Thursday, October 25, 2012

doTERRA Business 101

My wife and I were discussing the business side of doTERRA this morning, and it can certainly get a bit confusing. There are special offers on a regular basis, so let's look at one of those for a moment: the "free 50 product points" if you sign up between October 1 and November 30, 2012. How does that work? Let me explain as best I can—and I hope you like acronyms....

First, for every dollar you spend on product, you get PV—Personal Volume. Except, if you buy a kit the PV value will usually be less than the dollar value of the kit, since you're already getting a discount. For example, the Lifelong Vitality Pack has a wholesale price of $74.50 but you only qualify for 60PV with the purchase. If you bought the three items in the Vitality Pack separately (Alpha CRS+, xEO Mega, and MicroPlex VMz) you would need to spend a combined $143.50 for the three products, which would give you 143.5 PV (or is it 144 or 143? I'm not sure how/if they round). In this case, it's basically half price to get the whole pack, so there's little reason not to go this route in my opinion. Each month, you then sum up your total PV and you need to have at least 100PV to qualify for the business side of doTERRA, with some other opportunities available as well.

One of the most important of those is the Loyalty Rewards Program (LRP), which rewards you for buying product "automatically" each month. You can set this up when you sign up for doTERRA as an IPC (Independent Product Consultant), and you need to have at least 50PV on the LRP each month to qualify for the rewards. The LRP order can be changed at any time up until it ships (or maybe a few days before it ships), and it can be as big as you want but 50PV is the minimum. But what do you get for participating in the LRP?

Each month, product points are also accrued based on what you spend and how long you've been participating in the LRP. Here's the summary page. For your first three months, you get 10% of your LRP PV back as product points, 15% for the next three months, and so on until after a full year you're getting back 30% of your LRP PV in additional product. That's reasonably straightforward I hope, but again you have to qualify for LRP each month so you need at least a 50PV order, just to maintain. If you want to progress to the next percentage, you need to have 100PV per month. Confused yet? There's a bit more.

If you have your LRP ship before the fifteenth of the month, you can also get the free Product of the Month, as long as you have an LRP order of at least 125PV. Usually the Product of the Month is worth at least $25, so in my view you either go for the 125PV LRP order or just forget about the bonuses and LRP altogether. If you just stay at the base 10%, you get 5PV back per month on $50, so it really doesn't work out to all that much. If you do an LRP order of 50PV but then decide to buy 150PV outside of the LRP, that also doesn't count, so make sure you order product through the correct channel!

There's another extra that's worth mentioning: if you buy into doTERRA with at least a $500 (or is it 500PV?) order, you jump straight to the 15% LRP tier. So you cut three months off your LRP advancement.

All told the LRP gives you the potential to earn 30% of your LRP purchases back as product points, but to do so you'd have to be active on the LRP for 13 months (10 if you start with $500+ in purchases). That's a long time and a lot of product, so at least from my perspective such a goal only really makes sense if you're serious about the business aspect of doTERRA and/or plan on using a lot of product. Whew! Oh, and as a final parting shot, you can't spend any of your product points until you've been active for 60 days.

Going back to that free 50 product points when you sign up with a 100PV or more order, that's a special case. When you do that, you're credited the 50 points within 24 hours, which you can then call customer service to redeem for additional products. There's no additional waiting period on being able to use these points; however, there's a $3 per $100 spent processing fee, so you might want to save up and spend an even $100 (or not). So through the end of November, if you sign up with an order of at least 100PV, you then automatically get an additional 50 product points to be used as you see fit. These points can be used for future "purchases", with one point being equal to one dollar (e.g. 75 points would allow you to order an extra Lifelong Vitality Pack). Also note that these "purchases" don't qualify as additional PV/OV/TV for your business; they're only for getting free product.

The simple summary then is that the more you spend on doTERRA products, the more they'll give you back for additional samples. If you're signed up and buying 100PV or more on the LRP each month, after a year you're now essentially able to buy at 30% below wholesale—which would be awesome if you're running a retail store. That brings us back to the main subject of the doTERRA IPC business.

There are basically several ways to earn money. The first is that you can sign up as an Independent Product Consultant (IPC), which gives you a 25% "wholesale" discount, and then you could sell the products retail. By signing up, you agree not to sell below the retail pricing, so I can't legally for example buy On Guard at $32 per 15ml and sell it to someone at a price below the retail $42.67, so that's the price you should expect to pay as a non-member. Ironically, Amazon lists On Guard for just over the $32 price as a regular sale, so you basically can't compete with other retailers and would need to prey on people that want the product now. I honestly can't see this retail aspect being all that successful unless you run a health products store, massage clinic, etc. as anyone really interested in buying doTERRA regularly should pay the $35 signup fee.

The other ways to earn money are all commission based, with three basic areas to earn. First is through Fast Start bonuses: when you sign up a new IPC (or someone in your first two levels signs someone up), you get a percentage back of all their PV for the first 60 days: 20% for level one (directly under you), 10% for level two, and 5% for level three. Second is that after the first 60 days (and for people higher than level three—so levels four through seven), you earn a smaller percentage of the PV, based on how large your organization happens to be. Here's the full rundown, and you can also see this handy Compensation Plan PDF. The third option is the Power of 3 Team Bonuses, which warrants it's own paragraph.

For the Power of 3(TM!) bonuses, you earn the first by getting (at least) three people under you ordering 100PV or more on the LRP, with a combined 600 TV (Team Volume) for you and your first level. That will net you $50. To get the second bonus, you need to get three members of your first level to earn the $50 bonus, which will get you $250. (At this point, note that anyone reaching the second bonus should now be profitable as far as doTERRA goes—you can order $250 worth of product per month and you'll make at least that much back.) Finally, if you can get three members of your first level to earn the $250 bonus you get $1500. Needless to say, you'd have to work quite hard to get at least 27 people in your first three levels, with all of them ordering at least 100PV per month on the LRP.

Just for kicks, let's say you have that much volume in your organization. Besides the $1500 Power of 3 bonus, you also get a minimum of $168 per month just from the small 2% to 5% commissions on your first three levels. (Realistically, if you're able to get the $1500 bonus, you can probably quit your day job and focus on doTERRA full-time.)

Finally, if you can advance up the ranks far enough, starting at the Silver level there's profit sharing from the total volume of doTERRA sales as a whole. My understanding is that in general, one share of the Diamond Performance Pool is typically worth several thousand dollars, though obviously there aren't that many people that reach Diamond or higher. The other pool shares are worth more or less, depending on the pool and how many people qualify, but anything above Silver seems like you'd be making a fairly sizable monthly income.

And there you have it: doTERRA's MLM plan in a nutshell. And now you probably also have an inkling of why so many people get confused by MLMs and quit before they make any money. I've heard that the rule of thumb is that if you put a solid three or four hours of time into an MLM each week—talking to people, learning about business ideas, learning about the products, etc.—that you should be able to turn a profit within the first six months. If you're good, you can probably get there within a couple months, and if you're really good you can probably hit the point where you're into the $5000+ per month income range inside of a year. I'm not that good, as you've likely figured out by now.

As a relatively new company, doTERRA is still growing quite rapidly and there are many people out there who would love the products but don't yet know about them. I'm sure the better salespeople out there could turn this sort of opportunity into a major money making business. I'd love to get there as well, but I'm not much of a salesperson and as the title of this blog indicates, I'm more of a skeptic. If my long-term experience with doTERRA is positive, I'll happily try to get others using the products which eventually should get us to the point where we at least break even, but I've still got a ways to go before I reach that point. If you on the other hand have heard enough and are ready to take the plunge now, drop me a line and I can help you get started and put you in touch with some folks that are well established in the doTERRA business who can explain things a lot better than I just did.

--== doTERRA Skeptic ==--

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