MLM & Elevacity - Marketing Structure
Elevacity operates a 12-rank affiliate MLM scheme where Elepreneur affiliates can gain Check Match Bonus and other bonuses based on an unilevel compensation structure as they level up in rank. After a thorough research into Elevacity's MLM scheme and how it correlates with MLM and the pyramid scheme in general, its financial performance, testimonies, and possibilities, research has shown that Elevacity appears to walk a thin line between the a 'true' MLM scheme and the illegal pyramid scheme. Therefore, caution should be applied in dealing with them.
To address this request, we searched through the official website of Elevacity. However, we found no information on its multi-level marketing scheme (MLM). We only discovered that one would have to be referred by an "Elepreneur" to gain access into its marketing scheme. Further search into Elepreneur showed that it is Elevacity's marketing outlet/platform. Research into Elepreneur's website revealed no information on its MLM unless one logs in or signs up; hence, we had to use other third-party industry and review sites to provide an overview of Elevacity's/Elepreneur's MLM scheme. Also, for the purposes of this research, Elevacity and Elepreneur as a brand are used interchangeably; however, they all refer to Elevacity.
To identify the problems of Elevacity's MLM, we searched through survey and review sites that focus on businesses and marketplaces such as Better Business Bureau. We also searched media reports to see what they are saying about Elevacity's MLM structure. However, we could not find much on this regard. Hence, we expanded to the general MLM space to identify some problems that may be peculiar to Elevacity's MLM structure since it is assumed that all MLM structure would always have a pyramidal basis. The difference would only be the reward size and benefits.
Lastly, based on the problems we have established on Elvacity's MLM scheme and the general problems with MLM, we drew inferences and addressed the notion if Elevacity is a sham or not. Note that we have used data beyond 24 months because of their relevance in addressing some parts of this request.
ELEVACITY/ELEPRENEUR: MLM OVERVIEW
Elevacity operates its MLM scheme through Elepreneur where it organizes and manages its salesforce and network of marketers. Just like every other MLMs, Elevacity's MLM scheme involves an Elepreneur and his/her affiliates or downline. Elepreneurs earn money by driving retail sales of Elevacity's range of health products and as usual, compensation/commission from the recruitment of affiliates into the network. On average, a retail customer can earn 25%-45% on sales from personal inventory.
- Joining Elepreneur:
To join the network, new affiliates are required to pay a basic affiliate membership of $49 annually or they can opt for a one-time purchase with an 'enrollment pack,' which ranges from $249 to $999. There is also a $40 mandatory monthly autoship fee that Elepreneurs must pay to be eligible to get their benefits.
- Elepreneurs Affiliate Ranks:
According to reports from BehindMLM, Elepreneur's MLM features 12 affiliate ranks and each rank has a specific sales volume its downline is required to generate monthly for an affiliate to level up. This is called 'group volume' (GV) which includes an affiliate's personal volume (PV) and his/her affiliate's/organizational volume (OV) in an affiliate's downline. These parameters mostly determine how much an Elepreneur is compensated. The ranks are as follows:
- Star — sign up as an Elepreneur's affiliate
- Bronze — generate 2,500 GV a month
- Silver — generate 5,000 GV a month
- Gold — generate 10,000 GV a month
- Platinum — generate 20,000 GV a month
- Diamond — generate 40,000 GV a month
- Black Diamond — generate 80,000 GV a month
- Royal Black Diamond — generate 150,000 GV a month
- Ambassador — generate 300,000 GV a month
- Crown Ambassador — generate 500,000 GV a month
- Royal Crown Ambassador — generate 1,000,000 GV a month
- Triple Crown Ambassador — generate 2,000,000 GV a month
- Check Match Bonus:
When an Elepreneur recruits a new affiliate, they earn a 'Check Match Bonus' of 22% on the earnings of the recruit. On the second recruitment, the Check Match Bonus rises to 44%, to 66% on the third recruit, to 88% on the fourth, and so on.
- Infinity Bonus:
In addition to the Check Match Bonus, Eleprenuers who recruit at least three affiliates automatically unlock an Infinity Bonus, "a 20% match on sales volume generated by the two highest performing affiliates (out of 3 affiliates per group level) of each recruited affiliate." This bonus also works on an unilevel compensation structure of 3s — an Elepreneur affiliate is placed at the top of an unilevel team. Then, each recruited affiliate is placed directly under him/her as level 1. If each level 1 affiliate recruits a new affiliate, the recruit is placed directly under the level 1 affiliate, and becomes the level 2 of the initial/top Elepreneur affiliate. This continues down the line in that order. Thus, each affiliate sub level can be grouped as three affiliates. This infographic describes these levels in detail. With this structure, "an Elepreneur's affiliate earns a 20% match on every unilevel team level (top two affiliates on each level) as their personally recruited affiliate’s downline grow deeper."
Other bonuses include the E-Infinity Team Commissions, Lifestyle Bonus, Global Bonus Pool, and SHRV Stock Rewards. The E-Infinity Team Commissions is a 22% bonus paid out to via the unilevel team when earnings are not paid either through the Check Match Bonus or Infinity Bonus. The lifestyle Bonus is meant for Gold and other highly ranked Elepreneurs. While these Elepreneurs can earn between $500 to $100,000 in bonuses, they must meet an additional personal volume (PV) of 80. The Global Bonus Pool is generated from 4% of the company-wide sales volume. This share is split into five groups and distributed among affiliates with Royal Black Diamond ranks and above. The SHRV Stock Rewards rewards Elepreneurs with stocks with the parent company, Sharing Services, Inc., based on affiliates' rank.
PROBLEMS OF ELEVACITY: A GENERAL PERSPECTIVE
According to complaints filed on BBB by Elepreneurs, a good number of them were on the mandatory monthly autoship fee that affiliates must pay to be eligible to receive benefits. To corroborate this information, BehindMLM revealed that during sign up, Affiliates are required to pay $40 or more for a monthly autoship order or they cannot progress. This is a 'pay-to-play' red flag that points towards affiliate recruitment, which is the only way Elepreneur affiliates can improve on "their effective commission rate." These commissions from are then paid to each Elepreneur affiliate with viable downlines.
Furthermore, as revealed by Behind MLM, a careful analysis of Elepreneur's compensation plan shows that compensations are pivoted around volume requirements; there are no retail requirements tied to the compensation plan. This also shows an inclination towards affiliate recruitment. In plain description, "customers sign up as an Elepreneur's affiliate, establish a monthly autoship order and then get paid to recruit others who do the same." To better understand how these two issues raised above 'could' be considered problems, we take a high-level look at the similarities and differences between multi-level marketing and the much-considered illegal pyramid scheme and its problems.
Essentially, the only difference between the MLM and pyramid scheme is that the pyramid scheme is illegal. However, both leverage a limitless system of networks to drive earning opportunities; "they depend on recruiting people to become distributors of a product or service." A pyramid scheme has all the features of an MLM; however, the key difference is in the way they operate. While the core aim of MLM is to leverage the vast network of distributors to move product, it is not so for the pyramid scheme. It's usually only to pay in a compulsory fee, start the recruiting round, and then earn money from downline payments. According to the US Federal Trade Commission (FTC), an MLM scheme has a real product to market and if a distributor earns primarily from their sales to the public, it is legitimate. However, if a distributor earns primarily based on the number recruits and sales to them, it is probably a pyramid scheme.
Another aspect of the MLM and pyramid scheme analysis is that even pyramid schemes now pretend that they are product-focused, but this a smokescreen to cover the very scheme they operate. This is revealed by various articles from authoritative sources like the US FTC. This way, we find that there is a thin line between MLM and the pyramid scheme, with almost little or no differentiating factor. However, there are some checklists provided by reputable experts in the MLM/pyramid scheme industry, such as Robert Fitzpatrick, to help identify pyramid schemes. Of these checklist items, the most important questions include:
- "Do you have to pay for your sales job?"
- "Is it really about selling?"
- "Is it actually about recruiting?"
Similarly, another checklist published by The Balance Small Business puts these questions forward succinctly:
- "Are you required to 'invest' a large amount of money up front to become a distributor?"
- "Is there more emphasis on recruitment than on selling the product or service?"
- "Is the plan designed so that you make more money by recruiting new members rather than through sales that you make yourself?"
- "Are you offered commissions for recruiting new members?"
An attempt to answer these questions for Elevacity based on the two issues already highlighted above (a mandatory monthly autoship order and the seaming emphasis on affiliate recruitment), we can infer that the idea of a mandatory monthly autoship order and major focus on affiliate recruitment are problems in Elevacity's MLM structure because they make the company appear to be operating a pyramid scheme rather than a 'true' MLM scheme. This issue is probably what led to an FBI investigation of Herbalife and its MLM operations. More so, experts like Robert Fitzpatrick and Bill Ackman maintained that Herbalife operated on a pyramidal scheme, and as such, was considered fraudulent.
THE BIGGEST MLM PROBLEM
Elevacity's MLM structure, just like every other MLM structure, has one big problem — the problem of market saturation leading to an unsustainable business. In the real world, it's a common practice not to overhire or oversupply a market. Demand and supply must always be kept in check. However, the MLM space is highly unregulated with no control. Even Fitzpatrick argued that the last thing a marketer wants is to find his/her next door neighbor marketing the same product. As such, the "MLM is set up by design to blindly go past the saturation point and keep on going." "It will grow till it collapses under its own weight." Supply keeps on rising until the market is saturated and when this happens, inevitable losses set in and companies fold.
IS ELEVACITY A SHAM?
The fact remains that Elevacity is gaining traction financially. After all, it is leveraging an almost limitless network of affiliate system to drive sales. Therefore, it is easy to infer that its MLM scheme is functioning optimally. To back this up, there are testimonies of Elepreneurs who are leveling up the affiliate ranking system. A typical example was found in a report published by on February 2019, by Business For Home, the report showed that top leader Tommy Wyatt leveled up to the Black Diamond rank at Elepreneur. Nevertheless, caution must be applied with Elevacity just like with all MLM schemes. Its scheme, while prosperous at the moment, may not always remain the same due to the following reasons:
- Because research has shown that Elevacity's MLM structure has inherent problems that suggest that it is operating a pyramid scheme, it may only take a while for critics set in or even involve law enforcement agencies. "Since 1996, the Federal Trade Commission has filed 26 pyramid scheme cases against MLM companies, each time emphasizing false earnings representations and other deceptive marketing." In all these cases, MLM companies lost.
- Because research has shown an inherent problem with the MLM scheme, there's a chance the business may not be sustainable in the near future due to possible saturation. More so, if it truly operates a pyramid scheme (one that encourages customer recruitment to gain benefits), then it is going to drive the market saturation process even faster than normal, as more and more affiliates troop into the program.
In conclusion, based on financial reports, analysis of its MLM scheme (compensation plan) with respect to the general idea of the scheme and testimonials, the capacity to make money through Elevacity's MLM scheme is real, though it is dependent on factors such as affiliate rank and general downline position. However, there are potential issues surrounding the whole scheme, and as such, one should approach them with caution.