“Coming together, we are set to unleash an unparalleled synergy, combining our unique strengths to foster growth and opportunities, not only across Korea but throughout Asia,” said Robert Stevanovski, ACN Chairman and Co-Founder. “Our journey with our respected counterparts has been rooted in mutual admiration and a deep, personal connection spanning more than two decades. This is more than a business transaction; it’s a fusion of visions, paving the way for our employees, independent salespeople, and all stakeholders to thrive in an exciting, expansive new era.”

ACN Korea is known as a “Top 20” company in its sector. With this acquisition, both companies will reside under the Neora brand and will work together to create a platform for entrepreneurial growth in direct sales in Asia Pacific.

“I am thrilled to welcome ACN Korea into the Neora family,” said Jeff Olson, Neora Founder and CEO. “The ACN team has built an impressive legacy, and our shared commitment of ‘Making People Better’ aligns perfectly with our global mission. I eagerly anticipate the Emerge Event on February 17, where we can get to know each other better and share our vision for the future. Together, we are poised to build a transformative legacy in the Korean market.”

The post Neora Acquires ACN Korea first appeared on Direct Selling News.

“We’re excited to share our hard-won perspectives and everything we’ve learned in our journey about how to navigate adversity no matter where you are in life,” Amber said. “It will help you find joy in the journey, no matter what roadblocks may come your way, and gain valuable insights with every episode.”   

The podcast will be available across platforms, including iTunes, Spotify, YouTube, Pandora and Soundcloud. 

The post Neora Announces New “Built to Win” Podcast  first appeared on Direct Selling News.

But how do you turn all of that learning into action? The key is to pin down a handful of revelations that rose to the top, and then do something with them! In an effort to help us all take action, whether you were there or not, here are the next steps I would encourage any executive to take, inspired by Fall DSU 2023. 

1 / Get Serious About the Hispanic Market

The most blatantly clear takeaway from DSU was a lot of companies growing in the US have one thing in common: a commitment to the Hispanic market. This was a key point in about four different presentations. Whether you decide to target the Hispanic market or not, every executive needs to be intentional about how you’re thinking about this market, both globally and especially in the US.

2 / Simplify until It Hurts

John Alcala, CEO of It Works!, reminded us of just how much distributors have on their plates…and that’s before we add all of our stuff (promotions, incentives, announcements, launches…) to the mix! We all talk about simplifying our business, but do we really do it? To experience the kind of simplicity that actually prompts growth and duplication, you’ve got to shed some of the secondary “stuff” that only gets in the way for the average distributor. Go find it and do something about it.

3 / Experiment, Learn and Adapt

pawTree Founder and CEO Roger Morgan walked us through a few scenarios where the company identified a problem; came up with a possible solution; and launched quickly. Some worked well; some didn’t; and some only worked within very specific circumstances, but not others. The takeaways from his specific examples were helpful, but the biggest takeaway is this: am I tracking everything I do well enough to know if it works and why? And then do I keep iterating to see the improvement?

4 / Compare Your Business to Neora

A huge perk of DSU was hearing from Founder and CEO Jeff Olson and Co-CEO Deborah K. Heisz from Neora about their journey in their case against the FTC. The work they’ve done is so vital for every single one of us—both in terms of validating what we do and also shedding light on how we should do it. But in Stuart Johnson’s words, “If you’re still doing things the wrong way, this is not a win for you!” Deb shared some of the elements of Neora’s business (like 80 percent of those who buy from them are Customers and receive no commission) that strengthened their case. It’s in no way the hard-and-fast rule that must be followed, but if you need a standard to compare yourself against, it sounds like we just got a new one.

5 / Start Using AI (whether you want to or not!)

I’ll admit I’ve been slow to jump on the AI bandwagon. It can feel a bit overwhelming to understand. And it can feel like “just one more thing,” when I’ve already got enough “things” in my life. But after listening to Blake Mallen and Brandon White talk about how they’re putting AI to use right now, I realized my excuses hold little weight compared to the unbelievable benefits that can come from incorporating AI into how I work and live. Rather than figure it all out, I’m simply dedicating 15 minutes a day to using AI in some form or fashion. It’s the only way I’ll learn it and appreciate it. Maybe you should, too.

6 / Success Is in the Segmentation

No single speaker focused on segmentation as a topic, but many alluded to it. Bridgehead Collective’s Founder and CEO Heather Chastain’s generational research certainly shines a bright light on the need for us to segment what we do. The panel on affiliate programs (and how different each program is) certainly showcases how companies are trying to segment the opportunity in new ways. We even learned of the differences among segments within the Hispanic market. We can all do a better job of segmentation. Whatever is holding you back—technology, resources, know-how, WHATEVER!—let’s make 2024 the year we do something about it.

7 / What We Do Still Matters

Vivian Mokome, Founder and CEO of Vivian Mokome Projects, shared a heartfelt reminder that direct selling changes lives…and, in her estimation, can change continents! She sees direct selling as a prominent force for change in Africa. We must evolve as a channel and respond to the market in terms of what it wants and how it wants it. But we cannot lose sight of the actual life changes that have occurred and continue to occur, no matter how tempted we may be to downplay it in the midst of so many changes. Remind yourself of the greater good your company pursues and provides regularly. There’s no other fuel like it.

Were there more takeaways at DSU? You bet!
This is just a starting place. If you were there, think back to the points above in context of your own experience and determine what makes sense for your company. If you weren’t there, this list can still prompt extremely helpful conversations for your team. And bring them to DSU 2024! DSN

Note from the Editorial Staff: We’re excited to include these insights from industry expert Brett Duncan. Look for more content from Brett in the coming months on the pages of DSN.

Brett Duncan specializes in helping direct selling companies evolve into modern social selling models while still maintaining the culture and essence of who they are and what makes them different. He is Co-Founder and Managing Partner of Strategic Choice Partners, a business development firm that helps direct selling companies take their next steps.

From the December 2023 issue of Direct Selling News magazine.

The post 7 Top Takeaways for Executives from DSU Fall 2023 first appeared on Direct Selling News.

In a ruling that will surely be referred to as the new legal precedent, Neora has emerged victorious from its lengthy battle with the Federal Trade Commission (FTC).

After seven years of investigation, four years of litigation and three years of negotiations, during which the FTC insisted on a nearly complete erasure of the company’s multilevel marketing structure, the court has rejected all of the FTC’s claims against Neora.

“This is the first time that a direct selling company has ever defeated the FTC’s pyramid scheme claims in a court trial.”

–Ed Burbach, Chair of Foley & Lardner’s State Attorneys General Practice

“The FTC had a pre-conceived notion of who Neora was, and despite undisputed data proving they were wrong, they decided to proceed with an unfounded narrative,” said Deborah Heisz, Neora Co-CEO. “Their entire case revolved around one thing: their opinion that paying multiple levels of people commission on a product sale to a customer is paying for recruiting and not for product sales. That is simply not true and not the law.”

The New Precedent

For more than four decades, the FTC has adopted the Koscot Test, which identifies pyramid schemes as those who reward recruiting alone by paying commissions unrelated to the sale of a product to ultimate users. But the laws surrounding direct selling can be vague and the FTC leaned into this during the trial, with their expert witness stating under oath that “there is no test, mathematical or otherwise” to apply to determine an “overemphasis” on recruiting in direct selling.

With this lack of clarity, even direct selling companies who design their infrastructure to prioritize product sales, like Neora did from the very beginning, are not immune from FTC scrutiny.

“Neora’s resounding victory against the FTC is an important, preliminary win for the industry that rejects many of the FTC’s theories for attacking legitimate direct selling companies.”

–Katrina Eash, Partner at the Winston and Strawn Law Firm

“Direct sellers have been operating under a shroud of uncertainty for decades, wondering if they were going to be the next target of the FTC’s ever-changing interpretation of what it means to be a pyramid scheme under Koscot and the rules governing improper claims,” said Katrina Eash, Partner at the Winston and Strawn Law Firm. “Neora’s resounding victory against the FTC is an important, preliminary win for the industry that rejects many of the FTC’s theories for attacking legitimate direct selling companies. It’s unclear what the FTC will do next, whether the FTC may choose other jurisdictions it deems more favorable for future suits, or whether the FTC will continue to experiment with other weapons in its arsenal, such as its rule making authority. But one thing is for certain, Neora fought the battle for direct sellers everywhere, proving that when you build an ethical company and you’re willing to give everything you’ve got to defend that company and its distributors, you can do direct selling right.“

Just as the Koscot test and Amway’s win against the FTC more than 40 years ago shaped the legal landscape for the direct selling industry, so too will Neora’s hard-fought win determine how the FTC can legally pursue companies in the future.

“This is the first time that a direct selling company has ever defeated the FTC’s pyramid scheme claims in a court trial,” said Ed Burbach, Chair of Foley & Lardner’s State Attorneys General Practice and Lead Counsel for the trial. “It is also the first significant victory of its kind since Amway’s 1979 administrative law defeat of the FTC.”

The Future of the Industry in the Balance

The words “no evidence” consistently appeared in response to the FTC’s allegations, but the FTC’s bottom line during the trial was this: Any distributor who purchases product but does not earn commission is being harmed. What’s more, in the FTC’s eyes, those product purchases were considered a business expense, or net loss, regardless of whether the individual behaved as a customer. But this assertion does not take into account the number of reasons people choose to sign on as a distributor, like product discounts or early access to sales.

“We really had no choice but to fight.”

–Jeff Olson, Neora Founder and CEO

To support its claim, the FTC called on an expert behavioral economist who stated that Brand Partner purchases could never be considered ultimate user sales. The court fully rejected the testimony, saying it consisted of “rigid theoretical assumptions” that were not “borne out in reality” and stated that “it cannot be simply assumed that the 70 percent of Neora Brand Partners who never made a sale or earned a commission are disappointed victims of an illegal pyramid scheme simply because they never made a sale, recruited another Brand Partner, or earned a commission.”

“The fact that the vast majority of Neora’s product sales are to satisfy genuine consumer demand, and not as part of a business opportunity, fatally undermined the FTC’s pyramid scheme claim,” said Maureen Ohlhausen, Chair of the Global Antitrust & Competition practice for Baker & Botts law firm, and a former FTC Commissioner who advised Neora during mediation discussions with the FTC. “The court looked to the FTC’s own previous guidance about pyramid schemes, which distinguished between purchases made to satisfy personal demand and those that are simply incidental to the business opportunity and recruitment plan. Because 90 percent of Neora’s revenues come from ultimate user sales, the court determined that Neora does not operate like a pyramid scheme because it does not focus on recruiting as opposed to sales and does not depend on the continual recruitment of new members for its continued existence.”

Neora’s executive team now believes the agency’s commitment to these allegations wasn’t just an attempt to topple their company, but rather a way to target the entire channel and maybe even the independent contractor status as a whole.

“We didn’t just protect our employees and Brand Partners; we protected other industries,” said Jeff Olson, Neora Founder and CEO. “We really had no choice but to fight. I have been in direct selling for nearly 40 years, and my goal when we started Neora 12 years ago was to design a business around high-quality products and provide an opportunity to our Brand Partners without any of the ‘gotchas’ that can show up in the direct selling business. And that is exactly what we did. This was a hard-fought victory for our Brand Partners, employees and direct selling overall.”

“Before we made our first sale 12 years ago, we spent a lot of intentional time defining our core values,” said Amber Olson Rourke, Neora Co-Founder and Chief Sales & Marketing Officer. “A company’s core values are words on a paper until life presents you with hard choices. It is in those moments where you prove if you are going to live out your core values at all costs. We never wavered in making this decision to fight because any other decision would mean walking away from our core values, and the Brand Partners who helped build this company.”

Protect through Preparation

How can we protect our company from scrutiny? That question is at the top of direct selling executives’ minds right now. For Neora, a foundation of transparency and what the court described in its ruling as a “rigorous” and “robust” compliance program, as well as “proactive efforts” to prevent misleading representations about potential income or product claims, made a significant difference in the outcome of their trial.

“I am privileged and proud to have been a part of fighting the FTC on behalf of Neora, our Brand Partners and ultimately the direct selling channel, which I love.”

–Deborah Heisz, Neora Co-CEO

But this multiyear battle is a reminder, Neora’s executive team says, that there is no one tried and true template for staying out of the FTC’s crosshairs. Instead, they advise other executives to build with integrity, implement a strong compliance program and develop true product demand.

Then—be prepared to defend it.

“Every commission we have paid was because of the sale of a product, and almost 80 percent of our total revenue comes from non-distributor customers,” Jeff Olson said. “They had that data for two and a half years before we sued them. We were able to do that because we set the company up right from Day One.”

A Future Worth Fighting For

The collateral damage from a fight with the FTC is high, even when it ends in a landslide win. The looming outcome of the case has been a significant distraction that required immense time and financial resources and created a hefty mental and emotional burden for the executive team. But Neora’s customer base has been loyal, helping the company record some of its highest growth years even amid the years-long trial.

The FTC lost this case but, in many ways, it is still getting what it wants. The channel is much more product focused than it was a decade ago, and the quality of those products is increasing.

Recruitment models are no longer the norm and the industry’s signature multilevel model is being remodeled to include the affiliate and customer acquisition approaches. But for all of these changes, Neora’s victory has sent a clear message to the more than 1,000 direct selling companies in the US: direct selling is a legal and protected path to entrepreneurship.

“I am privileged and proud to have been a part of fighting the FTC on behalf of Neora, our Brand Partners and ultimately the direct selling channel, which I love,” Heisz said. “I am not surprised we won and that the courts upheld existing law. We knew from the start that we could win and that this was a fight worth fighting. We operate a good company that follows all of the FTC guidance and case law that pertains to direct selling. It was clear to us that the FTC was using our lawsuit, and others in our space, to attack the industry. I am so glad we had the facts on our side.”

“We are more excited than ever to share the story of Neora and the impact we have made,” Amber Olson said. “We had a historic launch in this industry, and our next chapter will make an even bigger, lasting impact.”

Judgement Summary

The Court confirmed Neora’s business model is legitimate

• 90 percent of total product sales in 2021 went to customers estimated for personal use
• There is a legitimate and substantial customer demand for Neora’s products
• 75-80 percent of sales are made to customers who have no incentives tied to the compensation plan
• Neora’s profits do not hinge on recruitment of new participants

The Court acknowledged the value of being a distributor—even without earning commission

• In light of discounts, Brand Partners may recoup their enrollment cost
• Receiving valuable goods in return for money does not characterize an expense as a loss

The Court deemed Neora’s compliance program effective

• Neora showed evidence of a “rigorous compliance program”
• Neora made “proactive efforts” to stop problematic Brand Partner claims
• There was no evidence of “defects” or “blind spots” in Neora’s compliance program

The post Victory for Neora first appeared on Direct Selling News.

“We are thrilled with the judge’s ruling, which affirms what we have known all along – that Neora is an ethical company,” said Deborah Heisz, Neora’s Co-CEO. “Our brand partners have worked diligently to build their businesses and this ruling is a testament to their hard work and dedication. We are proud to be part of an industry that empowers entrepreneurs – especially women – and creates real opportunities for success.”

Heisz continued, “Throughout this experience the FTC tried to strong-arm us into agreeing to impact the livelihood of tens of thousands of our brand partners. They didn’t want us to pay any commission to anyone other than the person making the sale, preventing us from rewarding our sales leaders in any way. There is no case law, rules or regulations that support the FTC’s demands. We would not acquiesce and instead chose to fight for the rights of our brand partners and became the first and only direct sales company to take this issue all the way through federal court with a favorable ruling.”

A Powerful Precedent

Neora’s executive team believes this government overreach poses a considerable threat to American entrepreneurs, but that this landmark victory will set a powerful precedent for protecting the rights of legitimate direct selling companies, as well as small business owners in other industries.

“When we proactively filed suit against the FTC on November 1, 2019, challenging the overreach of the FTC, we knew we would have a battle on our hands, but we were supremely confident that the facts and data would show the truth,” said Jeff Olson, Neora’s Founder & CEO. “Living out our mission statement of making people better sometimes means taking the road less traveled, making the hard choice to defend what is right at all costs. This isn’t just a win for our industry, it’s a win for American entrepreneurship.”

Olson continued, “Because Neora has always been built on a solid foundation with science-based products that bring true value to the market; a massive non-distributor customer base that represents nearly 80 percent of the company’s total revenue; and a modern ecommerce sales system that removes the needs for brand partners to carry inventory or incur unnecessary extra costs, we were able to take on and win this important fight.”

This multiyear effort has been a tangible illustration of Neora’s commitment to defending its brand partners through integrity, and the company remains dedicated to continuing and expanding its already robust approach to accountability and transparency.

Staying the Course. Growing Forward.

Heisz shared that the vast majority of its field leaders stayed with the company throughout the course of this trial and have even experienced some of their highest growth periods. All the while building an even stronger customer base because of its strong product portfolio. In the wake of a landmark win, she is even more optimistic about the future of Neora.

The post Neora Wins Landmark Case Against FTC first appeared on Direct Selling News.

In ten years, the company has generated more than $2 billion in cumulative sales and ranked #12 on Inc. 500’s America’s Fastest-Growing Private companies List, became a Direct Selling Association Top 20 member and was the youngest company to earn the honor of being included in the top 50 of Direct Selling News’ DSN Global 100 list. 

The company’s clean, performance-driven formulas have built a loyal customer base, attracting 2.3 million Preferred Customers and selling more than 40 million products worldwide. The products have also gained spotlight features in national and international media outlets like Allure, Shape and Bazaar.

CEO and Co-Founder Jeff Olson attributes this growth to the company’s three-part model, which includes results-driven products, an instant-gratification compensation model, and a culture of empowerment. 

“We believe in you until you believe in yourself,” Olson said.

Empowering Change for the Better

Neora’s culture has been driven by the desire to create a place where “people can build the business they’ve always wanted,” which for many Brand Partners includes the flexibility to work from wherever they are, cultivate meaningful work relationships and support their life goals through supplemental income.

The company’s mission of “helping people create happier, better lives” extends to making positive impacts on the world outside of Neora as well, through Neora Ripple Foundation, the company’s philanthropic initiative that has raised more than $6 million for charities dedicated to empowering people, including Big Brothers Big Sisters of America and World Vision.

It has also led to the creation of Neora’s sister company Live Happy, which promotes and shares authentic happiness through education, integrity and community awareness, and developed a happiness movement within the company’s culture. Because of this, Co-Founder Jeff Olson and CEO Deborah Heisz have been invited to speak before the United Nations on the International Day of Happiness, and both have been inducted into the Happiness Hall of Fame.

What began as a small startup is now a multibillion-dollar leader in the industry. As the company looks to the next decade, its leaders point to servant leadership as their roadmap to future success, and believe they are perfectly positioned to embrace the future by helping others over the years to come.

The post Neora Celebrates its 10th Anniversary first appeared on Direct Selling News.

“Neora is committed to providing tools to live a healthier and happier life, which is why we are excited to launch NeoraFit,” said Neora Co-Founder and Chief Sales & Marketing Officer Amber Olson Rourke. “This program offers everything you need to create and maintain a balanced lifestyle. By combining nutritionals that support your body around the clock with a system of easy-to-adopt healthy habits–plus accountability and support from our Brand Partners–we have created an all-inclusive program that’s simple and sustainable for everyone.”

NeoraFit supplements come from the company’s collaboration with experts in the field of fat loss, and the program is focused on encouraging positive behavioral change rather than gimmicks or rapid weight loss.

“We have spent years researching the right ingredients and technologies with the goal of helping others create a sustainably fit lifestyle,” says Founder and CEO Jeff Olson. “NeoraFit’s line of innovative supplements stays true to our promise of providing natural and clean formulas backed by science.”

The post Neora Announces New Weight Management & Wellness System first appeared on Direct Selling News.

Last November, right after Neora filed suit alleging that the FTC was attempting to improperly change direct selling laws, the FTC filed a lawsuit against Neora (formerly known as Nerium) and its owner Jeffrey Olson, alleging that Neora and Olson have been operating a pyramid scheme.

Recently Neora was successful in having the lawsuit transferred from New Jersey to Texas. The court found that New Jersey’s ties to the FTC’s filed case “are tenuous, at best,” including arguments the FTC presented regarding ties to New Jersey through Neora’s manufacturing process. The end-result was no substantive reason for not moving the FTC’s case to Texas, and so it was ordered on July 27.

On August 31, U.S. District Judge Sara Ellis granted the FTC’s motion to dismiss on the grounds that the claims presented are not ripe for judicial resolution and for lack of subject matter jurisdiction.

“Following the ruling to transfer the case from the FTC’s preferred venue in New Jersey, to our hometown of Dallas, Texas, we requested the dismissal in order to file our counter claims in Dallas and combine this into a single case,” said Deborah Heisz, Neora’s co-CEO. “Neora and Jeff Olson look forward to challenging the FTC’s overreach. As we said from the very beginning, we intend to defend ourselves and stand up for our industry with vigor.”

The post Neora/FTC to Be Single Case in North Texas District first appeared on Direct Selling News.

History circles back on itself. The commonplace gets modified over time with newer methodologies, but transformation—even in the world of direct selling—meanders through trial and error and sometimes re-emerges closer to the beginning than we expected.

Door-to-door sellers of the late 1800s introduced innovative, useful and pampering products to often isolated and ever-curious customers. That’s how the direct selling industry was born.

Selling products direct—where retail couldn’t or wouldn’t stretch—lightened consumers’ already heavy load. Quality products earned a loyal customer base for the sellers—often with regular routes—and the companies that would become household names: Fuller Brush, J.R. Watkins Co., Stanley Home Products, and later Tupperware, Avon, Mary Kay and the like.

As more than a century of industry transformation unfolded, the focus on customers waxed and waned. Never completely out of mind, customers sometimes fell down the list to other business model priorities. Some direct selling companies and their independent distributors experimented with financial growth strategies that became problematic, controversial and subject to scrutiny by regulators.

Amid the switchbacks taken by some companies, however, legacy direct selling businesses flourished by focusing on selling and servicing customers and sponsoring people who wanted to do the same thing. Central to their success was a business model based on actual customers buying real products.

Today, these types of companies identify as customer-centric—a newer label for something that’s been around in direct selling as long as the industry itself. Customer-centric companies possess really attractive products that disrupt traditional businesses to the benefit of the consumer, and they represent a 21st century direct selling business model that stands up to the expectations of customers, regulatory scrutiny and the sustainability goals for companies and the larger industry.

“As we march into a very different future, one where technology has changed the game, a new type of focus on customer acquisition and retention just makes sense. No business succeeds and achieves sustainable success without a strong base of real consumers,” says John Fleming, owner of Ideas and Design Group, LLC; former DSN Publisher and Editor-in-Chief; and former Avon executive.

WHAT CUSTOMER-CENTRIC LOOKS LIKE TODAY?

Customer-centric companies embrace their ability to fill a void in today’s marketplace, taking aim outside the channel to compete through product efficacy, value, impact and service. Product performance, pricing, packaging, marketing, customer service, shipping time and costs, loyalty programs and rewards—all of it aims to benefit, engage and retain the consumer. These companies invest in, focus on, track, and measure every facet in order to meet today’s consumer expectations.

“This is worth getting good at! The benefits to the company and the field organization can be massive, long-lasting and far-reaching. Repeat customer purchases create repeat sales and increased revenues. Customer-centric growth is typically more profitable and stable,” says Garrett McGrath, president of Elepreneurs.

Bouncer Schiro, CEO of Kynect, says the lifetime value per customer is exponentially greater as well. But the customer centric approach isn’t without its hurdles. “In the early days, our biggest challenge was that we were simply growing too fast. Our systems couldn’t keep up, but we solved most of those issues by listening to and focusing on the needs of our customer.”

“A quality product that provides high value is essential to get the consistent ongoing purchases from your ever-growing customer base. The most significant elements to get us there were first of all to ensure that our compensation plan was focused on customer acquisition and ongoing customer sales.

Secondly, we needed to have direct and consistent communication with our customer base around what about our products they like, what new products they were looking for and how we enhanced our preferred customer program,” says Stuart MacMillan, president of MONAT Global.

Customers are empowered these days, and their expectations are evolving. They find products and services at a click or with a simple voice command through e-commerce platforms. Most growing direct selling companies have robust customer acquisition and retention abilities online, as well as sophisticated point-of-sale systems that capture customer information and feeds data for all sales motions back to the home office.

“Direct selling companies that recognize themselves as platforms and provide the digital tools which enable distributors to market in a more personal manner will support a redefining of the direct selling model,” says Fleming.

QUICKENING THE PACE OF TRANSFORMATION

Technology is facilitating a transformation of the direct selling model, but it’s regulatory scrutiny that is—or should be—quickening the pace of companies to lean in to their customers.

The MLM regulatory landscape shifted in the U.S. with Federal Trade Commission lawsuits filed against Vemma Nutrition (2015) and Herbalife (2016), and more recently AdvoCare and Neora. These cases reflect a heightened scrutiny of both MLM compensation structures and unsubstantiated earnings claims. Companies have paid hundreds of millions of dollars in restitution; spent millions overhauling operational systems; restructured compensation plans; and in AdvoCare’s case, dismantled its MLM structure entirely.

While this type of scrutiny is not new, Brent Kugler, attorney with Scheef and Stone, says, “Today’s MLM company must have a compensation plan that in structure, practice and terminology emphasizes compensation and rewards based upon bona fide retail sales activity. Just as importantly, MLM companies should accurately and transparently disclose the earning or lack of earnings of all program participants, not just the participants who earned commissions in a given time period.”

The FTC has made clear that it intends to hold companies responsible for improper earnings claims made by their distributors and to expect aggressive scrutiny of MLM compensation plans that include threshold-based and duplication-based rewards.

Older comp plans that define volume and base rewards on distributor purchases need revision and rewriting to emphasize retail sales and rewards to distributors for verified retail sales activity instead. Calculations of distributor commissions, likewise, should generate from retail sales to non-distributors and omit personal purchase volume because it no longer counts in rank advancement. MLM purchase requirements should also change to minimum sales requirements.

“In the current regulatory environment, every MLM company needs to be taking a hard look at its compensation model and how it is deriving its revenues,” says Kugler. Recent FTC rulings indicate that companies—to remain compliant and not be labeled as pyramid schemes—must demonstrate actual retail demand for its products and services. This means a healthy majority of company revenues should be generated from bona fide sales to actual, non-distributor customers. Ideally, a customer-to-distributor ratio of 5:1 or higher is the aim, says Kugler.

DISTINGUISHING BETWEEN ICING AND CAKE

“The customer purchase decision must be able to stand on its own as a ‘fair trade,’ and then the personal touch by a caring consultant and the opportunity to earn by also supporting customers’ purchases is the icing, not the cake,” says Orville Thompson, co-owner and co-CEO of Scentsy.

Direct selling business models need to distinguish between icing and cake in order to remain FTC compliant. Customers do not have a representation agreement in place with a direct selling company. Distributors do have an agreement in place with a direct selling company. Differentiating and tracking purchases of active customers and distributors is vital because “actual” customers engage, purchase and continue to do so for enjoyment, not for the purpose of qualifying for some component of a compensation plan.

“The entire validity of direct selling is predicated on real customers, buying real products at real prices. By focusing on the customer and the product or service value being provided to them, companies can make decisions that bring sound business results while enhancing the direct selling environment,” says Thompson.

“If the product is relevant, distinguished and desired, then people will want it without having to start a home-based business. Indeed, if a direct sales company truly loved its distributors, it would ensure they succeed by having a high percent of their business done through retail sales,” says Jeff Bell, CEO of LegalShield.

“The only real money in direct sales is from a consumer who is engaged, satisfied and retained. Having a model focused upon signing up distributors is not only reckless but potentially illegal,” he adds.

“I believe that the days of just selling opportunity are long gone and that we have to lead with customer experience, customer education, and customer value,” says Brian Underwood, owner and CEO of Prüvit.

“If education and growth aren’t the focus and you build it based on the deal or opportunity, there is always another million-dollar deal out there, right around the corner. It doesn’t create any real new value or innovation,” he adds.

THE BENEFIT OF RAVING FANS AND CUSTOMERS

Distributors need valuable and innovative products and services to build a strong book of business. A high level of consumer experience generates repeat sales of in-demand products, and those loyal customers become the heroes of customer-centric direct selling companies.

“It Works! is a customer generating machine!” says Mark Pentecost, CEO. “This year, we’ve hit record sales with 75 percent of all of our sales coming from customers. That is industry changing!” They boast a 9:1 customer -to -distributor ratio.

“I think every company that has succeeded at a massive level is because of the benefit of having raving fans and customers. Raving fans share their passion with other people, which helps continue the company’s growth,” says Underwood.

“If you focus first on the value you’re offering your customers, your business proposition becomes more powerful and sustainable. Kynect’s customer-to-Associate ratio is 9:1, not because of the FTC’s influence but because our main focus is creating value for our end users. Then we worry about the business opportunity,” says Schiro.

“Customers have always been important to sustainable business growth. In our space—and in these unprecedented times—companies who produce impactful, affordable products and serve their customers well are outperforming those who are not. FTC Guidelines are pointing all direct selling companies in this direction. This IS the future of our industry,” says McGrath.

RECOGNIZING CUSTOMER- FIRST COMPANIES

With that future in mind, Direct Selling News launches a new Customer Centric Recognition program celebrating direct selling companies that boast high customer-to-distributor ratios and prioritize actual customer sales.

“Businesses built on customer acquisition and retention, especially those that meet the 5:1 and 10:1 customer to- distributor qualifications of DSN’s CCR will be the competitors to beat in this marketplace and environment,” says Stuart Johnson, founder and CEO, SUCCESS Partners.

“What gets measured—and recognized—gets done. With Direct Selling News having created the Customer Centric Program to recognize customer-first companies, it cannot help but have a positive impact on our profession,” says McGrath.

“More than two million people have felt the Total Life Change through our products, and we are hungry for more to experience it. That’s why we are so excited to be a part of this DSN effort and doing what’s right for our customers, our Life Changers, and our entire industry,” says John Licari, COO of Total Life Changes.

“DSN’s recognition has been a strong driver to company behavior for many years. Direct selling organizations have strived for the recognition and rewards that DSN has offered. As the direct selling channel faces increased scrutiny, we are super supportive of DSN’s focus on customer acquisition and retention. We believe this will be instrumental in focusing companies on healthy, long-term sustainable growth and enhance the reputation of a channel we have come to appreciate and so many millions of people rely on,” says MacMillan.

“It is so exciting to launch a recognition of the values, integrity and behaviors that will move our industry into a more sustainable future,” says Johnson.

The new CCR Program will be open to companies with a minimum of one year in business and $5 million in annual revenue. Active customers and distributors are limited to those in the U.S. and Canada. More details can be found at www.directsellingnews.com/ccr/.

RE-EMERGING MORE  VIBRANT THAN BEFORE

But actual transformation takes more than recognitions. In this regulatory environment customer centric-ish won’t be enough for the direct selling industry to re-emerge more vibrant than before.

“Customer acquisition, service and retention shouldn’t be the window dressing. It should be the absolute foundation of who we are!” says Andy McWilliams, CEO of RevitalU. He believes subtraction is necessary too. “Get rid of fees to join, big pack purchases and recruitment bonuses thinly veiled by customer acquisition minimums! LET’S CHANGE!!”

The days of direct sellers purchasing inventory and servicing customers personally is falling away. More companies are facilitating purchases and fulfilling orders for their distributors—while at the same time changing distributors’ customer acquisition expectations. Fleming says 20 or more loyal customers, who purchase frequently, is certainly the possibility for any direct seller who focuses on customer acquisition and retention.

“This changes the game and becomes foundational to a future that appears to be bigger and brighter. Those who aspire to be micro-entrepreneurs, or even entrepreneurs, will benefit from sharing with others this unique model, and sponsoring others who adopt the new behaviors. More focus on customer acquisition and retention will result in a much stronger business model for all involved. It’s exciting. Direct selling will also become a much more vibrant player in the general marketplace!” says Fleming

The post THE RE-EMERGENCE OF CUSTOMER-CENTRIC first appeared on Direct Selling News.

Deborah Heisz, Co-CEO of Neora, noted in the release that the FTC’s acts are in violation of efforts to rein in unelected federal bureaucracies and are a threat to the direct selling industry as a whole. “This is precisely the behavior that the President sought to prohibit in his October 9, 2019 Executive Orders, exhibit 1 and exhibit 2, as well as the Department of Justice in its November 16, 2017 Memorandum prohibiting all federal government agencies from utilizing ‘Guidance’ and other ‘off the book’ regulations to change the law,” says Heisz. “Neora has complied with all laws and the FTC’s most recent 2018 business guidance regarding direct sales business models.”

Founder and CEO Jeff Olson also went on the record about why they are taking the action against the FTC.  “Eight years ago, Neora began as a family-owned business seeking to change lives through our products and opportunities. We are the real deal; in the business of making people better, whether it is a hardworking parent or the budding entrepreneur looking to represent the industry’s leading products. Our Brand Partners work hard, and now it is our job to stand for them and protect the businesses they worked so diligently to develop.”

In the release, it states Neora retained renowned Ankura Senior Managing Director, Dr. Walter Vandaele, to conduct a thorough analysis of its data. Dr. Vandaele is a University of Chicago-trained econometrician who previously served as the Assistant Director for Regulatory Evaluation and Economic Advisor at the FTC’s Bureau of Competition. Neora states that this analysis establishes that 77 percent of commissions paid by Neora in the 2012 to 2017 time period (with approximately 82 percent in 2017) are for sales of product to ultimate end users. This greatly exceeds the law’s “primarily” standard, says Neora.

The company gave further evidence of the demand for Neora’s products. In 2016 and 2017, about 60 percent of Neora’s total sales were to non-business participants called “Preferred Customers”; which is considered high for the industry. The FTC has admitted that it has no material issues or concerns with the calculations or methodologies used by Dr. Vandaele.

“The reality is the lawsuit that we filed doesn’t just protect your business; it’s to protect the businesses of the 20 million Americans that are engaged in direct selling.”

– Deb Heisz, Neora Co-CEO

Nevertheless, despite repeated requests, the FTC has refused to provide Neora with its own alleged analysis. Instead, the FTC, according to Neora, is attempting to announce a new retroactive interpretation of how direct selling companies can operate without considering the actual data.

Olson believes no direct sales company is safe under the FTC’s new arbitrary retroactive standards. “We are an American small business and will take this David and Goliath-like issue and fight for the rights of the men and women who deserve a place in our American economy, and will not be bullied into settling for anything less,” says Olson.

Neora Field Leadership

Both Olson and Heisz addressed their field leaders this morning to discuss today’s developments before the announcement was made. Heisz said the suit was filed because first and foremost they wanted to protect their brand partners’ businesses. “In talking with the FTC they wanted to limit commissions in our businesses to only the person making the sale and the person who recruited the person making sale,” says Heisz. “We’re not willing to make that change, and disrupt the businesses that our brand partners have worked so hard to create. The reality is the lawsuit that we filed doesn’t just protect our business, it is to protect the businesses of the 20 million Americans that are engaged in direct selling.”

Founder and CEO Jeff Olson stated that he was ready for the challenge ahead. “We live in a land of laws, and there’s nobody above the law, even an agency within the government.” Olson also reiterated that he and his team have met with members of congress and feels support for their cause will only grow as a result of the action they are taking against the FTC. “We have the industry behind us, and I believe you’re going to see a lot more support for our cause in the next couple of weeks. This is not only about us, it’s for our industry and it’s the right thing to do.”

You can read Neora’s lawsuit against the FTC here

This story will be updated.

The post Neora Files Suit Challenging FTC’s Improper Attempt to Change Direct Selling Laws first appeared on Direct Selling News.