Richard Brooke shot me over an interesting article from the New York Post about Herbalife Eliminating 98% of all the Internet Marketing Lead Generation Tool Companies which have been one of the most successful but controversial methods used by their top reps over the last few decades. Is this the wave of the future for all direct selling companies as we watch Herbalife become the new benchmark, replacing the Amway case of 1979?
Herbalife makes leap from controversial online recruiters
By MICHELLE CELARIER – New York Post
Herbalife is working hard to burnish its image in its battle with hedge-fund manager Bill Ackman.
The Los Angeles-based company — which Ackman calls a pyramid scheme — has cut ties with a controversial group of online recruiters who promise to help new salespeople build their own Herbalife businesses with pitches such as “be your own boss” and “stay home with your kids.”
Herbalife has removed all but two of these companies from an approved list, according to a Feb. 15 internal memo obtained by The Post. That list numbered 29 in 2010.
Typically, these companies sell new distributors sales leads — for about $100 a pop — that come from people who have signed up via the Internet to learn more about Herbalife’s business opportunities.
Despite questionable practices, these companies have propelled almost a third of Herbalife’s top US distributors into the millionaire ranks. Six of the top 20 distributors — who belong to the Chairman’s Club or the Founder’s Circle — either ran these recruitment companies or had close ties to them.
Herbalife, which makes weight-loss shakes, supplements and similar products, doesn’t sell its products in stores. Instead, it relies on an army of people to sell the products on their own.
Ackman, who has shorted more than a billion dollars’ worth of Herbalife stock, claims the company needs a steady stream of new recruits to keep going — which makes it a pyramid scheme.
Herbalife said it does not pay for recruitment, and it prohibits its distributors from selling leads or advertising to other distributors, unless it’s through a third-party business.
It is unclear whether Herbalife has been able to enforce these rules, however.
An Herbalife spokeswoman acknowledged that some distributors did create online business systems that involved lead generation in the 1990s, but added that “very few are still using those methods.”
In the company’s memo to distributors, Herbalife said they can only do business with two companies: Chairman Club member Shawn Dahl’s Online Business Systems and Premier Team International, which uses leads from OBS.
But Herbalife’s distributors are also banned from buying leads from OBS, which has a related website called incomeathome.com.
“If those leads were even half what they say they are, something better would have happened,” said a former distributor named Richard, who told The Post he had spent $10,000 buying leads and other material for about three months before finally throwing in the towel.
Despite the ban, several talk radio hosts are still running personal testimonial ads for incomeathome.com, with Herbalife’s name linked to it.
Herbalife declined to comment on the ads.