Usana’s Rich Distributors Get Richer

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This month, Usana Health Sciences (NASDAQ:USNA) is revealing a plan to help the rich distributors get richer. Rich distributors, you say? I thought no one made any money in Usana or any other multi-level marketing company?

Well, that’s almost true. About 99% of people in MLMs make no money, and end up losing anywhere from hundreds to tens of thousands of dollars. 70% of all commissions paid go to the top 3% of distributors. But never mind that! Usana wants to make the fraction of 1% who already receive all the money from the victims below them even richer.

Here’s the plan for enriching those at the top of the pyramid:

USANA is adding a new Bonus to help promote growth for our Top 25 Income Earners.  Each quarter, the Top 25 income earners (worldwide) will be determined and they earn a share of 1% of USANA’s world-wide Sales Volume Points for that quarter (now called the Elite Bonus). The amount an individual earns depends on (a) His or her position or rank (i.e. number in the Fortune 25) in the previous quarter, (b) The actual earning this quarter and (c) The absolute growth in Commissionable Volume Points he or she achieves this quarter over the corresponding quarter of the prior year.

Quintile pools: The top 25 income earners are divided into five equal quintiles based on their income rank in the previous quarter. Each quintile gets its own pool, which is a proportion of the overall Elite Bonus pool.

Top Quintile (#1 to #5)                =          35% of the Elite Bonus pool
Second Quintile (#6 – #10)          =          24% of the Elite Bonus pool
Third Quintile (#11 – # 15)            =          19% of the Elite Bonus pool
Fourth Quintile (#16 – #20)          =          14% of the Elite Bonus pool
Fifth Quintile (#21 – #25)             =            8% of the Elite Bonus pool

Income and Growth Shares: Each quintile pool is then divided into 45 shares – 30 for income and 15 for growth.  The 5 associates within each quintile earn a number of “income shares” and “growth shares” as follows:

(1)  The number of Income shares is determined by the proportion an associate contributes to the income of all 5 associates in the quintile
(2)  The number of Growth shares is determined by the proportion an associate contributes to the total absolute CVP growth of the 5 associates in the quintile.

Conditions:

1  In ranking the Top 25 Income Earners, all sources of income in the previous quarter (commission, leadership bonus, and global contests, etc.) will be included. However, the elite bonus earned in the previous quarter will be excluded.

2  Whereas the quintile an associate is placed is determined by his or her income in the previous quarter, the income shares and growth shares he or she receives is determined by his income in the current quarter. The associate does not share in a higher quintile’s Elite Bonus, even if his or her income this quarter places moves him or her into the higher quintile. The associate’s rank this quarter will only determine his or her quintile in the next quarter

3  Growth is measured by the absolute CVP growth versus the corresponding quarter of the previous year. Only the basic commission (CVP) is measured – all other income (leadership bonus, front-line commission, Elite Bonus, etc.) are excluded.

4  If an associate’s income registers a negative growth, the growth amount will be considered zero when calculating the total growth of the quintile.

5  An associate must be qualified to receive Leadership Bonus to be eligible for Elite Bonus.

6  If, for any reason, one or more of the Top 25 Income Earners become ineligible to receive the Elite Bonus, the associate immediate below in income rank will be moved up to replace him or her.

7  In the case of a tie in income earned in a quarter (say between #5 and #6 positions), the associate with the higher growth will be placed ahead of the one with the lower growth.

8 In calculating Income Shares and Growth Shares, the number of shares will be rounded to 2 decimal places.

Please note that the number of individuals participating in the elite bonus may increase as sales increase.  The number and frequency of individuals to be added has yet to be calculated.

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