Part II – Do Diamonds make most of their money from selling tools?

Back in 2009 I wrote a post Let’s Talk About Tools Part I, beginning a conversation about an area that has been of some controversy in the Amway world – the promotion and sale of Business Support Materials or BSM. After a mere 5 year break I’m finally here to talk about Part II – Do Diamonds make most of their money from selling tools?

Just today I saw a claim from an MLM critic that (in 2004) “the best of the best (Diamonds) were earning $250k/yr, but only $60,000 from sales/downline sales.”

He was claiming that while Amway Diamonds and above were making more than $250,000/yr, only about $60,000 of that was from the sale of Amway products through their network – the rest from the sale of “tools” – books, CDs, and seminar tickets. It’s not an unusual claim. Amway critic “Joecool” regularly makes similar claims, and former IBO Scott Johnson (aka Tex) is absolutely obsessed with the idea, commenting about “Stop the Amway Tool Scam” on virtually any news article or website that mentions Amway.

So is there any truth to this claim? As I point out in Part I, successful Amway IBOs can and do earn money from (1) the production and resale of training products and  services to Amway organisations (2) the sale and distribution of tools through ones own downline and (3) by selling their services as professional speakers.

So how much do they make?

Several years ago I and a number of other Amway bloggers were invited to participate in a panel discussion with Amway staff. One of the invitees was the tool-profit obsessed Scott Johnson, so I decided to see if I could get some hard data and information about how much Diamonds made from BSM sales. I emailed all the various “support organisations” I could find contact information for, including Britt WorldWide (BWW), eFinity, INA, Network 21, Yager Internet Services and others to see if they would share some information. Unfortunately only one of them was willing. For confidentiality reasons I won’t name them, but they’re a very significant and large group.

For this company, qualified Amway Platinums and above could earn a monthly volume rebate on the BSM purchased by their Amway organisation. CDs for example sold for a retail price of $7. However, just like with Amway, there was an increasing discount (paid as a rebate) for larger volumes, as follows -

VolumeRebate
 ($US)
0-4990
500-9990.50
1000-19990.75
2000-39991.00
4000-59991.20
6000-79991.40
8000-99991.60
10000-149991.80
15000-199992.00
20000-299992.20

A similar rebate scale works for tickets to seminars. For example, qualified Emeralds and above earned the following rebates on tickets to major Weekend Seminars -

VolumeRebate
($US)
0-490
50-1495.00
150-24910.00
250-49915.00
500+20.00

The schedule works like the bonus brackers of Amway, so a Diamond earing at the “WES 250″ bracket would most likely be “paying out” of their bonus to at least a couple of Emeralds. A Founders Platinum with a volume rebate of 75 cents might be paying out 50 or even 75 cents of that to another downline Platinum.

In addition this organisation pays speakers to present at major functions. Airfaires, hotels, and a per diem for expenses are paid, along with a speakers fee. This fee averages about $3250.

Now, just like with Amway, there are huge differences between organisations. A Diamond can have 6 platinums all in the US, or thousands of platinums spread around the world. So there can be huge differences in their Amway income, and huge differences in the volume of BSM materials they move through their organisation. But how does the BSM income compare to Amway income?

Well, in 2007 the average North American Emerald earned around $70,000 from Amway.

The average North American Emerald in this organisation in 2007 earned around $7,000 from BSM rebates and speakers fees combined.

The average Emerald had “system” or “tool” income of around 10% of their Amway income.

In 2007 the average North American Diamond earned around $155,000 from Amway.

The average North American Diamond in this organisation in 2007 earned around $23,000 from BSM rebates and speakers fees combined.

The average Diamond had “system” or “tool” income of around 15% of their Amway income.

Now, this data is now 7+ years old and it’s important to note a few things. First of all, different BSM companies calculate their rebate systems in different ways. I’m told for example that in the past some BSM companies paid their rebates not based on volume, but based on the pin level they had achieved. So someone who had qualified Diamond received the Diamond rebate level - even if their volumes had dropped and they were no longer qualifying as an Amway Diamond.

Different groups also have different numbers of CDs and meetings they encouraged their groups to attend. I’ve heard of groups that encouraged the members to buy as many as 10 CDs a week. Others are 4 or 5 a month. Obviously if you’re selling a lot more CDs then you’re making a lot more money from this income source. Similarly some speakers are far more in demand (or have far more personal desire) to be on the speaking circuit, and this earn more from that income source. There are also other differences in how the profits (if any) of the production companies are used and/or distributed.

So yes, some Diamonds, in some organisations may earn more from their BSM related activites than from Amway. But this is unusual, not the norm!

Furthermore, in 2007/2008 Amway implemented a whole new accreditation system for companies that supplied BSM to Amway IBOs. As part of this Amway required the companies to allow an independent marketing firm to study their compensation plans for fairness and Amway’s approval. Many changes had to be made – including moving from an “pin level” based rebate to a volume rebate. On top of that, Amway also drastically increased a range of bonuses. In 2007 the average Diamond earned around $155,000. In 2014 the figure is over $600,000.

In the past, cases of Amway Diamonds and above earning more from “tools” and “the system” than from Amway occurred but were not common. In 2014 it’s virtually non-existent.

No, in general Diamonds do not make more money from tools than from Amway.

Amway wants me to shut down Amway Wiki

Update: A reader informs me that Amway’s Business Conduct & Rules department and Amway’s Legal department are not related. To be clear the letter I received was from Amway Business Conduct & Rules so I’ve edited the article below accordingly.

Years ago there was a website called Quixtar Wiki. It was run by Amway and Quixtar critics and they filled it essentially with criticism and anything negative they could find about the Amway and Quixtar businesses, and some stuff that was just plain made up. Any time you searched for a Diamond’s name, it would rank near the top of Google’s listings. So, if you invited some prospect to come to a seminar to listen to a successful Amway achiever, they’d google the person’s name and end up on a virulently anti-Amway website.

Good stuff, eh?

So nine years ago I started Amway Wiki, which would give a true picture of the business. I wouldn’t hide the negative – court cases, divorces, terminations, whatever – that kind of information is there too. But so is all the positive stories of the thousands of Diamonds around the world. Today, if you invite one of your prospects to a meeting to hear from an Amway Diamond, and they google the name, odds are AmwayWiki will be at or near the top of the pile – and people will get a positive view, the truth.

Today, AmwayWiki gets around 50,000 page views a month, from thousands of people around the world. They get a perspective on Amway written by hundreds of editors from around the world, mostly (I assume!) Amway IBOs themselves.

I personally rarely edit AmwayWiki.  Indeed, I no longer even own it (or this site for that matter). AmwayWiki was just one of a number of web properties I packaged as a deal in exchange for shares in a company that owns a variety of websites.

Every now and then though, someone from Amway corporate around the world has emailed me and asked if I can make some changes to an article. It’s an open wiki, so they could actually edit it themselves – as can anyone else – but I usually help and make the changes. Sometimes it’s to correct errors, sometimes it’s because they’re concerned there’s too much Line of Sponsorship (LOS) information in the article.  LOS data can be valuable to competitors to Amway who may try to raid entire Amway lines and convince them to move companies.  In acknowledgement of this, since the beginning of Amway Wiki I set a guideline that (except for exceptional historical cases) only Diamond and above achievers should be listed. No Emeralds, Platinums, or others. Occasionally people put this information in, and if I become aware of it, I delete it.

There are now thousands of articles on Amway Diamonds from around the world. I think I’ve written or contributed to only a handful. During the week I received a phone message from Amway legal Rules & Conduct department asking me to contact them about the wiki. I emailed them but it appears there is something wrong with Amway’s email setup as two of my addresses were rejected and the third I received no response from.

So today my US upline who handles my business there sent me a scan of a letter I’d received. They want me to delete all of the Diamond pages, or disable the website entirely. Previously when they’ve requested smaller changes they’ve threatened to cancel my IBOship if I don’t comply.

One wonders if Amway Legal has ever read How to Win Friend’s and Influence People!

So, Amwayites around the world – what do you think should happen to Amway Wiki? Give me your thoughts in the comments, and perhaps let your local Amway office know as well.

The Andhra Pradesh High Court did NOT determine Amway India was an illegal money circulation scheme

In news out of the state of Andhra Pradesh in India today, Amway India CEO William Pickney has been arrested and taken in to custody for the second time following what can only be called frivilous and false allegations against the company. I’ll post some more on this but first I want to address a lie falsehood that is continually spread about past legal proceedings against Amway India. This lie was repeated in numerous newspapers today, and has done in the past as well. Here’s one example from today, reportedly from an Andhra Pradesh Police statement -

a division bench of the High Court held that the scheme of Amway is illegal Money Circulation Scheme and falls within the “mischief of definition of Money Circulation Scheme.

A little history is necessary to understand the situation here.

In 2006 Andhra Pradesh state police (CID) shut down Amway in that state claiming it violated India’s Prize Chits and Money Circulation Schemes (banning) Act.

 

Amway petitioned the High Court and an injunction was issued against the CID, allowing Amway to reopen. Amway then went further and asked the High Court to dismiss the CID case completely. The High Court rejected that request, stating -

if the allegations contained in the report of C.No.1474/C-27/CiD/2006 dated 24-9-2006 are taken on their face value they make out an offence punishable under the provisions of Sections 4, 5 and 6 of the Act.

The “allegations contained in the report” are the Andhra Pradesh Police’s claims about how Amway operates. The High Court simply said that if what the Police claim is true, then Amway is in violation of this act, so the case shouldn’t be dismissed and the allegations should be investigated. In August, 2007 the  Indian Supreme Court ordered the Police to complete their investigation within 6 months, so the case could proceed. After 7 years it still has not been completed.

Here are three key examples of some of these “allegations” -

“a person who joins as distributor is required to enroll six persons”

False. A person who joins Amway isn’t required to do anything.

“the money the person at the top of the group is supposed to get according to the scheme includes the money which the first member, pay either towards subscriptions (initial/renewal) or by selling products.”

False. Distributors don’t earn any income at all from subscriptions.

From renewal fees, Amway earns “easy/quick money sans any service to the distributors/ members.”

False. Amway provides significant services to distributors in exchange for membership fees. Furthermore, the “easy/quick money” part of the law in question is regarding promoting you can earn it by joining Amway. Not that it’s quick and easy for Amway itself. (note: these fees have since been removed in Amway India anyway)

I completely agree with the Andhra Pradesh High Court! If the allegations are correct then Amway may be in violation of Prize Chits and Money Circulation Schemes (banning) Act, so a full court hearing is a perfectly reasonable thing to have to establish whether the allegations are true or not, and it would be unreasonable for the High Court to intervene and simply dismiss the case before it had even started.

Nearly 7 years later this case has still not proceeded, and the Andhra Pradesh Police are outright lying wrong about what the High Court said.

What does a Professor of International Business think about Amway?

Professor Ing Jiří Jindra, CSc.  is a Full Professor at the University of Economics, Prague, in the Czech Republic, with nearly 100 academic papers published in peer-reviewed academic journals. A few years ago he was interviewed and asked what he thought about Amway. A new Czech blog, Amway Fakta, has posted a video of the interview with English captions. Have a listen (or read! don’t forget to press the CC button to get the english subtitles) to what a  expert says about the Amway business.

Thanks for the great work, Amway Fakta!

Amway North America proposes biggest changes to compensation plan in 25 years

Amway LogoAt the recent North American Diamond Club, Amway announced a proposal for significant changes to the basic compensation plan in Amway’s oldest market. Probably the most obvious change is the removal of the 3% and 6% bonus brackets, combined with halving the group volume requirements for 9% down to 300PV.

Replacing the 3% and 6% bonus levels will be a tiered “rewards” system offering discount coupons on Amway purchases the following month. For generating 100-149PV IBOs will earn a $10 discount, for 150-199PV $20 and for 200-299PV, $30. This program is similar to one introduced in Amway Europe a couple of years ago, where IBOs receive a 10€ discount coupon to use the following month. Unlike North America, however, the 3% and 6% bonuses remain (albeit at the higher volume levels of 200 and 600 points). Continue reading

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