while someone below them makes “huge numbers” as you describe. If it “happens all the time”, please give us 5 or 6 very specific examples with names and numbers.
This is entirely possible and in most cases is exactly what happens. If you move upline from my wife she earns more than the 200 people above her. The women on her team who is earning the most is down almost 150 spots from where my wife is, that is to say the 140+ people above her earn less than she does.
It’s really interesting you bring this up because this was exactly how I thought it worked at first until I spent the time to understand the compensation plan. Without getting to complex into it, in a binary system, typically it is your responsibility to build your weak leg so you can capitalize on the volume that is being built on the strong leg by your upline (unless you get placed in a dead spot, then you own both sides).
Nick said, “Honestly, debating the product value is pointless because you either find it worth your money or you don’t. It’s based on the individual. You might find the same nutritional quantities on the FDA label but that doesn’t give the entire picture of what the product contains. On top of that, some people don’t mind splurging on premium products. Even consumables.”
I don’t think you are going to debunk dozens of years of publications like Consumer Reports with a simple statement like that. Yes, it is based on the individual, but my website is largely for individuals who want to make smart purchasing decisions. People don’t mind splurging on premium products, but Shakeology, like dozens of MLMs that I’ve studied is not a premium product. Hence why other products of equivalent quality are 1/3rd or 1/4th the price.
Minutes ago, I just finished writing the following same argument about DoTERRA Essential Oils:
“Every MLM tries to use the ‘quality’ explanation, but it fails when the alleged ‘Pinto’ quality products are loved like the way they are on Amazon. Having studied dozens of MLMs, the real reason for the expensive pricing is that they are Pay-To-Play if you want in on the alleged ‘financial freedom’ opportunity of the pyramid scheme of recruiting others.”
The reason why I got interested in MLM the first place was that someone tried to sell my wife $45 of juice in a wine bottle. Every distributor claimed it was “premium juice.” They jumped up and down about it until my MonaVie Scam article had over 6000 comments. Years later it would come out that the creator called it “expensive, flavored water”.
There are unlimited examples of this. LifeVantage charges ~$600 for $60.56 worth of product in Protandim VantagePacks.
If a product wants to be “premium”, they have to show it. This isn’t in testimonials, but the actual objective differences that make a product “premium.”
With MLM, we can’t be sure if people are happy to pay the premium price. We’ve seen people jump on board to pay $45 for MonaVie juice. When the pyramid of the business opportunity impoded (see the Google Trends), people weren’t happy to pay it anymore. And it recently recently went into foreclosure, where it used to do a billion in sales.
Distributors paid the premium price, because they had to do an amount of Personal Volume (PV) to qualify to be active to earn from their pyramid.
At what price does Shakeology become fair? Put it in GNC, Vitamin World, or anywhere else where it can compete in a free market instead of an MLM market place that inflates the price by attaching the “price of admission into a ‘business opportunity’ that appears to be a pyramid scheme.” Then we can find out its true price. I’d speculate it would be near or below the two products that I mentioned in the article. I noticed you didn’t attempt to make a case for why it should be priced more based on any specific quality of the product.
You give an example of someone above who earns less, but not someone who doesn’t earn a single dollar and has someone under them who earns a million. There’s a huge, huge difference. Please go back and show me that example.
Also, I didn’t bring it up, another commenter did.
Thank you for writing this! I’ve had at least 5 friends get sucked into the beachbody vortex of hell. It’s so annoying to have their incessant fake-happy, fake-enthusiastic posts come across my newsfeed 4-5 times a day. Pictures of every meal, pictures of them smiling while drinking their shakeology, pictures of them working out looking ridiculous. I’m embarrassed for them. I almost got sucked in though. A few of them seem to really make good money. One claims she has only been coaching 15 months and now makes 6 figures. This is an uneducated, unskilled worker that went from no income at all as a SAHM to making over 100,000 a year. My inner skeptic says,”bullcrap”. But as a fellow SAHM I want to believe. But I’m not going to prey on overweight, poor women to get money. Most of these girls are single moms or they’re military spouses…and military spouses don’t pay ANY fees. Take a look at how many of the coaches are ex-military or a military spouse. It’s a win win for them. They’re not shelling out the $300 in fees a year. Anyway, I’m tired of it. How are women that make $12 an hour at their day job and have 2-3 kids with no father involved able to afford $150 shakes? The answer is they can not, so they become a coach to get the discount, and then they realize if you sell these highly over priced shakes you can make extra money. So it’s essentially women preying on each other financially.
Of course she can *claim* she earns six figures; that doesn’t make it true. Have you seen her tax returns? If you haven’t, then you have no way of knowing she’s telling the truth on any level.
I, too, noticed that many of my fellow “coaches” were on welfare and living in desperately poor areas of the country: the Rust Belt, the Deep South, etc. As I mentioned in a previous post, apparently MLM’s are a big problem in India, and it’s because of the poverty over there. MLM’s prey on the poor and desperate, selling them false hope.
You’re right that none of those women can “afford” those shakes. They’re maxing out their credit cards to buy them, or worse yet, making their kids do without necessities so they can buy Shakeology, all in the false hope that they, too, will one day earn six figures and live the dream.
Lazy Man,
Once again very good job pointing out all the flaws in this MLM “business” opportunity. I found you a few years back when I had a friend approach me about Visalus. By the way, I had two buddies involved. Both sold enough to qualify for the BMW incentive and both are no longer involved but still have that absurd lease hanging over their head.
I wanted to thank you again for your work here. I now have a neighbor who is into beachbody and while I knew I was a pyramid scheme from the get go (sorry Nick and the other believers, its a pyramid scheme and you will be out of the business in a few years if not sooner) I was pleased to see your well researched article for a little extra info.
These MLM’s drive me nuts. With Facebook and social media I see this stuff everywhere. Its funny, the only people in my circle of acquaintances that actually do this stuff always have one thing in common. They don’t understand basic finance. I know plenty of MBAs and never had one of them approach me about an “exciting MLM business opportunity.” I really do like that people want to be an entrepreneur but before you embark on any entrepreneurial endeavor you first need to understand basic finance.
What’s that saying? A fool and his money are soon parted. Well joining an MLM doesn’t make you an entrepreneur it makes you a fool.
Product is moving. The pens get used. No recruitment revenue, only product commissions. Absolutely 100% a pyramid scheme. The only real reason people are paying $100 for a pen is for the opportunity to make money off the sale of pens.
I get this on some level and as much as I hate beachbody and coaches “blowing up” my newsfeed, I don’t believe this is their intention AT ALL…some people are just blindsided when they enter into opportunities like this. They truly believe they are helping. In some cases, at least from my friends, this is a second revenue stream. I don’t believe or at least I hope that breadwinners are trying to make money off MLMs….there are too many coaches now. The only people who are making serious money are the founding coaches….
That’s yet another of the problems with MLM, they create tons of supply of coaches, even if there’s not sufficient demand for product to be bought by them. You wouldn’t put a McDonalds on every corner. You wouldn’t open up a McDonalds on every block. You wouldn’t approve a McDonalds franchise if there wasn’t sufficient demand for it. MLM fails these very basic business fundamentals.
Sadly, there are breadwinners hoping they can support themselves off an MLM. I agree that most of them are blindsided; they desperately want to believe that this is a real “opportunity” and that it will work. If you’ve been out of work or severely underemployed for a while, your house is in foreclosure, and you don’t know where you’re going to live when you get kicked out, it’s easy to fall prey to a scam like this.
This mindset is heavily pushed on recruits. I remember us coaches being told stories of “Diamond” coaches who were on food stamps and were weeks away from living in the streets when they hit it big with Beachbody. We were told that all we had to do was “be positive” and “work hard,” and it could happen to us, too. I am certain that if anyone took the time to vet these people, it would be discovered that they were liars.
I remember being suspicious of one coach in particular who claimed to be making six figures–yet he still worked at a low-paying retail job. If he was really making all of that money “coaching,” why would he even bother with a minimum wage gig?
I’m a BB “coach” – and to this day, I still tell people that it only means I’m a glorified salesperson. Not blind about it being a MLM, and I didn’t join for the “business” aspect. I’m only in it for the 25% discount although sometimes I make a few commissions here and there when a few friends buy stuff from me.
I like Shakeology and it IS expensive so the 25% discount helps a lot. It’s also not impossible to find some on Ebay at a lower price – no tax + free shipping – which I have also done before.
I might quit this “coaching” thing soon since I am not really into the business thing plus the fees just add up.
I am not a beachbody coach only a customer, or shall I say was. I purchased the 21 Day Fix program. Now as far as the program goes, I don’t have a problem with it. I did have a problem with coaches. In the first 3 weeks, I had 2 coaches which wasn’t worth a thing. The first one fell off the earth and the 2nd one only kept trying to get me to buy more and more stuff and when I wouldn’t she disappeared. This business is a joke. It’s all about how much more money can I make and not about helping people. I actually cancelled my account and I’m not sure if I will purchase anymore products because of this. I have not, nor will not purchase Shakeology. It’s expensive and I do not do autoship. I hear too many horror stories of people cancelling and still getting products and being charged. I do think this is a pyramid scheme, it has all the classic signs but I will say I like the workouts but that’s about it.
Us Beachbody coaches are defending the emperor’s new clothes. Well written and explained, Lazyman, despite our embarrassed and humiliated protests. I did lose weight but after a year have only lost money and while I am a sucker for health shakes and I genuinely was attracted to their ingredients, and the workouts are awesome, I have only lost money buying stuff. They got me after feeling hopeless and being on food stamps, what can I say? I only have one client and feel like I should write to her personally and apologize. I feel so embarrassed, stupid and desperate for having fallen for this. You’re sticking up for people like us that fell for it despite the protests. Thank you for all the info.
Sit here and preach what you want…say what you want, but the bottom line is….Beachbody IS a successful company, many coaches are successful, and regardless of your long winded blog here, coaches are still helping people. Beachbody is not going anywhere anytime soon. Moving on….
Enron was a successful company until it wasn’t. I don’t consider it helpful to get people to buy $100-120 shakes when they can get equivalent level nutrition in the $30 range.
Beachbody may not be going anywhere, but the MLM scheme will likely go away in the next 5-10 years. Too many people are getting too wise to it for it to continue.
I can’t help but thank you for this well researched piece.
I really want to thank you for the comments section though.
EVERY last one of the BB Coach arguments in this VERY thread PROVES every single one of your points. Especially the arguments why it’s supposed to not be a pyramid.
Not a single person who disagrees with you has proven you wrong, they all used the EXACT arguments you meticulously proved were invalid.
Which has left me quite amused as I read these comments from upset people who are really just helping prove to me how correct you are.
Thanks Lazyman.
If Beachbody were a ‘pyramid scheme’ they would have shut down by now, don’t you think? Plus I find it interesting there are a lot of former lawyers who gave up their day gigs to be Coaches. Now why would someone who is a member of the ABA endorse a ‘pyramid scheme’?
Enjoy your Vega.
You would think it would have been shut down, but I’ve investigated it and it doesn’t work out that way. It would have to go to trial (companies have rights too) and the FTC would have spend a lot of its time and budget. These companies make a lot of money and can hire the very best lawyers. They’ve got nothing to lose. MLM companies also contribute money to politicians.
If you have some time, you might want to check up on the Herbalife situation. It’s been around for 30 years and just in the last 2-3 years every agency under the sun has investigate them. It only happened because a billionaire (Bill Ackman) spent a lot of money making a big public presentation that it was a pyramid scheme.
So it really takes a lot of things to come together to shut down a company. However, thanks to the internet, we are seeing that the communication of these pyramid schemes is getting better and people are getting more information about them. I get the feeling that once Herbalife falls, focus will shift to all the similar MLM companies.
There are a lot of lawyers who endorse pyramid schemes. It makes them money, so why not? It’s not like they’ll get disbarred or anything like that. They’ll simply say that they were duped like everyone else.
Shakology is horrible, I make my own shakes for a fraction of the price and they taste much better! If you’re stupid enough to spend 130$ a month on a shake, you either have alot of extra money or your stupid. On the other hand, the people I know who sell it basically found a way not to work a normal job 9 to 5, good for them. The thing that really bothers me…. The fact that no one admits they simply do it for the money! All the passion BS! Really, you weren’t that passionate about shakes or working out before you could make money from it! Posting shakology stories five times a day on facebook! Really…… You just want to help people! Really good people work out, are healthy, enjoy the outdoors….. Without constantly trying to sell overpriced products on facebook to friends and family! I’ve met people who have literally made millions from beach body and to me it’s mind boggling!
Mike said: “them. The thing that really bothers me…. The fact that no one admits they simply do it for the money. All the passion BS!”
As Upton Sinclair said: “It’s difficult to get a man to understand something if his salary depends upon his not understanding it.”
I’ll second that. Thanks Brad. It’s a duty and a pleasure to serve the community.