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Climb to the Top
Emily Lambert and Klaus Kneale 07.17.08, 6:00 PM ET Forbes Magazine dated August 11, 2008 Pyramid selling schemes are a dime a dozen. Orrin Woodward's Orrin Woodward organization is one step ahead of them all. Near midnight on a recent June evening Orrin Woodward, cofounder of a company called Team, took the stage at the Nationwide Arena in Columbus, Ohio. Music blared. Lights flashed. Seven thousand people, who'd paid $90 each to get in, cheered wildly. "Struggle is a part of every great victory," intoned Woodward. "Leaders," he went on, "are dealers in hope." Hope, for most of Woodward's audience, is a fruit juice gussied up in a wine bottle labeled MonaVie and sold for $39. Unload enough of this stuff on friends, recruit them to do the same, and you can be rich. Woodward, by contrast, doesn't have to sell a drop of the concoction to make a killing. Team, rather, sells things that help people sell things like MonaVie. Team sells "tools"--$258 sets of motivational compact discs, $69 Team shirts and books like Woodward'sLaunching a Leadership Revolution, all of which filled the Nationwide Arena's hockey rink. Outside, a black Mercedes-Benz gleamed next to a sign saying "Work hard, go black diamond, get one of these!" "Team is truth," declared Andrew Mey, who had traveled from Grand Rapids, Mich. for the Ohio event.
Babble Rouser End of an Era? It Takes a Crisis
In the distributional art form known euphemistically as "multilevel marketing" and more crassly as a pyramid, a seller attempts to recruit Complete Contents other sellers, who recruit still others, and so on. Members get a percentage of revenues hauled in at some or all points below them in the pyramid, so those close to the top can do very well for themselves. The Direct Selling Association, a trade group, pegs the collective revenues of multilevel vendors at $30 billion in the U.S. and $111 billion worldwide. Exotic juices, nutritional supplements and cosmetics are among the favorites of the pyramid crowd. Team is one step ahead of all these juice selling schemes. It is a pyramid atop a pyramid. It is selling motivational aids to help MonaVie vendors move the juice. But wait. If you can't earn back the $258 you've spent on the motivational lectures by selling $39 juice bottles, you could earn it back in another way--getting people to buy $258 motivational lectures. If you're good, you flog the lectures to other people, who sell them to yet others. Everybody gets rich. Everybody, that is, except the last round of buyers. That's the theory, anyway. The reality is that a mere 1% of Team members make any money from involvement with the firm. Sounds rather like a chain letter, doesn't it? Woodward insists it's not. He says he's selling hope and sales skills. Team hauled in $42 million last year and boasts 60,000 mostly middle-class members. Last winter 15,000 of them braved an ice storm to assemble in St. Louis for speeches on "Overcoming Obstacles." About 90% of Team's sales tool revenues come from people who also sell MonaVie juice.
Woodward's Web site shows the 41-year-old on his 72-foot yacht and grinning with Pastor Robert Dickie Jr. of Berean Baptist Church in Grand Blanc, Mich. Dickie speaks at Team conventions and gives Bible lessons on Team's CDs. His son, Robert Dickie III, is Team's chief executive. "What I try to give most of all is hope and encouragement," says Woodward. Hope is an expensive commodity. Most Team members spend more buying its motivational aids and MonaVie's juice than they ever take in. Roger Lareau, a Michigan alarm company employee, says his wife has rung up $20,000 in debt buying Team sales tools and Amway products and is now on to selling MonaVie juice. Their marriage has fallen apart as a result. "She still thinks Team is going to set her free one day," he says. Woodward is a product of America's rust belt. He was raised a half-hour from Team's headquarters in Flint, Mich., the town Michael Moore immortalized as a symbol of industrial decay in the film Roger & Me. Woodward studied engineering at General Motors (nyse: GM - news -people ) Institute (now Kettering University) and later designed fuel pumps for the automaker. Frustrated with gm, in 1993 he began selling products on the side for Amway, the granddaddy of multilevel marketers (2007 revenues: $7 billion). Five years later Woodward quit gm to become a full-time distributor for Amway (now known as Quixtar in North America). Woodward quickly realized how important sales tools are to multilevel marketers. Tools encourage recruits to reject doubters and, if money fails to materialize, to blame themselves and keep trying. Tools can themselves be a gold mine. That was a lesson Woodward learned from Dexter Yager, a former beer salesman and Amway distributor who set up a highly successful sales tools business. Woodward founded Team in 2001 and built it into one of the fastest-growing tool vendors associated with Amway. Senior management at Amway had long feared that tool vendors risked being tabbed illegal pyramids and dragging the company into a legal morass. Still, the company tolerates them because tool vendors generate sales for Amway. Woodward claims Team's tools generated Amway sales of $200 million and net profits of $60 million last year. The relationship between Amway and Woodward began to deteriorate a few years ago when Team began promoting its tools as a money-making opportunity in themselves. That message has the potential to get both Team and Amway in legal hot water. Amway, meanwhile, already had legal headaches. The law firm of courtroom tiger David Boies is now maintaining a California class action against Amway in which former distributors have accused it of being an illegal pyramid. The company faces similar claims in India. Amway's battle with Woodward came to a head last summer during a meeting at Amway's headquarters when, so the firm claims, it terminated Woodward; he says he quit. As the dispute spilled into court, Woodward trotted out what he says is a report Amway produced for a top distributor indicating that a mere 3.4% of its U.S. products are sold to unaffiliated users. Amway says the 3.4% represents only a "fraction" of its retail sales. Woodward's claim could pose problems for Amway. In a 1979 regulatory action involving the firm, the Federal Trade Commission attempted to draw lines between legitimate and fraudulent pyramids. The ones that are legit focus on getting revenue from consumer goods sold to retail customers. The ftc did not, however, define "retail" in that case. That leaves plenty of wiggle room for guys like Orrin Woodward; he counts the vast majority of people in his pyramid, who seemingly try but fail to make money, as retail customers. His Amway divorce left Woodward with motivational tools but no product to motivate people to sell. Members defected. Sales plummeted. Woodward tried selling his tools to customers like Kettering University, a Michigan pizza franchise and a Phoenix car dealership.
Last spring he contacted Dallin Larsen, MonaVie's founder. Larsen formerly headed sales at Usana Health Sciences, an Amway rival. He founded MonaVie in 2005. The men met at Larsen's 8,900-squarefoot home in Largo, Fla. and struck up an alliance. A YouTube clip shows a MonaVie distributor, who calls himself Dr. Lou Niles and is dressed in red scrubs, at a distributor-sponsored meeting, implying that MonaVie cures cancer. MonaVie and Team officially condemn such claims. Instead, MonaVie's Web site says the juice "blends unequalled nutritional power with an unparalleled business opportunity." "I don't want to build a business on hype," Woodward says. Hype apparently doesn't include Woodward's blog's claim that the juice has "incredible" word-of-mouth marketing potential. No question, it's a great deal--for Woodward. He figures he'll pocket $6 million this year off MonaVie and Team.
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