doTERRA was founded in Utah in 2008, they are a producer of essential oils. The name doTERRA is a Latin term which means 'gift of the earth'. The doTERRA story explains that the company wanted to promote their products using a 'unique sales model', which would give people the 'opportunity to achieve financial freedom'. They now have over 2 million 'wellness advocates' in almost 100 countries signed up to their multi-level marketing system.
At the Finance Guy, we believe that you can't make money with network marketing, but we decided to do a full review of doTERRA. We want to find out if this really is an original money making opportunity, or if it's just another MLM.
What is the doTERRA Opportunity
There are three reasons why people become wellness advocates:
Users - sign up because they like the products, and want to learn more about essential oils. They might refer people
Sharers - love the products and want to sell enough to pay for their monthly 'Loyalty Rewards' order
Builders - want to replace their full time income with a work from home opportunity.
We looked at the 'building doTERRA naturally' brochure, which is designed to introduce the opportunity to those who want to replace their full time income. The brochure explains that becoming a wellness advocate with doTERRA 'will open you to greater financial opportunity and help you achieve your own personal goals for success.'
The brochure shares some hints and tips about goal setting and using the internet to connect with your doTERRA upline. There's even a sample activity chart included to help you monitor the progress of your team. It will also help keep yourself on track with recommended daily, weekly and monthly tasks to keep you on the path to success. We found it amusing that they included use the product every day, as one of the keys to success.
One of the pages in the brochure is titled 'Income Earning Statement', and it shows that doTERRA wellness advocates who have reached the 'leadership ranks' within the system are earning quite well. Silver members of doTERRA are earning an average of $26,600 per year while those who reach the 'Presidential Diamond' rank, are earning an average of $1,353,000 per year. The brochure gives the impression that people are making money with doTERRA
Are People Making Money with doTERRA
We looked at a review by the Talented ladies club, which suggested that Doterra Advocates aren’t making money, in fact they tell us that less than 0.5% of advocates make more than $9,000 and that’s before expenses.
They also point out that in order to ‘remain active’, doTerra advocates need to spend at least $100 per month on oils. They also imply that the products are expensive. So far it’s not look very good, but we decided to keep going with our own research.
If we went by the earnings table in the brochure, we'd think that 38% of doTERRA advocates are earning over $59,000 per year. However we noticed that this table only applies to the leadership ranks, who in 2015, made up only 1% of all doTERRA members. Their brochure does not represent the earnings all doTERRA advocates
To get the full picture, we looked at the 2015 doTERRA Earnings Disclosure Summary (EDS), which has been combined with a summary of the opportunity. The first thing we noticed was a big friendly pie chart claiming that only 15% of doTERRA members join to pursue the business opportunity. It purports that the other 85% join doTERRA with primary goal of buying their product at a discount.
It then says that while 85% of members do not join for business purposes, they are still eligible for commissions, which many of them have earned. It then proudly states that in the US, 20% of doTERRA members who made a purchase in 2015, earned some commission.
The EDS goes on to outline the earnings breakdown of all members. We created the table below using the information provided:
As you can see from the table, the information is more confusing than it needs to be. doTERRA has chosen to group three ranks together to show that 9% earn an average of $1,600, then they've grouped another two ranks to show that 4% are earning an average of between $3,950, and $9,950.
doTERRA has presented their earnings information in a way that makes it difficult to interpret. We consider this to be a red flag, it could be some form of oversight. It could also be that doTERRA is deliberately trying to make things look better than they really are.
Even in this format, we can see that on average, 99% of all doTERRA advocates earned less than $10,000. Only 1% are earning more than $200 a week in commission from doTERRA. Of the 15% of advocates who join to 'start a for profit business', 14/15, or 93.33% of them made less than $10,000 in 2015
Most people with full time office jobs would be earning $40,000 per year or more, yet 99.62% of doTERRA members earned less than this in 2015. Can it really be such a great business opportunity if less than 1/200 doTERRA advocates are earning a full time income. That means that 97% of those who signed up for business, are not generating a full time income.
It could be that 2015 was a bad year for doTERRA advocates, so we also looked at the 2016 doTERRA earnings disclosure. It tells a similar story, starting with the claims that most people only join for cheaper products. One noticeable difference is that in 2016, leaders only represented 0.5% of all members. By our calculation, in 2016 99.81% of doTERRA members earned less than a full time income.
Why is it Difficult to Make Money With doTERRA
We applied Dr Jon Tayolors 5 Step MLM evaluation to the doTERRA compensation plan. We found that the doTERRA business opportunity raises all 5 red flags indicating that it would be very difficult to make money with doTERRA. We will go through each of the red flags and explain how it applies to doTERRA
Red Flag 1 - Constant Recruitment of New Members
The doTERRA Fast Start bonus, is designed to keep members constantly recruiting. This bonus is only paid for the first 60 days after a new recruit opens an account. If you join doTERRA, then the person who recruited you will earn a 20% commission on any orders you place in the first 60 days of your membership. After this time, they will earn a 2% commission on your orders.
doTERRA advocates can earn up 10 times more commission from new recruits, therefore they have a constant incentive to keep recruiting. The Fast Track bonus doesn't end with the person who recruited you. It is paid to three enrollment levels in your upline. The second level Fast Track bonus is 10%, which reverts to 3% after 60 days. The third level Fast Track is 5%, which remains at 5% after 60 days, but is only paid at the rank of director and above.
Once you have joined doTERRA, the person who sponsored you will also earn Fast Track bonuses on anyone you recruit. It is in their best interest to tell you that you need to recruit as many new members as possible. It doesn't end at recruiting though, they will do their best to make you buy as much doTERRA as possible in the first 60 days.
Red Flag 2 - Promotion Through Recruitment
We can see this red flag in the doTERRA Uni-Level Bonus. This is the monthly commission you will earn from the activity of your downline. To qualify for the maximum Uni-Level bonus, which pays gradually increasing commissions down to 7 levels, you need to achieve the doTERRA rank of 'silver', or above.
To achieve higher ranks in doTERRA, you need to have a combination of personal and organizational volume and what they call 'qualified legs'. To achieve any rank above consultant, you will need to personally order 100 points worth of doTERRA per month. Members need to spend U.S $100 per month on personal orders.
The points spent by everyone in your downline go toward your organizational volume. Every time you personally sponsor a new recruit, you can choose to either place them in an existing leg, or you can make them the 'front line' of a new leg.
To qualify for the rank of 'Premier' or above in doTERRA, you will need to have qualified legs. For example at the Premier level, you need to have two legs at the 'Executive' level. To reach the top rank of 'Presidential Diamond', you will need six legs at the 'Platinum' level.
You can not get promoted in doTERRA unless you recruit enough people to build qualifying legs. A leg will only qualify if the team members in that leg are purchasing the required volume of doTERRA products each month.
Red Flag 3 - Pay to Play
To qualify for any commissions from the doTERRA compensation plan, you will need monthly PV. You will need to spend U.S $50 per month on product as a 'consultant', and U.S $100 per month at all other levels.
Recruiters will refer to this expense as 'your personal consumption', but we do not agree. Unless you are already buying and using $100 worth of essential oils per month, then whatever you buy will be an additional expense. Before you agree to spend your money, ask yourself a simple question. Are you buying the products because you want to use them, or because you want to qualify for the incentive program?
Dr Taylor warns that pay to play can lead to hyper-consumption. To qualify for the 'business opportunity', members buy more product than they can consume or sell. Eventually products start to get stockpiled as members fill their storage areas with unopened boxes of hopes and dreams
Red Flag 4 - Most of the Rewards go to your upline
Dr Taylor warns that the compensation plans of most MLMs results in extreme inequality of payouts, he estimates that while a few people at the top make a lot of money, 99.6% of people who join MLM will lose money.
All the incentive payments from the compensation plan need to be included in the 'wholesale' price charged by doTERRA to their members. We calculate that when you buy doTERRA products, 64% of the price you pay goes to your upline. This is shown in the table below:
Red Flag 5 - More than 5 levels in the payout plan
Dr Taylor says 'Excessive levels in a downline is another sign participants are expected to sell primarily to their downline, rather than to the general public. This makes it an exploitative money transfer scheme, or product-based pyramid scheme'.
The doTERRA Uni-level bonus is paid to 7 levels (for those who qualify). The Infinity Bonus and Diamond Pool are paid... to infinity. This system is not sustainable! The only way for the people at the top to make money, is if people below them in the system are spending it.
How Good are doTERRA Products
We have not purchased or consumed an doTERRA products, so we looked at some online doTERRA product reviews. One by the supplement police found that doTERRA oils were pure and high quality. It's good to know that the products are high quality.
Another review we found by essential oil haven, confirmed that doTERRA is producing quality oils. They did go on to mention that doTERRA products are no different from the high quality pure essential oils made by their competitors. The main difference is that doTERRA is more expensive than most competitors.
This raises an interesting question about the people who 'join to get doTERRA at a discount'. If all they wanted was pure essential oils at a better price, then they would not buy from doTERRA. Even at the wholesale price, you can get the same quality essential oils at a lower price from competitors.
We see this as a common problem with network marketing. As we saw with doTERRA, at least 64% of the wholesale price is needed to fund the compensation plan. This means that only 36% is for doTERRA corporate profit and to pay all production costs. The prices need to be high because the MLM business model is more expensive than traditional marketing
What Are the Benefits of Essential Oils
Essential oils get their name because they are an extract of essence. They are so concentrated that even a few drops is enough to create a noticeable fragrance. According to thrive primal, essential oils can be used for a multitude of benefits including:
Depression and Anxiety
On further reading we noticed that this website was run by a doTERRA advocate who was trying to sell doTERRA products. We decided to do some more research. We also looked at Live Science, who acknowledged that essential oils are used in some alternate forms of medicine. They then explain that there is limited scientific evidence that they provide any real benefit.
We also looked at science based medicine, who wrote an exclusive review on doTERRA products. They also note that the evidence that essential oils work is 'sparse to nonexistent'. They also note that most of the beneficial claims are made by members of the MLM seeking to recruit new members and sell product.
While we couldn’t find any evidence that there are any medical benefits to essential oils, several doTerra Advocates have made false claims about the benefits of their oils. Because of the way advocates are promoting the oils, there is an FDA issued warning to doTerra
Below is an extract from the FDA warning:
’Your consultants promote your above mentioned dōTERRA Essential Oil products for conditions including, but not limited to, viral infections (including ebola), bacterial infections, cancer, brain injury, autism, endometriosis, Grave’s Disease, Alzheimer’s Disease, tumor reduction, ADD/ADHD, and other conditions that are not amenable to self-diagnosis and treatment by individuals who are not medical practitioners’
We also looked at this warning about doTerra and Young Living from a qualified aromatherapist. She explains that ingesting essential oils, or applying them undiluted to the skin, can be very harmful. She is very worried about the ‘advice’ she is seeing given. She urges everyone to never ingest essential oils, and if you are applying them to the skin, they should be diluted all the way down to no more than 3%.
What are Others Saying about doTerra
We looked at a review by qualified naturopath Katherine Maslin. She confirmed that ‘therapeutic grade’ is just something invented by doTerra. She also explains why essential oils should never be ingested. They are simply unsafe
Over on Influenster, the reviews are mostly positive. Apart from a few complaints about the price, people seem happy with their oils. Then again most of these reviews seem to be written by existing doTerra Advocates. They have a vested interest in promoting the doTerra name.
The people at Lazy man have the opinion that doTerra is a scam. They agree that the products are overpriced. They also note that the ‘health benefits’, are unproven. In short they think doTerra is a pyramid scheme.
MLM best company gave doTerra a very good rating. It’s not surprising given that most people who vote on their site are from inside the MLM industry. Even with the rating of 8.1/10, they still raised some interesting points. One is that the doTerra therapeutic grade claims are meaningless. This review confirms that this ‘certification’, is something which doTerra themselves invented and has no value outside their own company.
Another issue we noticed is that in 2014 doTerra had problems with the FDA. It turns out that the claims about the health benefits of doTerra oils, aren’t proven. Therefore advocates who make such claims are in breach of FDA rules. They were forced to take corrective action including this doTerra FDA compliance video.
Is doTERRA a Pyramid Scam
Even though MLMs closely resemble pyramid schemes, they are not illegal. The reason dates back to the 1979 case of Amway vs the FTC. After 4 years in court Amway was found to be offering a business opportunity, rather than a pyramid scam. The technicalities came down to wording in their paperwork. One example requires consultants to make retail sales.
The Amway ruling effectively opened the doors for all other MLMs to operate within the law. However we should remember that being legal doesn’t make it ethical. If you knew that less than 1% of people had a chance of generating a real income, would you feel comfortable recruiting new consultants?
Another issue, is that even though these rules may be in the paperwork, they are difficult to enforce. For example, several people in MLMs have said that they have cupboards full of product. This is because of the minimum monthly purchases they need to make to remain active in the system. Even though stockpiling is against the rules, there is no way for the company to monitor it.
Being legal does not make MLM ethical. All companies are in business with the goal of selling goods and services for a profit. Network marketing companies are able to charge a higher price because they create a customer base of loyal members who believe that by consuming these products and recruiting others to do so, they will become financially free.
Should You Join doTERRA
The only reason you should join doTERRA, is if you are already spending over $100 per month on their products and want to recommend them to others. Even if this is the case, you might want to look at what other brands are charging for the same essential oils. You might find that you can save money by switching brands.
If your only motivation for joining doTERRA is to make extra money, then we think you should consider other options before proceeding. Our calculations found that less than 0.5% of all doTERRA advocates are generating enough commission to replace a full time income
As with most MLM companies, it is possible to make money with doTERRA, but it is very unlikely. If you have the skills to make money with doTERRA, then we believe you'd make more money applying those skills to start your own business.
As always we welcome your feedback in the comments section below. We'd love to hear what you think about doTERRA, especially if you can share your personal experiences with the company
For more posts like this, look at our list of mlm reviews.