Some people claim Rodan + Fields is a pyramid scheme and a good for nothing scam.
Yet, others say it’s the greatest opportunity on the planet and that’s total BS.
With such strong opinions coming from both sides of the argument, who or what should you believe? Safe to say, getting to the truth of the matter can be very difficult.
Which is why you need to go beyond mere opinion and get the facts from someone who’s not promoting this biz op. Only then can you confidently decide for yourself…
First Of All, What Is a Pyramid Scheme?
A pyramid scheme is an illegal business model where people pay money to join, and recruit others to do the same. This continues with people recruiting people, who recruit people.
It’s all about chain recruiting as oppose to selling a genuine product or service to retail customers. The only money being made is through recruiting.
Only a small percentage of people ‘at the top’ make a substantial income with this model.
Why? Because a large number of new recruits are required for anyone to earn decent money. At any given time, it’s the masses at the bottom of the pyramid that fund the lifestyles of the heavy recruiters at the top.
It must be this way for anyone in such a scheme to be making big money. Period.
This is also precisely why ALL pyramid schemes eventually collapse, because there’s a finite number of people on the planet willing to join such a scheme.
As a result, recruiting (mathematically) must inevitably slow. When it does, people at the lower levels naturally start leaving. The end results is more and more people leaving from bottom to top, until the entire scheme falls apart.
What Is NOT a Pyramid Scheme
Something I’ve heard many mlm zealots say, is that all companies are pyramid schemes. This is absolutely ridiculous. Plain and simple.
You could argue that most companies are ‘pyramid shaped’. Since the executives at the top earn the most money, while lower level employees earn the crumbs. But that does not make them a pyramid scheme by any means.
In a traditional company:
- All employees earn (at least) minimum wage for the time they put in
- The company focusses on selling genuine products and/ or services
- Employees do not focus on mass recruiting
- The business model is sustainable
In a pyramid scheme:
- Most people earn far below minimum wage, to fund the few at the top
- The company does not sell genuine products or services
- The entire focus is on mass recruiting
- The business model is NOT sustainable
Clearly, there are significant differences between the two models.
Another common misconception is that multi level marketing is a scam or pyramid scheme. It’s not. They do leverage the same ‘multi level’ recruiting system as a pyramid scheme, but there are legitimate mlm companies out there.
So, what’s the difference between an mlm and a pyramid scheme?
Legitimate mlm’s have a much stronger focus on retail product sales as oppose to chain recruiting. This ensures the longterm sustainability of the company and business opportunity.
That being said, there are mlm companies that do “sell a product”, yet are far from legitimate.
This statement from the FTC puts it well:
Modem pyramid schemes generally do not blatantly base commissions on the outright payment of fees, but instead try to disguise these payments to appear as if they are based on the sale of goods or services.
In other words, some dubious mlm companies skirt around the law. The ‘product’ acts as a front to run an otherwise clear cut pyramid scheme. This is where the line starts to blur and why it becomes very difficult to actually determine a real pyramid scheme versus a legitimate mlm company.
Thus, it is absolutely critical to learn more before deciding on this issue. Read on…
Are The Rodan + Fields Products Legit?
Rodan and Fields is a multi level marketing company. As with any mlm, it’s important to know how legitimate the products are.
Are they really just snake oil used by a product based pyramid scheme, or a genuine product?
To be clear, I am not an expert on skincare products. However, I have researched these products from a business perspective and I do believe they are legitimate.
- These are real products people actually use
- There’s a good amount of evidence to support the product’s quality
- They sold over $1 billion in products in 2016 and are the #1 skincare brand in the US
- The official website is clearly focussed on acquiring genuine customers
- The company has been selling their product range successfully since 2002
There’s no disputing that the prices are higher than average, which is a common trait among product based pyramid schemes. But in no way does this constitute anything sketchy in and of itself. This is simply how the brand has positioned itself in the market, as a more exclusive ‘high end’ skincare product.
How great the products are I really can’t comment on. But there’s no reason to believe they are any less legitimate than comparable skincare brands in the market.
So they have a real product. Check. Now we need to dig a little deeper…
The Rodan and Fields Compensation Plan
There are various ways you can earn within the Rodan and Fields compensation plan. In this section, I’ll walk you through the details to show you how it works.
Full disclosure, this section is pretty boring, long winded and technical. But it’s super important to get to the bottom of this issue. So stay with me…
Becoming a Consultant
In order to become a R+F consultant you need to signup and purchase the $45 consultant kit. There are more expensive packages available that come with more products/ samples, but this is all that is required to get started.
Becoming an ‘Active Consultant’
In order to earn more than just ‘retail profits’ (explained shortly) a consultant must become ‘active’ and stay active. This means accumulating 100 ‘sales volume’ (SV) points each month.
Earning these points can come from customer sales, or buying for personal consumption.
According to the companies latest pricing catalog, this means selling and/ or consuming just over $100 in product each month to stay active.
Again, this is not required to earn retail profits. But to get into the ‘meat and potatoes’ of the compensation plan it is.
Ways You Can Earn
There are five main ways you can earn within the compensation plan as I’ll now explain.
How much a consultant earns within this income stream, depends on the customer discount level of who they are selling to. Consultants earn the difference in price between what they pay, and what the retail or preferred customer pays.
Consultants earn more from retail customers because the ‘gap’ between the consultant and retail price is greater. However, there’s an addittional way to earn from preferred customers as I’ll now explain.
From this point forward, you must become an active consultant to participate.
This pays out 10% commissions on any sales generated from your preferred customers, your consultants and your consultants’ retail customers.
This is where the ‘multi level’ aspect of this comp plan kicks in and where you need to understand how your downline works.
R+F uses a ‘unilevel’ downline system. This places a consultant at the top, and their personally sponsored consultants and preferred customers directly under them on ‘level 1’.
Each new level 1 consultant creates a new ‘leg’, and there’s no limit to how many legs wide this downline can be. Whenever your level 1 consultants recruit new consultants themselves, they are placed on your level 2. In this case, the downline continues infinite levels deep.
The 10% commission are calculated based on each products’ commission volume (CV) amount as per the pricing catalog:
For example, if all the sales from your level 1 consultants (including their retail customers) and your preferred customers came to 2,300 CV for that month, you would earn a $230 commission.
Personal Team Commissions
To earn this commission, you must hold the ‘executive consultant’ title or higher. Once qualified, this pays out 5% of the CV within your ‘personal team’ each month.
What is your personal team?
Your personal team includes every consultant within your downline up to and including the next executive ranked consultant. This also includes all personally sponsored preferred customers, and the preferred customers of any consultants below executive consultant rank.
To qualify for this income stream, you must hold the ‘level 1 executive consultant’ title or higher.
The personal team commissions I explained above stops paying out when any given leg reaches an executive consultant. But this is also where the ‘generation commissions’ kicks in.
Generation 1 begins with your executive consultants’ personal recruits, and ends when anyone under them is promoted to executive consultant.
In other words, generations start and end with each executive ranked consultant.
This same process is repeated down 5 generations total, with each generation paying out 5% commissions based on the total CV accumulated within each.
RFx ranked consultants (ranks explained below) can also earn 2.5% of their 6th generation.
There are also various performance based bonuses offered to consultants who reach certain milestones. This includes holidays, vehicles and other benefits depending on the achievement.
Consultant Titles and Qualifications
There are nine ranks in total. Each offers a higher level of earning potential and additional requirements must be met in order to qualify for each.
Consultant: Pay $45 for a starter kit to qualify and earn retail profits
Active Consultant: Maintain 100 SV each month (as with all titles moving forward) to qualify and earn consultant commissions.
Executive Consultant: Maintain 600 ‘personally sponsored qualifying volume’ (PSQV) each month to qualify and earn personal team commissions.
Note: PSQV is sales volume from consultants (including their retail customers) and preferred customers you personally sponsor.
Level I Executive: Sponsor one executive consultant to qualify and earn generation 1 commissions.
L-II Executive: Sponsor two executive consultants in two separate legs to qualify and earn generation 1 and 2 commissions.
L-III Executive: Sponsor four executive consultants in four separate legs to qualify and earn generation 1-3 commissions.
L-IV Executive: Sponsor six executive consultants in six separate legs to be eligible for generation 1-4 commissions.
L-V Executive: Sponsor eight executive consultants in eight separate legs to qualify and earn generation 1-5 commissions.
RFx Executive: Sponsor 15 executive consultants in 15 separate legs, 5 of which must start with a level V consultant, to qualify and earn generation 1-6 commissions.
The Average Rodan and Fields Consultant Income
According to the Rodan and Fields US income disclaimer, out of 286,709 consultants, only 161,361 consultants earned a commission in 2016.
Out of the 161,361 consultants who did earn a commission, here’s what they earned in the year 2016:
- 1% earned in excess of $28,156
- 10% earned between $4,841 and $28,156
- 50% earned between $647 and $4,841
- 39% earned $647 or less
There are other average figures shown in the disclaimer you may want to check out. But less than 1% of consultants are earning what many would consider a full time income.
It’s easy to throw stones at the company when you see data like this. But it’s not that simple.
For starters, how much money anyone in any business opportunity makes (regardless of the underlying business model) largely comes down to the effort they put in. How much time they spend learning, taking action and pushing through to get results.
This really cannot be overstated.
Some will conclude that the above figures prove it’s not worth it. Fair enough. I personally think it comes down to the individual and (provided the opportunity is legit) anyone can succeed if they really work at it.
In any case, I think it shows a lot of integrity when a company displays data like this so prominently. It’s also good that they don’t make wild income claims to begin with too.
Rodan + Fields Pyramid Scheme: The Verdict
I do not believe Rodan and Fields is a pyramid scheme or a scam.
For one thing, the company sells a tangible product people are actively buying across the globe. Again, I’m no expert in skincare. But they have reached some pretty incredible milestones so they must be doing something right.
R+F is also very open about how it works, how much money people are making and they do not push ‘get rich quick’ hype. However, there’s still ONE question remaining…
How much of the companies total revenue is coming from genuine retail customers?
Why does this matter?
As per the compensation plan, consultants can ‘self qualify’ for commissions by purchasing the required 100 SV (about $100) each month. This is very common in the world of mlm.
In order to qualify for earning the real money however, consultants must accumulate 600 worth of PQSV each month. This cannot come from personal purchases. It must come from purchases made by their personally sponsored consultants (and their retail customers) or personally sponsored preferred customers.
In and of itself, this is actually a good thing. However, this arrangement could be easily abused by consultants.
How? Anyone could sign up and recruit six consultants who all pay their $100 each month to ‘stay active’, and in doing so, meet this 600 PQSV qualifier. There is nothing tangible in place to stop this from happening within the compensation plan.
This ‘retail customer’ versus ‘affiliates buying to qualify’ really is at the center of this issue. And not just with R+F either. This is one of the most widely debated issues within mlm.
In any case, without knowing the numbers it is impossible to know for sure. Rodan and Fields is selling a legitimate product and they are operating ethically. Assuming they are running a pyramid scheme is purely speculation.
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