Advocare is a Texas based company which was founded in 1993, they produce a variety of dietary supplements, which they sell through network marketing. In 2016 Advocare had almost 600,000 distributors in their MLM system. The company made a profit of US $586 Million, which placed them at no. 37 on the 2017 Direct Selling News Global 100 list
We decided it was time for a streetonomic review of Advocare. We believe that you can't make money with network marketing, but will still give Advocare a chance to prove us wrong.
We are not associated with Advocare, and have not purchased or tried any of their products. Our review is based entirely on information which is publicly available on the internet. We appologize if any of the information we relied on is out of date or inaccurate
What is the Advocare Business Opportunity
If you've met an Advocare distributor, or a member of any MLM, then you have most likely heard how this could be a potentially life changing opportunity which could be your key to financial freedom. While statements like this may be true, the same could be said about buying lottery tickets.
On their website, they explain that there are 5 ways to earn with Advocare. Like all MLMs, they explain that making sales isn't the only way to profit from Advocare. You can also generate income if you recruit others and build a downline. The 5 ways to earn with Advocare are:
1. Retail Profits
2. Wholesale Commission
4. Leadership Bonuses
To find out more about how you can make money with Advocare, we read through the 2017 Advocare compensation plan. We will look at each of the 5 ways to earn in more detail below:
1. Retail Profit
According to the compensation plan, 'retail sales are the simplest way to earn income with Advocare'. Distributors can purchase products directly from Advocare at a price which is between 20% and 40% below the suggested retail price.
All you have to do make a profit, is buy the products then find customers who are willing to buy them from you at the retail price. Remember their retail price is just a suggestion so you can set your own prices and adjust this profit margin.
The strategy of adding a profit margin is a simple one. It's been used for centuries by every salesperson who ever attempted with a career in sales. We are willing to assume that salespeople have never had a 'stable income'. It's the kind of job where some earn a fortune, while the others (who might even be sitting at the desk right next to them), struggle to make ends meet.
2. Wholesale Commission
This is the 'passive income' which Advocare will pay you when people in your downline buy Advocare products. The amount you earn is based on the difference between your discount levels. For example, if you qualify for a 30% discount, and your new recruit qualifies for a 20% discount, then Advocare will pay you this 10% difference on any products purchased by the recruit. You will not earn any wholesale commission from members in your downline who are at at the same discount level as you.
Wholesale commission is also paid on any products ordered by your preferred customers. A preferred customer has paid a small joining fee so they can buy products directly from Advocare at prices 20%-30% below the suggested retail price.
All new distributors and preferred customers automatically qualify for a 20% discount. You can 'qualify' for larger discounts when you have generated enough Personal Volume (PV) on products you purchase or Group Volume (GV) on products purchased by your downline.
Your combined PV/GV is the total recommended retail value of all Advocare products ordered by you and your downline. As your PV/GV grows, you will qualify for larger discounts. As the saying goes, you can save money when you buy in bulk.
Your discount level is based on your cumulative PV/GVover up to 6 pay periods. There are 24 pay periods per calendar year with Advocare. Pay periods end on the fist and the third Tuesday of every month. This means that your discount is based on the total PV/GV you have generated over three months.
The table below shows the current PV/GV qualification levels needed for each discount level:
Once you have reached the 40% discount, you are at the 'advisor level'. Preferred customers are not eligible for this level of discount. Distributors can also qualify for the advisor level if they generate a total of $3,000 in PV/GV over 24 pay periods, or 1 full year.
3. Override Earnings
Once you have reached the advisor level, you can start earning override commissions. This payment can be earned on the Business Volume (BV), generated by your downline. You can earn overrides on up to 3 levels of advisors in your depth.
Each product has an assigned value of Business Volume points (with the exception of sales aids and distributor kits). Advocare states that the Business Volume is 'approximately 50% of the suggested retail price'.
Like the wholesale discount, you can qualify for a higher override if you generate enough PV/GV. The main difference here is that it can't be accumulated. You have to generate the qualifying PV/GV every pay period. The potential overrides you can earn and the PV/GV required for each, are shown below:
4. Leadership Bonuses
This is like a combination of wholesale and override commission. Once you become a leader, you can earn a commission on the BV generated by your entire downline. Your leadership bonuses grow as you advance through the 11 potential leadership levels.
Like the wholesale commission, you are paid the difference between your leadership bonus and any leadership bonuses earned in your downline. The leadership bonus starts at the 'Silver' level which pays a 3% commission on all BV. Once you reach the 'Triple Diamond' level in Advocare, you can earn 19.75% commission on all BV in your downline.
The leadership bonuses and their qualification criteria are shown below:
Advocare rewards their top performers with what we'd call 'soft dollar benefits'. This means you get paid with something which is not cash. Like all MLMs fully paid 5 star vacations are a popular incentive used by Advocare.
Advocare incentives can be created by either the company or by distributors who are at the leadership levels. Each incentive is designed to motivate members at specific levels in the downline to perform extra well during the 'qualification period'.
Incentives can be anything that motivates people to push a little harder. While the top leaders might be pushing for 5 Star vacations, new distributors might earn something like a new iPad if they sponsor enough new people and generate PV/GV in their first 90 days.
We did not find any specific details about current incentive offers, but we are assuming that incentives are still being used.
How Much do Advocare Distributors Earn
We looked at the 2016 Advocare Income Disclosure Statement, it's no surprise Advocare made the Top 100 list. With 570,289 individual distributors purchasing products in 2016, it must've been a very profitable year. That figure does not include all the preferred customers who placed orders in 2016!
The year might not have been so great for distributors. The same report shows that 72.31% of distributors did not earn any commission from Advocare in 2016. They might have earned retail profit, but we can't be certain because Advocare doesn't track the retail profit made by their distributors
We believe that in 2016 over 410,000 people participated in the Advocare business opportunity and made no commission at all. Advocare would argue with this point. In their disclosure statement, they claim that some people become Advocare distributors so that they can 'purchase products at a discounted price'
We see similar excuses in every MLM income disclaimer we look at, and we never believe it. There are people who join Advocare just to get discounted products. They sign up as 'preferred customers'. If they had no intention of trying to make money, then they wouldn't join as distributors. As we noted earlier, the income disclosure statement only looks at distributors, and does not include preferred customers.
Preferred customers and distributors would get the same discounts on personal purchases. Preferred customers pay $19.95 to join Advocare. Distributors join with a $59 'distributor kit', which includes some product samples along with a book of retail sales receipts and a magazine with stories about people who made money in Advocare. We do not believe that anyone paid an extra $40 for sales tools they never planned to use.
The commissions earned by all Advocare distributors in 2016 is summarized in the table below:
From this table we calculate that in 2016, 99.24% of Advocare distributors earned less than $100 commission per week. We further see that only 0.11% earned what we consider a full time annual income ($50,000 and above). We infer that only 1 in every 909 Advocare distributors was able to replace the money they could earn in a normal job.
Advocare defines active distributors as anyone who earned a commission in 2016. This is supposed to make us think that only 27.69% were trying to make money. The other 72.31% bought the sales tools so they could be preferred customers.
We decided to play along with the marketing spin and only look at the 'active distributors'. We now see that 97.26% of active Advocare distributors earned less than $100 per week. The real improvement is that 0.38% of active distributors were able to earn a full time income from Advocare. The odds of replacing a full time job with Advocare have improved to 1 in 263
Why is it Difficult to Make Money With Advocare
We applied Dr Jon Tayolors 5 Step MLM evaluation to the Advocare business opportunity. We found that it raised all 5 red flags. According to Dr Taylor, this would suggest that very few Advocare distributors ever tun a profit.
MLM is a way for companies to sell products without directly employing a sales force or using traditional marketing. It's a system which is profitable for several companies, including Advocare. MLMs exist because they generate corporate profits.
The problem for distributors, is that MLM is a marketing system, not a profit sharing system. Their compensation plans can be very attractive when you look at what is possible. They become less attractive when we look at what is probable.
The main reason why it's difficult to make money with all network marketing companies, is that most of the rewards go to your upline. Of the 5 ways to earn with Advocare, 4 of them are earned from purchases made in your downline. Your upline earns all this commission from your purchases. These payments are included in the 'wholesale' price Advocare charges you.
The wholesale commissions are great if you qualify for the full 40% discount and have a large network of friends and family buying Advocare products in your downline. As a new distributor you will start of with a 20% discount. The remaining 20% is paid to your upline. This means that when you spend $80 with Advocare, $20 will go to your upline as wholesale commission. Your initial 'wholesale' price includes a 25% margin paid to your upline.
Distributors who are at the 'advisor' level can earn an override of up to 7% on Business Volume. This is paid to up three layers of advisors, for grand total of 21%. This payment is also included in your 'wholesale price'. When we include the 19.75% BV paid in leadership bonuses, we see that BV payments of 40.75% . Are included in the 'wholesale' price paid by all Advocare distributors.
Advocare told us that BV is equal to around 50% of the suggested retail price. We calculate that with a 20% discount, then 25.46% of your 'wholesale' price goes toward these BV payments to those near the top of the system. This is on top of the wholesale commission you've already paid. At this level 50.46% of the price you pay to Advocare goes to your upline.
Things get a little better if you qualify for the 40% advisor level discount. At this point you won't pay any wholesale commission. However your upline is still earning BV based payments from you. We calculate that at this stage, 33.95% of the price you pay to Advocare is paid to your upline.
Retail profit might be the 'simplest way' to generate income, but that doesn't mean it will be easy. The 'suggested retail price' is just that, a suggestion. There is no guarantee that you will be able to sell products at this price.
A quick search on Amazon, will show you some distributors are offering products at a substantial discount to the retail price. Some of them might even offer them at prices below what you are paying Advocare for the same products. If you want to earn retail profit, you will have to compete with the prices offered by other distributors.
The compensation plan is included in the price you pay. This means that Advocare can only a maximum of 62.05% of what they charge you to produce the products, package them, ship them to you, and generate a $586 Million profit for themselves. The only way to sustain this system is if the wholesale price of Advocare products is more expensive than most competitors retail prices.
How Good Are Advocare Products
Any salesperson will tell you that the best way to make money is with good quality products. The quality of the products will directly influence the price retail customers are willing to pay. We did not purchase or use any Advocare products, so our product research is based entirely on third party internet reviews.
A writer for Spit That Out, put herself on a range of Advocare products. She found that there were some possitive results (slight weight loss). Some products gave her what she thought was an allergic reaction. She also experience 'severe abdominal pain' from the detox products, but her upline told her that this was a normal reaction.
Diets in Review looked at the Advocare 24 Day Challenge. This review found that 74% of consumers were unhappy with the product. They further found that it contained several ingredients which could be harmful to your health. We are not sure how much we trust their 'review' because they are trying to sell an alternate dietary system.
For a more trustworthy perspective, we looked at review of Advocare by a certified nutrition consultant at Ancestral Nutrition. Some of the highlights from this review are that Advocare contains:
Genetically Modified Ingredients
Rancid Vegetable Oils
May cause a wide range of health problems
Is Advocare an Illegal Pyramid Scam
Even though MLMs resemble illegal pyramid schemes, they are legal as long as there is a product or service attached to them. We don't think that Advocare distributors are trying to scam their new recruits. It's more likely that they themselves believe that the system will one day make them wealthy.
Some former distributors believe that Advocare is an illegal pyramid scheme. In March 2017, they filed a federal class-action against Advocare which alleges that they are a pyramid scheme.
It could be a coincidence, but found it interesting that the compensation plan we looked at was issued in the same month, and contained some interesting legal speak. For example one of the requirements for earning overrides is that you submit a sales compliance form which 'must show that you have made at least five sales to at least five different customers / preferred customers during each pay period in which any overide, leadership commission or other bonus or incentive is earned.'
If you don't satisfy this requirement Advocare may find that you are in violation of their 'excessive purchase of inventory' policy. The consequences could include loss of future payments, or even expulsion from Advocare. We have found similar wording in several MLM documents.
The paperwork is designed to protect the corporation from any illegal activity done by the distributors. MLMs let their distributors promote their system, they set 'rules' in the paperwork, but enforcing the rules is very difficult. When disgruntled former members cause legal problems, then the paperwork allows the corporation to blame the 'rogue distributors' who broke the rules.
Another common complaint is that MLM members make illegal and false claims about the quality of their products and the benefits they can achieve. Advocare is not immune from this. Truth in Advertising has a database of unsubstantiated health claims made by Advocare distributors.
Should You Join Advocare
As with all business opportunities, you should take some time to get to know the products and their market before you sign any paperwork. We suggest that you have a look at some products from competitors, read the ingredients and see what stores are charging.
If you find that the products are good value at full retail price, then you might be able to make money selling them. Keep in mind that more than 99% of Advocare distributors aren't earning much money. Perhaps this is a sign that you should consider other business opportunities before you decide whether or not Advocare is right for you.
Update May 2019
On May 17, Advocare announced that after a ‘confidential agreement’ with the FTC, they will be changing their business model. As of 17 July 2019, Advocare will only pay commission on what they call a ‘single level compensation’. In other words retail sales commission will be the only way to make money with Advocare. This means that Advocare will no longer be a Multi-Level Marketing company
Distributors will no longer be able to earn commission from their downline, they will only make money from sales made to retail customers. Advocare describe these changes as ‘the only viable option’.
While nothing can be confirmed at this time, it appears that the FTC found serious problems with the Advocare MLM compensation model. If this is true, then it could have widespread implications for the entire industry. Time will tell, but we expect these changes will cause a huge exodus of distributors from Advocare
As always we welcome your feedback in the comments section below, especially if you can share your own Advocare experiences.
For more posts like this, look at our list of mlm reviews.