One of our readers recently asked us to look at a MLM which has just arrived in Australia. Rodan + Fields is the collaboration of dermatologists Katie Rodan and Kathy Fields. In 1995, the pair formed a San Francisco based company which found early success with their proactive solutions acne treatment. In 2002 they launched the Rodan + Fields brand of high end cosmetics.
Despite being purchased and promoted by the cosmetics superpower Estee Lauder, the Rodan + Fields brand failed to find commercial success. In 2007, the doctors purchased their company back from Estee Lauder and converted it to a multi-level marketing company.
In 2016 Rodan + Fields had just under 287,000 consultants in their growing international network marketing system. Here at The Finance Guy, we believe that you can't make money with MLM, but we'll give Rodan + Fields the chance to prove us wrong! In our full streetonomic review of Rodan +Fields, we'll find out if this is a good business opportunity, or just another MLM money trap.
What Does Rodan + Fields Do
Rodan + Fields produce a wide range of skin care products, which according to the internet, are of very high quality. We are not surprised that Rodan + Fields produces top quality products. After all they were developed by a pair of Stanford University qualified dermatologists.
In 2014 cosmetics was a US $460 Billion global industry. By 2020, it is expected that there will be a global demand for cosmetics of US $675 Billion. There is no doubt that this is a growth industry and that money is being spent.
How Do You Make Money With Rodan + Fields
According to the Rodan + Fields website, this is a 'life-changing' business opportunity. You will have the ability to achieve financial freedom while working your own hours. But why let us explain it.. here's a video from the co-founders
As expected, their video reminds us that they are dermatologists, and that Proactiv was a very successful product. Based on this we are given the impression that this new venture is bound to succeed. Keep in mind Rodan + Fields is not Proactiv Solutions, and Stanford Med does not teach business skills.
To get a better idea of how you can achieve life-changing financial freedom, we looked at the Rodan + Fields Compensation Plan. This document explains precisely what you need to do in order to make money from the business opportunity. We discovered that, like most MLMs, making money is more complicated than you might expect it to be. There are 5 ways to earn with Rodan + Fields:
1. Retail Profit
You can earn a retail margin from selling Rodan + Fields products to customers. Sales can be made in person or over the internet (as long as they purchase using your personal R+F web link). You can earn up to 33% from one off sales and up to 16% from 'preferred customers' who sign up to receive a monthly supply of Rodan + Fields products.
2. Consultant Commissions
In order to qualify for this payment, you will need to meet the monthly quota of 100 points of 'qualifying volume' (QV) on your Rodan + Fields consultant account. Rodan+ Fields sometimes calls it Sales Volume (SV), Commissionable Volume (CV), or Personally Sponsored Qualifying Volume (PSQV).
Regardless of what they call it, the volume is essentially the same thing. It's the amount of product which you and your team need to buy before you qualify for compensation. Network marketing companies use these point systems as a way to standardize their qualifying quotas in a global market.
No matter where you live, or what the price is in your local currency, the same products will have the same point value everywhere in the world. Here is an example of the 2017 U.S Rodan + Fields Product Price & Volume List
In order to qualify for consultant commissions, you need to remain active. To do this you need to sell 100 points worth of product through your Consultant Account every month. Active consultants can earn commission of 10% from any products bought by consultants or customers who are on their 'L1'.
In Rodan + Fields, L1 is the first line of referrals. It includes any members who you recruit to Rodan + Fields as either consultants, or as customers.
3. Personal Team Commissions
To earn team commissions, you need to first qualify as an Executive Consultant with Rodan + Fields. To do this you will need to remain active and have your team generate 600 points of Personally Sponsored Qualifying Volume (PSQV). This can come from either preferred customers or consultants you have personally sponsored. The points earned by consultants you sponsor will include any volume from their retail sales
As an executive consultant you will earn a team commission of 5% on all the points generated by your team. Your team includes all the consultants and preferred customers you have enrolled, and all the retail sales made by consultants you have recruited. Rodan + Fields refers to this as your L2 points.
4. Generation Commissions
Once you have reached the level of Executive Consultant and one of the people you sponsored also reaches this level, then you will become a 'Level 1 Executive Consultant'. This will entitle you to earn a 5% commission on 'Generation 1' in your downline.
You can continue to increase in levels as more consultants you have sponsored reach the Executive Consultant rank. Once you have 8 Executive Consultants in your personal team, you will become a Level 5 Executive consultant. At Level 5, you can earn 5% commissions from 5 generations in your downline.
The earnings potential doesn't end there. If you continue to grow your team you can qualify as an RFX Executive Consultant and earn a 2.5% commission from the 6th generation in your downline To qualify for this, you will need 15 Executive consultants in your team and 5 of them need to achieve the title of 'Level 5 Executive Consultant'
5. Performance Bonuses
At different times during your Rodan + Fields journey, you may qualify for additional incentives. These may range from car incentives to small cash bonuses, and many other non cash 'lifestyle rewards'.
Are Rodan + Fields Consultants Making Money
To find out how much consultants are earning, we looked at the 2016 Rodan + Fields Income Disclosure Statement. Like most mlm income disclosures it starts with a bit of marketing and explains that their goal is 'help people create life-changing opportunities'. They also purport that their products and business are suitable for all people no matter what their age, sex, or background.
One thing we liked about Rodan + Fields, is that their income disclosure includes retail profit margins earned by consultants. This is because the customers place orders online and Rodan+ Fields credits the appropriate consultant with the retail commission.
In 2016 Rodan + Fields had 286,709 consultants enrolled in their business opportunity. Of these 161,361 or 56.28% received at least one commission payment in 2016. The remaining 125,348 or 43.72%, earned no commission at all from Rodan + Fields.
The income earned by Rodan + Fields Consultants in 2016 is summarized in the table below:
As we can see, only 2.17% of all Rodan + Fields Consultants earned more than $10,000 in 2016. That means that only 1 in 50 Consultants made more than $200 per week from this 'life-changing opportunity'.
If we look at those who are making money from Rodan + Fields, we see that only 0.29% are earning over $50,000. In 2016 99.71% of Rodan + Fields Consultants earned less than a full time income from their business opportunity. Your chances of replacing the income from your normal job are 1 in 345
Let's not forget the commissions paid do not include expenses. Consultants will need to spend time and money building and promoting their Rodan + Fields network. Many of them will also need to spend their own money in order to keep up with the $100 per month in required product sales. If we included expenses, we'd find that most Rodan + Fields consultants are losing money
The income disclosure conveniently only shows data for those who remained part of Rodan and Fields for the year. If they were to include all the consultants who quit during 2016, then we believe the results would be much worse.
It’s possible that this was just a bad year, so in an update, we decided to have a look at the 2018 Rodan and Fields Income Disclosure. The summary of earnings is shown below:
As we can see from the table above, only 0.6% of R+F consultants earned more than $50,000. In other words 99.4% earned less than a full time income from Rodan and Fields.
To make things worse, this table only counts the consultants who were paid a commission in 2018. It turns out that 46% of Rodan and Fields Consultants earned no commission at all in 2018. If we were to include these consultants in the table above, we’d find that more than half of Rodan and Fields Consultants lost money from the business opportunity in 2018.
It’s important to remember that consultants are people who joined the Rodan and Fields business opportunity. Even though they can access the products at ‘wholesale’ prices, they were not customers looking for discounts. We believe all consultants were recruited with the hopes of earning extra money. Unfortunately, we calculate that, only 1 in 333 R+F Consultants will ever replace the income from their regular jobs.
Why is it Difficult to Make Money with Rodan + Fields
We believe that the problem is with the network marketing business model. It's not designed to help people make money or gain financial freedom. The system is designed to promote and sell products. MLM is profitable for the companies which produce the products, but not for the members who join the business opportunity.
In his book, Multi-level Marketing Unmasked, Jon Taylor found that 99.7% of people who join any MLM, end up losing money. Despite what you hear in the sales pitches, it is highly unlikely that you will make money from any network marketing company.
MLM is a way for companies to sell products without employing a sales force and without having to spend money on traditional advertising and promotions. Instead they build a network of loyal believers who are willing to pay unusually high prices for the added hopes and dreams of financial freedom.
The high price set by MLM companies makes it very difficult for consultants to make retail sales. We found a consumer review of Rodan + Fields products, by a site called 'Skinny and Sassy'. They confirmed that the products are of high quality. They went on to note that the ingredients used are 'nothing new'.
We were not surprised to see that most consumers found Rodan + Fields was too expensive. Given that there are other products of equal quality made from the same or similar ingredients, consumers are not willing to pay the premium for having the R + F label on the jar.
Even at the preferred customer and consultant prices, Rodan + Fields products were found to be more expensive than most of their competitors. Any salesperson will tell you that it's very hard to make money selling overpriced product
Part of the reason it's difficult to make sales with any MLM is the high price. Another reason is market saturation. Anyone can sign up to be a Rodan + Fields Consultant. Every time a new consultant joins, they are competing with all the existing consultants to find customers and to find new recruits.
One of the advantages we heard in a sales pitch was that you can sell it over Facebook. Well so can everyone else. The internet makes it easy to set up a point of sale. So easy that anyone can do it. The hard part comes in attracting customers. Why will they come to your Rodan + Fields link instead of one of the other 287,000 owned by other consultants.
Consultants aren't your only competition. Customers can also buy products directly from the Rodan + Fields online store. . The only way to attract traffic and make money online is to have original content or offer something very unique. Simply having a link to become a carbon copy of what 287,000 others are already doing will not generate results. Especially if the first thing people find when searching for the products, is the corporate webpage which can make the sale and cut the MLM members out of the deal entirely
The high attrition rate with MLMs makes it difficult to build a downline team. Before you can grow your network, you’ll need to replace all the consultants who quit every year. It is common for more than 50% of members to quit any MLM in their first 12 months.
Why are Rodan + Fields Products so Expensive
Even at the 'wholesale' prices paid by consultants, MLM have to charge a substantial mark up in order to fund their compensation plans. A snapshot of the Rodan+ Fields Compensation plan is shown below:
The table above shows all the commissions that can be earned on the CV or Commissional Value points in Rodan + Fields. When you buy product at the 'Consultant Price', the 8 levels of commission are included in this price. As a new consultant 42.5% of what you pay to Rodan + Fields is paid as commission to your upline.
The remaining 63.5% of the consultant price, goes to Rodan + Fields to cover all the costs of production and to generate some profit for themselves. A common myth within MLM is that it's a system which 'removes the middle distribution layers'. It would be more realistic to describe it as an opportunity to become part of the 42.5% middle layer mark up.
This is the real reason why the people who sponsored you and everyone above them in their team will encourage you keep buying product every month. They may tell you that the key to success is never giving up, or something similar. We think their real motivation is the fact that your upline only makes money if you are spending money.
Is Rodan and Fields An Illegal Pyramid Scheme
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.
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 the same, they will become financially free.
Should You Join Rodan + Fields
Before you sign up for the business opportunity, try being a retail customer. If compared to competitors, you find that Rodan + Fields offers quality products at a fair price, then maybe you should join.
A Rodan and Fields ‘success story’ we found. A lady claimed that she liked the products so much, but didn’t want to pay the full retail price (or should we say overprice). Becoming a consultant gave her access to the ‘wholesale’ prices, and after sharing the opportunity on Facebook, she ‘covered her costs’.
This consultant refuses to disclose her actual income, (possibly because it’s unimpressive), but assures us that it’s enough to get her some free makeup each month. While getting some free product might not sound like a ‘success story’, in MLM it actually is. Keep in mind that around half of R + F consultants earn absolutely nothing.
If you have stumbled across this opportunity, and think it might be a way to earn some extra money, then keep in mind that after expenses most are losing money. If you have the ability to earn some free makeup with Rodan and Fields, you could probably use the same skills to earn a real income in a real sales job.
There's no such thing as a proven path to financial success. It doesn't matter how well others have done, you can duplicate every move they made and still lose money. In our opinion it is very unlikely that you'll turn a profit with Rodan + Fields or any other MLM. Those are our thoughts, we'd love to hear from you in the comments section below, especially if you want to share you own experiences with Rodan + Fields
For more posts like this, look at our list of mlm reviews.