BK Boreyko Tries His Hand at Magic: Does he pull it off?

01c62c29d34ede51f7c12ef645d59945I can remember where I was sitting when I saw David Copperfield’s infamous Statue of Liberty trick.  I was right in my living room, sitting three feet from our “big screen” 25 inch television.  I was speechless!  I had my imagination running wild….where in the world did it go!?  Is magic real!? As it turns out, years later, people revealed the logistics behind the magic: it was a revolving stage.  The statute was shown between two pillars, the curtain was lifted to conceal the statute, and as David Copperfield was doing his thing, the stage rotated without audience detection.  When the curtain was dropped, the audience (and those of us watching on television) were staring out into the ocean without even realizing it.

Changing the optic! Pure genius!

With BK’s latest announcement, he’s attempting a similar effort.  In summary, he’s changing the perspective (words) about MLM without changing the model itself.  He’s just rotating the stage while keeping the statute (the model) in tact.

In BK’s video below, he SPRINTS from the MLM category, claiming that Vemma is “more like Amazon and less like Amway.” I’ll start this breakdown with the obvious points first:

(1) Amazon is not a member of the Direct Selling Association;

(2) Amazon does not terminate its affiliates for promoting other MLMs;

(3) Amazon does not bind its affiliates to non-solicitation clauses (commonly done by clients of mine and every other company in the MLM industry);

(4) Amazon does not have monthly volume requirements.  BK makes it clear: “We no longer require our affiliates to buy products.”  Well that’s good to know, because you technically were never supposed to have such requirements anyways.  I know, I know….it’s debatable whether a company can impose a purchase requirement. ViSalus does it (I think).  But in my opinion, I advise all clients to stay away from required monthly purchases. Instead, Vemma is doing what 95% of all other MLMs do: they’re now requiring VOLUME.  Can this volume be achieved via the now optional Autoship? Yep.  Will the majority of reps qualify in this manner?  Probably.  Does this “change” make Vemma more like Amazon and less like Amway?  No. Ironically enough, Amway has ZERO volume requirements for reps to join.

(5) Amazon does not have a genealogy for calculating commissions i.e. there’s no opportunity for recruitment;

(6) Amazon discloses its revenue from customer sales. While BK implies of significant customer activity, we have no way of knowing the numbers.

Affiliate vs. MLM

In his video, BK distinguishes affiliate models from MLMs as follows: affiliate programs are more customer focused and there are no requirements to buy product. Please remember, the entire point of an MLM sales strategy is to SERVE CUSTOMERS. If Vemma was not on this track before, what in the world were they doing? And I’ve already opined on the issue of required product purchases. They never should’ve had those requirements in the first place. Going with a volume requirements puts them in line with most other MLMs out there (keyword being “IN-LINE”…..not ahead).

Real Changes

These are the changes that seem legitimate:

(1) Affiliates are all Customers first. When a “Customer” enrolls another customer, they become an Affiliate and qualified to earn commissions (after they generated the volume via personal purchases and/or sales). This is interesting to me. Do these Customers go on the Affiliate’s front-line i.e. like a personally enrolled affiliate would? If so, Vemma made it more difficult for affiliates to sling participants down in depth. This would legitimately slow recruitment; thus, look more like an Affiliate arrangement. If, on the other hand, these “Customers” are given a position in the genealogy and can benefit from their upline’s actions on a later date, we’re back to David Copperfield’s rotating stage. If the latter is the case, regulators will not consider those people as Customers in the event of an inquiry (my opinion).

(2) There’s a “Custiliate” program. Friend and MLM consultant, Mel Atwood, coined the phrase “Custiliate,” so I’ve got to give credit where credit is due. A Custiliate is a hybrid between a customer and an affiliate. The Customer cannot earn the big bucks but there are some financial incentives available. There’s nothing earth-shattering here. There are numerous companies out there that offer incentives for customers to share the products with other customers. With Vemma, they’re giving customers “credits” that can be redeemed for product sales. This is a good thing and most companies need to implement similar incentives. The key question: will the incentives lead to an increase in customer revenues? If an MLM is selling $1,000 lemonade, the policy would be lipstick on a pig because there would never be legitimate demand for such a product. If Vemma’s product is priced outside of the market, the Custiliate program is window-dressing. If it’s in-line, it’ll help drive the numbers up. This is not proven by making comparisons with Red Bull. It’s proven by customer revenue. It’s that simple.

(3) Vemma now pays full CV on customer activity. This caught me off guard. Why in the world were they allocating 50% on customer volume? This would be a dis-incentive for distributors (affiliates) to accrue customers. Why pursue customer sales that yield 50% CV when they can recruit and get 1 to 1 on the volume for their commissions? This is so bad, I’m not convinced I’m right. If they fixed the 50%, good for Vemma. They’re now in-line with other MLMs (again, in-line…..not ahead).

Conclusion

At a time when the industry needs to be more united, BK’s announcement of “big changes” is counter-productive. Will these changes lead to meaningful changes in Vemma’s sales culture, leading to a more customer-oriented company? Or is he just rotating the stage, using the right words and gestures while only changing the perspective?

What do you think?

If you’re reading this via email, click here to view BK’s announcement video.

  • http://mlmhelpdesk.com troydooly

    Kevin, I can see your concerns, and they do raise some interesting questions. Like you I want to eliminate the grey, and raise the bar for all network marketing companeis.

    If BK’s moves truly seperates the customers from affiliates, and the ratio of customers to affiliates (reps, distributors, independent professionals sales pros, brand partners) whatever they are called, then I see this as a good move.

    Now as for referring VEMMA to Amazon, .vs Amway, well that is a disconnect for me. The way I see it, and BK did bring this up… VEMMA sells an exclusive product at a higher than normal price (and not one time annual fee of $79 for PRIME free shipping), which doesn’t look like Amazon. But…

    Amway in my opinion, looks closer o Amazon that VEMMA at this stage of the game. At Amway, I can buy their quality products, or just about any other household name brand product I want… Like Amazon.

    I am all for creating unity in this community, and would also like to see the DSA leaders, think about launching or embracing an association or sub-associuation for the independent profesisonal in the field.

    I know this is not the thread, but it seems to me, if you atorneys all put an arbitration clause in the P&Ps, then instead of going before someone who has no clue about direct sales, we could go before a board of our peers with a mix of execs, owners, and independent profesisonals. Just saying… :)

    • Kevin Thompson

      Thanks, Troy. I look forward to your article. As for the DSA embracing another association, it’ll never happen. It takes humility and strong leadership to bring others into the fold….

      As for handling disputes before a board of peers, I sense a business! We could create a dispute resolution company that specifically services MLMs. And the new companies that pop up could call for all disputes to be settled by this entity, which would be run by leaders across multiple companies. I don’t know….maybe there’s something there.

      • Mel Atwood

        I’m in!

      • http://mlmhelpdesk.com troydooly

        I like this idea. I would love the DSA to embrace, but at the very least, we need to know that both sides of an issue are being heard by those who fully understand!

  • BlissBrooke

    Kevin as usual your points inmo are valid and I see an additional albeit different one. In spite of the narrow immediate disconnects in BKs strategy, what I see through BKs eyes is a much longer term strategy. This is just the start…perhaps a little clumsy but better to launch it than perfect it.
    I believe BK has the vision and courage to see this through for his company…not that in 5 years he wont be an MLM company. I believe he will. But he will teach his tribe to tell the story in a way that the younger crowd can hear it and I believe he will align himself and associate with the Amazons of the world more so than the Amway’s. This is a long term play. If Veema does not generate complaints, does not go public ( at least until this is done) and moves away from associating with the Direct Selling MLM crowd in 5 years they could be virtually under the radar. More importantly they will create a trend that paves the way for other companies. And other companies have successfully done it ie Amsoil, Tupperware and a few financial services companies.
    If anyone has seen my interviews on the street with Super MLM Man, our track record after 60 years is lousy. People still do not know what we do ….until you say Amway…then they are very clear and they do not like what that stands for.
    We have to shake up the paradigm and do things differently both from an honoring of people and a marketing standpoint. I applaud BK for shaking it up. It may look like just a slight at hand for the moment but my guess is he will see it through and Veema will be outside the fray in a few years.
    And if I am wrong well that will be the 7458th time thus far in my career. Onward!

    Ps. One thing we all ought to be fighting for is the right for someone to launch their own business and dream even if the odds of succeeding are not good. They are not good in anything we attempt to do. Nor is it in the budding entrepreneurs best interest to tell them how high the odds are stacked against them. Oh btw only 1 out of 1000 makes any serious money…good luck. Painting a positive spun picture is in the new reps best interest providing their investment is somewhat protected which is clearly is our our model.
    And two….we ought to be fighting for acceptance that every rep/distributor/affiliate/whatever you want to call them that is NOT earning overrides on a team…does not have their own little pyramid and is not recruiting to build one IS a customer regardless of the price they pay. Ergo 90-95% of all distributors are customers. That is a fact and one for which we ought to be fighting.

    • Kevin Thompson

      I agree with your last paragraph. We need to be consistent with how we define and treat customers. Regarding your first paragraph, I’m not concerned about BK’s ability to “pull it off.” I’m troubled that he’s being misleading. His program obviously had problems and he simply got the model in line with other MLMs and he’s saying “we’re better than them.”

      There’s more to integrity than positioning. I knew of leaders in Quixtar (Amway) that positioned it cleverly i.e. “We get paid to drive traffic to websites and those websites reward us for loyalty” Are you kidding!? They got away with it. Was it the right thing to do?

      The key metric: customer revenue. BK is not going to disclose it. So we just have to marvel at his “courage” and assume that his new “customer focused” strategy will actually lead to more customers. I’m suspicious.

    • J. L.

      Yes, most distributors behave just like customers. When they join, they are thinking they will become distributors, but they don’t. Instead, they just buy products and sponsor no one. It would be much easier if distributors were defined by their recruiting activities instead of by their enrollment status.

      Canada has already figured this out. Direct selling companies operating in Canada are required to disclose the earnings of typical participants. Typical participants are those with a downline. Because most people who join as distributors don’t ever recruit, this means in Canada that typical participants are really atypical.

  • J. L.

    When we design compensation plans for direct selling companies, we always define “active” as meeting a volume requirement that includes both purchases by an independent representative and his/her personal customers. We do this because to be legally compliant, this is needed. Companies who require personal purchases from their independent representatives to be eligible for multilevel compensation have illegal pay plans. In BK’s video, he says that 50% of the CV generated from your personal customers will count toward the requirements to be active. What do you think, Kevin? Is it legal to count purchases from customers as less valuable than personal purchases for an activity requirement ?

    • Kevin Thompson

      I think he USED to allocate 50% CV for customer sales. If he’s currently only counting 50% towards the requirement to be active…I would not say it’s illegal. But….he’d certainly be making it easier for regulators to argue that the real money is in recruitment. I’ll need to check out the video again to check.

      • J. L.

        In the video, he shows an example of how a 120 CV purchase by a customer gives the affiliate 60 points of credit toward his or her activity requirement.

        • Kevin Thompson

          It’s got to be the math. It’s the only reason I can justify it. There must not be enough margin to cover the upline commissions AND the custiliate rewards. So he cuts it in half. Which leads me to the main point of the article: will this “change” really lead to additional customers, or is it just window treatment?

          • J. L.

            If the product is priced reasonably so that customers will purchase it without the income opportunity, then this change will lead to additional customers. Time will tell.

    • Mel Atwood

      Same here Jay. I go to the point of clarifying PV as Personal volume (purchased), PSV as Personal Sales Volume (the PV of you and your customers), where PSV may be part of qualifications to be considered ‘active’ or qualified, but where PV never is.

      With only 50% of CV available from Customer purchases… how could an Independent Professional / Affiliate justify… from an incentive and reward perspective… customer acquisition? Even if it IS legal… it’s beside the point, there incentive would be on person recruiting not on customer development.

    • globalray

      Melaleuca does require a 35 product point order ($90 – $120 in my country) every month in order to qualify for commissions!! It used to then rise to 55 pts once you got to a “leadership” level but that was removed. For some reason, autoshipping is discouraged.

  • Mel Atwood

    Thanks Kevin for your article. This is a solid and important conversation. One that we should all participate in… but, I must admit… I am stunned by the pivot in BK’s semantics that end up painting MLM as bad, anti-customer, with forced product purchases.

    The idea of Vemma, blending in Customer Rewards (“Custilates”)… is something I MASSIVELY applaud, and have been touting for almost 8 years. Using our most loyal and happy customers as “Brand Ambassadors” is awesome. I wrote about it in an article I did last year for The World of Direct Selling ( http://www.worldofdirectselling.com/our-changing-world/ ).

    Let me be clear… BK has been generally setting a GREAT example of what a GOOD MLM is. And now… he’s saying… “We’re so good, because… we’re NOT MLM.” Expressing sentiment that MLM is NOT good.

    IF Vemma isn’t MLM, and IF MLM (as defined by BK) requires product purchase, and IF MLM (as defined by BK) is NOT Customer focused… then… isn’t BK really saying that MLM’s are Pyramids?

    I take issue with this MASSIVE miss-characterization of MLM.

    In a personal email to you Kevin I wrote: ” I suspect, this may do substantial harm to the entire space… as Regulators, Talking Heads, and Wall-Street… use BK’s own words (an insider, “turned states evidence”)… to throw DARTS at the MLM world.”

    MLM done right… IS customer focused.
    MLM done right… DOESN’T require product purchase.

    Vemma is MLM, with a great front end twist, I greatly admire and support. I simply disapprove of BK distancing himself from MLM, by essentially making false characterizations about what MLM really is.

    • Kevin Thompson

      The subtle point that I was trying to make (that you picked up on) was that BK is all but admitting his program had problems. Required monthly purchases? Allocating 50% CV for customers? It’s not indicative of the rest of the industry, it’s indicative of his company.

    • Monte Bertrand

      Literally standing up and applauding both of you guys right now.

  • Jeff Weisberg

    My hat is off to BK. People will always knock change & innovation. Vemma is like the Apple of direct sales. There is something to be said for a man who has done over $2 Billion in sales as an owner & been in the office running his own company for 19 years. He is constantly working on making things better for his partners in the field & has always been interested in not being the biggest fish in the pond, but the biggest gold fish. Remember what the great advertising agency giant said, “Talk good about me or bad about me, but just talk about me!!”