Efusjon – A perfect example of what to avoid in MLM

Efusjon, often spelt with a lower case ‘e’, launched in early 2009 with great hype and fanfare. The opportunity to make enormous amounts of money with efusjon was forcefully marketed on the social network, Facebook. Indeed, some members who used Facebook literally became efusjon extremists.

Well right now, efusjon is being sued in California for operating as an illegal pyramid scheme. The reason for that is the only way for distributors to make money in efusjon is to recruit people into the network.

See, a network marketing business model is sustainable because there is the constant movement of a quality product to the end consumer who’s happy to pay for it. A pyramid scheme is a non-sustainable business model that impoverishes 9 people for every 1 that gets rich.

This case demonstrates that just because a company has a tangible product and is using a multi-level marketing distribution channel to get it into the hands of consumers, it does NOT mean that the company is not running an illegal pyramid scheme.

Now, the Third Pillar of “The 5 Pillars” of Network Marketing is “A Remarkable Product at a Value Price”.

In the case of efusjon, they do actually have a good product. They’ve put a different twist on the bloated, but growing energy drinks market by mixing in health ingredients such as acai berries. They promote the anti-oxidising benefits of the product. No problem. The problem is, the products are not value priced.

The retail price for a case of 48 efusjon energy drinks is $140, or approximately $2.92 per can. That is significantly more than you would pay for a can of Red Bull at a convenience store. But that’s not all…

The wholesale price for the case of 48 cans, the price at which the distributors buy, is $120, but they also have to pay thirty six dollars $36 to get the stuff delivered as well. So that’s a total of $156 for a case of energy drinks that they can now retail at $140!

Who’s going to retail when they’re losing $16 for each case they sell?

The Company does give each distributor a replicated website where they can sell units of the product for $35. But the commission they get for selling the through their website is only 4.5%, or about $1.58 per unit sold.

So under these circumstances, with the product being overpriced and very low, even negative commissions, there is absolutely no incentive for any distributor to retail the product to people not participating in the business opportunity.

To remain in the compensation plan, a distributor must purchase a case of energy drinks every month, $156+. If a distributor fails to meet this requirement, she loses her position pay plan and therefore is no longer eligible for any bonuses. This essentially means that efusjon forces its distributors to buy its product whether they want to or not.

Whilst there is very little incentive for distributors to retail the product, there are huge incentives for them to recruit new distributors. Active efusjon distributors, those on the monthly autoship of 48 cans, are labelled as either “Associate” or “Executive”.

Associate distributors have a position in the compensation plan, but are NOT eligible for bonuses! To be eligible for bonuses, an Associate must become an Executive by enrolling 3 new associates into the network. This requirement obviously drives the behaviour of recruiting – you don’t get paid if you don’t recruit.

This is what eFusjon calls “The Power of 3″ – you get three, and help your recruits get three, who help their recruits get three, and we’ll all be rich! (Except those at the bottom who just can’t get three…)

The major perks that makes efusjon so recruitment driven are the fast start bonuses. An associate who signs up a new associate on the autoship program gets $75 in fast start commissions.

So now weigh it up: -$16 dollars for retailing the product, $1.58 for selling 1 unit of the product online, or $75 for signing up a new distributor. Hmmm…

That’s not all. If you help one of your Associates become an Executive within the first 30 days of him signing up, you will receive a one time bonus of $200. This is a classic example of pyramid scheme recruitment incentives – the more people you sign up, the more you get paid.

In summary, here are the lessons we should all learn from the efusjon case…

1. Make sure you have a marketable, retailable product – Nobody could make a living retailing efusjon outside of the distributor network.
2. Be very careful of hype and fanfare – Recruitment driven companies need to use a lot of hype and in-your-face marketing to get people into the deal, otherwise they can’t make money.
3. Understand how you get paid – as the compensation plan drives the behaviour of the distributors in the field.

You can go to the website Class v Efusjon to learn more about the court case.

To your MLM success,

Wayne Wu
Founder, The Profitable Networker

P.S. I would love your input! If you have an opinion that would contribute to this discussion, please leave me a comment below.

P.P.S. Share the love. If you enjoyed reading this article and think others will get value from it, please share it on Twitter or Facebook by clicking on the "Tweet" or "Share" buttons at the top of this post. Thank you.

Related posts:

1. How To Identify and Avoid Pyramid Schemes
2. efusjon Fails – Another “Ground Floor MLM” Tragedy
3. How The Price Of Your MLM Product Can Strongly Influence Your Success
4. Can You Be Successful with Your MLM Product?
5. Network Marketing and Travel – Do They Mix?
6. Recruit or Retail? Which creates long term MLM profits?
7. Autoship Is Mandatory For Long Term Residual Income in MLM

Tagged as: 5 Pillars, efusjon, Energy Drinks, Illegal Pyramid Schemes, Multi-level marketing, Quality Product