This was a General Letter to the Nikken Distributors in Holland, by Gerard Nederpel and Tineke Verton, written in August 2004. Although this was written about Nikken, the principles are the same for many of the MLMs around the world.
After much soul searching, Tineke and I have decided to put our Nikken activities on hold. Our decision is in itself nothing extraordinary. Hundreds, if not thousands of people before us have, ever since Nikken started their activities in 1997 in Holland, stopped their activities in the meantime. What is perhaps not so ordinary is the fact that we have decided to put our story on paper and to share this with others. We don’t do this out of disappointment or spite, but simply so that others may gain from our experience.
We have discovered that the promise that one can become financially independent with Nikken is no more than a myth. The 99.3% of the Nikken Distributors who are not financially successful at the moment (or who have not been successful in the past) will be able to ascertain that their lack of success was not because of them but because of Nikken’s marketing system. We are able to show that the chances to earn a “reasonable income” with Nikken is less than ONE PERCENT, let alone that one can become financially independent. Once again that is simply a myth.
Our Own Background
Tineke is a mother of three student sons of 16, 19 and 21. She became a Nikken Distributor in 2001. After 4 successful 21 clubs she eventually achieved the rank of Silver in November 2002. Gerard was during 20 years Chairman and Managing Director of a successful International Shipping Company in London. He became a Nikken Distributor at the end of 2002.
In February 2003 we met each other in a wonderful way. When we also discovered that we were both Nikken Distributors we regarded this as a special sign. Since that time Nikken became our joint passion and we tried to build up our business with a lot of enthusiasm. After 1-1/2 years of hard work we started to wonder why success kept eluding us. Were we really so incompetent? At the same time we were also amazed as to why so many of the other Nikken Distributors were similarly unsuccessful. We decided to find out why this was.
Searching for the Cause
The many American books written on the subject of MLM all indicate that the biggest problem in MLM is the constant attrition of people. It appears that many people who join a MLM organisation stop after a short while. We wondered what the cause of that might be. We could not accept that the thousands of Nikken Distributors who ceased their activities during the past eight years in Britain and the other European Countries were all lacking in talent.
On the face of it the sale of generally good quality products and the building up of a marketing organisation does not appear to be too difficult. Everyone with a bit of common sense, enthusiasm and perseverance must be able to do this. Why is it then that so few Distributors are able to create a reasonable income?
All MLM authors are unanimous in their opinion that if a Distributor is not successful that this is purely due to a lack of vision and perseverance. We doubted this viewpoint and we made a completely different assumption. We assumed that the lack of success was not because of the people, but because of the marketing system. If that assumption was correct, what was then the precise reason why people failed? We started to look at Nikken’s marketing methods very critically. After a while certain matters became clear to us.
We arrived at the following conclusions:
- Nikken does not concern itself with sales but is predominantly interested in the recruitment of people
- The customers are primarily the Distributors themselves
- The Nikken products are not officially approved and also expensive. This combination means that the products are very difficult so sell to ordinary consumers.
Recruitment of People
It started to dawn on us that Nikken does not sell products but that their marketing methods are purely directed towards recruitment of people. The reason for that became now also clear to us.
People who join as a club member can be more easily influenced. Nikken is then in a position to tell Distributor members about their ‘great vision’. How they wish to improve the world, how they want to expand to 100 countries by the year 2010 and that they want to create 10.000 millionaires by that time and so forth.
Nikken’s marketing is further based on their 5 ‘Pillars of Health’ viz. ‘A Healthy Body’, ‘A Healthy Mind’, ‘A Healthy Family’, ‘A Healthy Society’ and ‘ Healthy Finances’. The background stories of each Pillar are so convincing that it appeals to almost everyone. Under ‘Healthy Finances’ the Business Opportunity is being presented as the most important Pillar of all.
When someone becomes interested in the Business Opportunity and signs up to become a Distributor, a carefully planned scenario begins.
One gets encouraged, preferably within 48 hours, to make a list of at least 100 names of family, friends and acquaintances. Under guidance of the Sponsor those people are then approached for an appointment. This meeting is carried out according to the special ‘ABC’ method with the Sponsor as leader. In this way everything possible is tried in order to convince the potential client to either buy something, to persuade the person to come to the next ‘Opportunity Meeting’ or (of course) to become a Distributor.
Thereafter the new Distributor is encouraged to go for the rank of Silver soonest possible by holding a series of 21 Clubs. A 21 Club means that 21 different people will, within a period of one week, be told the Nikken story and be given a free magnetic massage. Each of those meetings must last at least one hour. The purpose is to create a turnover of €5000.00. Failure to do so means that one misses out on a special financial reward and neither does one receive official recognition.
In order to obtain the rank of Silver one has to have a turnover within one month of €20.000,00. One is also allowed to do this in four months but then the turnover has to be €25.000,00. Apart from this one must recruit minimum three people, each of which has to buy products for at least €1500,00. It is furthermore compulsory to follow a two day personal training course ‘Humans Being More’ and one has to purchase a Demo Pack and a Career Pack. Finally one must commit to purchase healthcare products for a fixed period of 12 months. All added together the compulsory investment comes to roughly €3200,00. It doesn’t stop there. Distributors are being pressurised to purchase extra products “in order to gain experience.” This means that most people invest at least €5000,00 of their own money.
Having achieved Silver is being presented as something very special. The truth is that people have worked very hard during sometimes very long days and weekends for very little income. We are certain that most Silvers invest more money in purchasing products than they earn in profits on sales or in commissions and bonus payments. 3
The Financial Reality
We estimate that only about 20% of the Silvers in Holland are active and we reckon that those earn about €800,00 to €1200,00 per month. The income of an active Gold we estimate at between €3000,00 and €4000,00 per month and a Platinum about €5000,00 to €7000,00 per month with perhaps an odd month where €10,000.00 or so may be reached. From this it will be clear that a ‘reasonable income’ only applies to the ranks of Gold and Platinum (and higher).
During our investigation we came across the following figures:
After more than 7 years of Nikken activities in Holland, only 19 of 2911 people (a mere 0.7%) earned a “reasonable income.” The figures show that whilst the total number of Distributors between April 2003 and May 2004 increased by 50.1%, the number of Distributors with a ‘reasonable income’ increased by only 0,.2%. This percentage would be even lower if we would apply the total number of people which have dropped out since 1997.
We suspect that the percentage of Distributors with a “reasonable income” in Holland is very similar to those in the other European countries.
Nikken’s Network Marketing System Is a Self-Propelled Pyramid That Moves Across Quicksand
The 0.7% of the Nikken Distributors in Holland who receive a ‘reasonable income’ owe this to the investments of the other 99.3% of Distributors. This proves that Nikken’s Network Marketing system is a self propelled pyramid which moves across quicksand. As long as new Distributors continue to be seduced to invest money, the pyramid keeps moving and the tiny top of the pyramid will continue to earn money. However, when the recruitment of new people were to stop, the pyramid would come to a halt and disappear into quicksand. This does not only apply to Nikken but applies equally to all MLM Companies, irrespective of the products they market.
The Nikken Company
Furthermore we have some doubts about Nikken itself. The story goes that in February 1998 Nikken received a Dun & Bradstreet rating of 5A1. We wonder whether Nikken would receive this rating today. It is a well known fact that due to market circumstances turnover and profits can change rapidly. Nikken gives us the impression that they are a closed and a somewhat mysterious company which doesn’t disclose anything about their turnover and business strategy. The only thing we ever read about their turnover was in their magazine of January 2004 when they talked about 1,5 billion dollar. Was that the t/o for 2003 and what has the t/o been for the other years? Who are actually the shareholders (stockholders) of Nikken? How big are the cash reserves they have built up since 1975? Those must be substantial, mustn’t they?
Those are a number of things we reckon that a Distributor should know so that he or she can arrive at a considered decision whether Nikken is the right company for them. In “Nikken shows the way” in their magazine of November 2003 Distributors are described as “business partners.” Why should business partners not be entitled to this kind of information?
Another big disadvantage of a MLM company such as Nikken is that they hold all the power. Apart from the fact that they can alter their prices and assortment of products at any moment, they can remove a Distributor from their computer system without any reason. One has no protection nor any rights and cannot therefore fight such a decision.
Nikken arbitrarily decides what the prices of their products should be. Not only that. They have created an ingenious system whereby each product is allocated Qualification Points (in order to reach a certain rank) and Commission Volume (CV) over which commissions and bonuses are being calculated. We have established that in Europe Nikken reduces the CV value by 10%, 25% and in some cases even 50% (Pi-Mag Watersystem, Optimiser, Cardio-Strides, Greenzymes etc.). Nikken does this in order to reduce the amount which they have to pay out in commissions and bonuses. In America the CV is equal to the wholesale price so why not in Europe? Is this the reason why Distributors on Nikken’s website can see what their turnover is in Qualification Points but not what their CV is? Has this deliberately been done so that Distributors cannot check whether their commissions and bonuses have been calculated correctly?
Finally we are of the opinion that, since Nikken receives their money in Europe mainly in Euro’s and given the fact that the Euro has shown an increase of 29% versus the Dollar during the past two years, the CV should have been increased by 20% to 25% instead of decreased.
According to Nikken, they were successful in Japan and the Far East between 1975 and 1989. Apparently this was on the basis of using a network of traditional agents. In 1989 Nikken decided to expand to the USA and then chose to change to the MLM system.
The psychology of their marketing plan is so subtle and sophisticated that it is frightening. Everything is deliberately aimed at the goodness of human beings. Their deepest emotions are being stirred. Nikken talks about a better world, a cleaner environment, a ‘new economy’ in which everyone has an equal and honest chance to become financially independent. Moreover Distributors are being told that they will have more time to spend with their family, that they will be able to do more for society etc. etc. Who wouldn’t get attracted by such ideals?
However, our investigation shows a completely different picture. People are led to believe that as long as they believe in the vision of Nikken, that if they are willing to change, that if they develop a tougher mental attitude and show a great persistence that they can become financially independent. Alas, Nikken’s Business Opportunity is no more than a mirage. From afar it looks attractive, but as one gets close it evaporates.
As already mentioned Nikken’s Marketing system is particularly geared up to push people to the rank of Silver. Once attained one discovers that this rank does not mean very much. The arsenal of family, friends and acquaintances has meantime been exhausted, trying to interest new people outside one’s own circle is harder than thought and the products are difficult to sell. For a while Silvers continue to do their utmost but in the end most of them cease their activities, believing that they are to blame for having failed.
It is clear that the constant recruitment of new people and trying to get them to become Silver is where Nikken’s turnover comes from. This is what keeps Nikken alive. This is the growth which the pyramid needs in order to keep moving. Once recruitment stops Nikken will be finished.
Many thousands of people in Holland and in Europe are being misled by various MLM Companies in a similar way. They get lured with the “American Dream” of financial freedom, but only the owners and shareholders of a MLM organisation together with a minute number of their top Distributors become wealthy. For more than 99% of the people this “American Dream” becomes a “European Nightmare”.
In the article ‘Healthy Millionaires’ of Nikken’s magazine of August 2004 Nikken’s President Mr. Kendall Cho confirms that financial freedom is being used as a bait and that the key is recruitment of people.
We say that his ‘Vision 2010’ is absolute nonsense and we would like to ask him the following questions:
- How many Distributors are there worldwide and how many of those are Millionaires?
- How many Distributors are there in each of the 15 European Nikken countries and how many of those have the ranks of Silver, Gold, Platinum, Diamond, Royal Diamond and Royal Ambassador?
- What is the average monthly amount that Nikken pays to the Silver, Gold and Platinum ranked people?
Only an honest answer to those questions will make it clear how realistic or unrealistic the chances are which Nikken offers on what Mr. Cho calls: ‘a life-changing business opportunity which will make your dreams come true’.
We are aware that we may cause quite a stir with this letter. Especially with those who have been connected with Nikken for some time. We can only say that is has been difficult for us too having had to face this reality. Or as Tineke said ‘We felt as if we were married with Nikken’. We wished that it were different but we cannot deny these facts. If you have not been successful financially than you now know that this was not due to any fault of yours. The people who are Gold and Platinum will have to consider whether enticing people with beautiful but unattainable promises agrees with their own integrity or not.
Postscript (July 2006)
Nikken did not officially acknowledge seeing our letter, but they responded by terminating our distributorship! We received quite a bit of written abuse by several of the leading Dutch Nikken distributors (as one would expect) but no one has been able to refute any of our claims. Probably because they cannot. Figures don’t lie.
The authors can be contacted by e-mail at [email protected].