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Lyoness Compensation Plan Analysis by Rene Liaw
News Update – April 3, 2013
Before we get into the comparison of Lyoness, I will mention up front that in my compensation plan comparisons, not only will we compare the compensation plans but also the concepts behind the company.
But as usual, let’s not forget that when one chooses to join an MLM company, one must be clear and separate the idea of using the products, versus making money in the company. The two are completely separate. You can love vitamins or juices, but with the amount of saturation in the market, it doesn’t make sense to build another health and wellness MLM. Retention are at an all time low, and new companies launch every month!
People in the world are being exposed to more MLM’s by the minute and are getting smarter when they choose which company to work with. Compensation plan then becomes a key fundamental because effort translates to money. So why not get paid more for the same effort?!
I do have to say that most people who look at this compensation plan have NO idea what’s going on because they make things more complicated. One example is that this is simply a binary system with 2 legs. But rather then say left and right legs or team, they say above and below! Psychologically speaking, that’s just more confusing then the usual left and right leg.
Also, minor but important detail here. Having a big logo over the bottom right of the text just makes it harder to read the already complicated compensation plan that most people don’t already understand.
1) Cash Back
In the Lyoness compensation plan, the first way of making money is the Cash Back. This is where you just save 1 or 2% on your own purchases.
In GWT, when you buy products for yourself, the usual discount on items is 50% of cost for the Diamond LC’s. So you save 50% essentially.
2) Friendship Bonus
You basically earn 0.5% of what purchases your personally sponsored people spend and 0.5% (1st Generation) and 0.5% of what your sponsored people’s own sponsor’s spend (2nd Generation).
At GWT, you earn 10% commissions on what your personal sponsored people spend (1st generation), and 10% on EVERYONE in your organization (unlimited generations). This is a significant difference because would you rather earn 0.5% on your teams spending or would you want to earn 10%. That’s a 20 TIMES payout difference. For the same effort at GWT you’re making 20 TIMES the amount.
3) Loyalty Cash
So they have this term called Accounting Unit but this basically equates to one of your team members spending $75 in their system. So $75 given to the company from someone equates to 1 Accounting Unit. Lyoness is a 50/50 payout plan which is the traditional binaries where as GWT is the world’s FIRST FREE FLOWNG VARIABLE PLAN. GWT can be 50/50, 1/3 and 2/3 or 2/3 and 1/3 or anything in between 1/3 and 2/3. This just means that you can get paid out faster and has less restrictions in getting paid.
To continue, once one has 35 units on the left team each put in $75 and 35 on the right side each put in $75, you then earn $675 SPENDING MONEY. I capitalized SPENDING MONEY because this is not CASH in your pocket or commission earned… it’s money to spend on buying more products, in particular to buy gift cards or mobile gift cards. So really, in this example, you’ll need a balanced 35/35 payments of $75 each for a total of 70 payments each $75 just to get spending money. You can read about Loyalty Credits and more here. So 70 payments of $75 = $5250 of money going in, and someone received $675 of Loyalty Credits (don’t forget when you spend the Loyalty Credits it’s at the retail price).
And a question to ask is regarding the down payments which to many people members have the “option” to simply do nothing more but make down payments and earn from others down payments — making it “appear” as a money game, with no relatable sense to “shopping”:. For example, in current retail stores and down payments, when you make a down payment you don’t get a greater discount on shopping.
In GWT, if you had 35/35 people each spending $75, you would make $315 CASH or commission essentially into your pocket. Would you rather prefer $675 to spend on more products or $315 CASH into your pocket. Personally, we’re here to make money in MLM so it’s obviously an easy decision to choose CASH.
4) Loyalty Credit
This is something most people probably don’t fully realize what’s happening. In this earning, they say you can buy a gift card order on behalf of a Member Benefit or someone in your team. What’s really happening here is that they’re saying to put money into the system but not into your own account but rather into your teams account so that you can get more accounting credits. I can foresee a lot of people who end up putting in more money into the system in order to reach the 35/35 to get that payout. And again, the money earned is towards more shopping in their network.
In GWT, we don’t need to do that but one could and still earn 10% in CASH and not in spending money.
5) Loyalty Commission
Okay, this is the commission, potentially passive or residual income that we always focus on at GWT because that’s what will retire you and is constant. We know bonuses come once and then are gone and have to be worked to earn again. Goal of MLM is to build enough residual income!
Basically, when you have 6 payments (3 left and 3 right), each at $75, which is 6 payments at $75 gives you $450 of money going into the system, then you earn $12.00. So this is a cycle payout of 2.67%. Again, would you rather have a payout of 10% or 2.67%? This is for what they call AC-1 which is when you have the first 6 people paying the $75.
To get to a higher payout, one has to have more $75’s in the system. It’s not clear here but from the math, I would assume you would need to have 10 more additional $75’s, 5 on each side. With 10 payments of $75 now you would earn $18 for $750 (10*$75) going in. So that payout is 18/$750 which his 2.4%. So interestingly, the more payments you have the less you get paid. This is still for AC-1.
The next level is when you have 20 additional payments you then make $24 so that payout is $24/$1500 which is 1.6% and this continues on. The next 30 payments, the next 40 payments, and the next 50 payments.
So here’s the average.
3 and 3 at $75 each gives you $12.00 (2.67% payout)
5 and 5 at $75 each gives you $18.00 (2.4% payout)
10 and 10 at $75 each gives you $24 (1.6% payout)
15 and 15 at $75 each gives you $36 (1.6% payout)
20 and 20 at $75 each gives you $48 (1.6% payout)
25 and 25 at $75 each gives you $60 (1.6% payout)
So here is the average then.
6+10+20+30+40+50 = 156 payments
2.67+2.4+1.6+1.6+1.6+1.6 = 11.47% / 6 = 1.9% average.
6*2.67% = 0.1602
10*2.4% = 0.24
Total is 2.6402 / 156 payments is an average payout of 1.7%. This is because the lower payout happens for the majority of the people after the first 16.
In GWT, the payout is 10% on each and every single person. Also, in GWT there’s no need to try to work your way up to higher percentages because you get 10% right away. In Lyoness, the more payments you have the less percentage you actually make.
Online, you’ll find many articles like this one,
that have concerns with the $75 and how it’s generated, or in other words, how units are generated (1 unit is $75). From the retail side, at 2%, one would need to spend $3750 @ 2% to generate $75. On a quick comparison, at GWT, if someone bought $3750 of retail of my website, I would have made roughly $1875 (50%) retail profits. In addition to that, $1125 of volume flows up the system which people then get paid 10% of that. So really, would you rather have someone spend $3750 in Lyoness at a retail partner and you get $75 as one unit, and again, you need at least 3 left and 3 right units to hit a payout of $12. In the perfect situation in both companies, Lyoness you make $12 and GWT you make $112.50.
The other way one can generate the $75.00 is through down payments. So a member could just pay $75 into the system and have another unit on their left or right side. There is a strategy they talk about which is that someone pays in $3000 and get’s a whole bunch of units in their system. This is similar to if we just put in additional money into the bottom of our GWT Binary tree to push up volume that pays us, but it still pays us 10% at GWT.
Within the Lyoness compensation plan there are a total of 8 levels of membership. At each level members are awarded a bonus as well as an increase on the amount they earn per accounting unit they receive a bonus on.
Members gain membership ranks based on the number of accounting units they have converted into cash returns.
In GWT, there are no ranks. Ranks again are something that I trained about in my compensation plan pitfalls video and to really understand what ranks do, take a look.
But again, in GWT you are able to achieve the HIGHEST earning potentials without having to reach a rank. Also, in Lyoness one must reach a certain rank and then RECONFIRM the rank again the following month. So imagine if you reach it one month and then don’t make it the next month. Just more problems. And you have to do this every year for the rest of your life!!! Reaching it only gives you a 12 month qualification. I can foresee many people losing their ranks.
Also, in their ranking system, there aren’t any overrides so once someone in your team hits the same rank, you lose the spread between the $ per Career Unit. Watch the video above to fully understand this.
Lastly, Lyoness talks about not having an autoship so there is no need to pay $75 a month to get your payout and this requires some clarification. Firstly, if there is no autoship or need to pay monthly to get paid, then this defeats the purpose of Residual Income or Passive Income and can make your monthly pay cheques very unstable. It could be high one month, low the next.
Comparison with other companies
Lyoness that has their cash back incentives is exactly the same concept as Market America and their shop.com websites. From looking on their website thus far, they don’t have as many partners as Market America has such as Bestbuy or Future Shop (at least I could not find it). A company that has cashback ideas need to make sure they can work as many partners as possible. And one should really look at how many partners are coming and going for this company. I found this online and did try to look around for these partners but I don’t read French and most of them are in French or some other language.
But more importantly, when looking to build an MLM company, we all know everyone does it to make the long term ‘forever’ income. The question I always would ask myself is “Is there anything stopping another company from coming out, and doing the same thing?”. With Lyoness, there’s already others doing this. The question must be asked because what would happen if more companies launch with a similar concept? It’s not hard after all. And if it does happen, then all of your downlines would decide to join the start of another company and you just lost your team.
My personal thoughts?
Personally, for me, I love my credit cards. I already get guarantee 2% cashback and it’s convenient. For me to have to pre-order all these gift cards from Lyoness to save an additional 1% and then to have to carry all these gift cards around with me, is just too much of a hassle. Perhaps some people would like to carry gift cards and will order ahead of time, but it’s a slight inconvenience for me. Lastly, I’ll continue to use my Credit Cards because aside from the cashback or travel rewards, they also have additional insurances, flight delay, baggage loss, purchase protection, etc… I also personally know that most people spend money on their credit cards and try to pay off their credit cards when they get their pay cheques. With Lyoness, you have to use your money up front and some people may want to have the flexibility of not putting a fixed amount in gift cards.
But again, in terms of longevity and stability, I can also foresee different areas of concerns. One bad news press could lead to many vendors discontinuing business. Already in Europe, Carrefour has already stopped business with them. If they have Petro Canada but then other gas stations, what will happen between competitor rivalries? If all the gas stations are in, what happens in the long run? There’s another company again called Market America that has a lot of their vendors that Lyoness doesn’t have and they also have a gift cards to buy from shop.com or buy gift cards and get 50% cashback as well. So… my point is not to say which company is better or worse but to say that there can be a lot more competitors entering the same market which leaders to your team saturating and your residuals dropping.
My Bottom Line? For the effort it takes to save the 1%, for me… I’m more focused on making big money… and it’s a hassle to carry around gift cards. Will it appeal to others? Maybe. For the effort it takes to earn a quarter of a percent on building a team for residual income with in my opinion many uncertainties, it’s not worth it. At GWT, for the same effort you can be reaching $10,000/month with much more certainty.
UPDATED – Friday, March 22, 2013
My wife just showed me this website and it reminded me about Lyoness.
So basically another discount website where you can get additional discounts from major retail stores…even Apple!!!