One of the questions we need to address to determine if Herbalife is a Pyramid or Ponzi scheme is this: is the only, viable way to succeed as a Herbalife representative to bring in more associates who work under a principal? In other words, as discussed, Herbalife uses Multi-Level Marketing ("MLM") as its business model. A principal has to recruit associates (or, if you prefer, a sales person has to recruit other sales persons) in order to move forward.
A MLM is very advantageous to Herbalife because the sales persons are also customers. Obviously, in an MLM situation, the more people that are "recruited" by Herbalife means that Herbalife has a constant supply not only of new customers, but of salespeople that have to consistently buy the products. This means that Herbalife, theoretically, has two sources of income - the "buyers" who are in essence lower-level salespeople and the "sellers" who are in essence higher-level salespeople. The pyramid, or triangle, keeps on moving up - for each "seller" there are multiple "buyers" beneath him and each "buyer" becomes another "seller" who has to recruit new salespeople to work under him.
But, a real Pyramid or Ponzi scheme will collapse once people stop entering the pyramid. Remember - a Pyramid or Ponzi scheme is not really selling anything - the entire process revolves around constantly getting new people to continually sign up so that the profits move towards the top. Once there is a stoppage of fresh blood, the entire scheme will collapse. Contrast this with a non-Pyramid or non-Ponzi scheme where it does not matter if new people are attracted to the scene because the company or business is actually selling something, whether a good or a service, which people want.
A MLM is very advantageous to Herbalife because the sales persons are also customers. Obviously, in an MLM situation, the more people that are "recruited" by Herbalife means that Herbalife has a constant supply not only of new customers, but of salespeople that have to consistently buy the products. This means that Herbalife, theoretically, has two sources of income - the "buyers" who are in essence lower-level salespeople and the "sellers" who are in essence higher-level salespeople. The pyramid, or triangle, keeps on moving up - for each "seller" there are multiple "buyers" beneath him and each "buyer" becomes another "seller" who has to recruit new salespeople to work under him.
But, a real Pyramid or Ponzi scheme will collapse once people stop entering the pyramid. Remember - a Pyramid or Ponzi scheme is not really selling anything - the entire process revolves around constantly getting new people to continually sign up so that the profits move towards the top. Once there is a stoppage of fresh blood, the entire scheme will collapse. Contrast this with a non-Pyramid or non-Ponzi scheme where it does not matter if new people are attracted to the scene because the company or business is actually selling something, whether a good or a service, which people want.
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