ACN Network and Islam

There has been a lot of discussion recently as to the ACN Network and Islam. Should we buy into it or does it compromise our principles? Does it provide a Halal income or border on Haram practices? The decision as always is yours but here is a review of what ACN actually is.

ACN is a multi-level-marketing company (MLM) founded in 1993 by Greg Provenzano, Robert Stevanovski, Tony Cupisz and Mike Cupisz,four Entrepreneurs.

The company began life selling long distance services based in the United States but since then has moved globally across 23 countries expanding their services to include daily essential use services. The services they provide include: Landline telephone, high speed internet, satellite television, cellular phone and home security.

They use the following three models in the countries in which they operate:

1. The reselling of ACN branded services purchased from a provider. For instance in America they purchase local telephone services from AT&T and bill customers from ACN. This model of business became available due to the deregulation of the industry.

2. Acts as sales rep for the service provider. ACN sells the service but the billing is provided by the branded service provider such as T-Mobile for internet in the United States.

3. The selling of ACN branded and self provided services. Examples of this are the Iris X videophone and the ACN branded computer technical support service.

What is Multi-Level-Marketing?

Multi-Level-Marketing(MLM) is a marketing strategy whereby the sales staff are remunerated for sales but also for the sales of salespeople they have recruited into the company. The recruited staff members are called the ‘Downline’ or ‘Minions’ and there is often very complicated levels of compensation that go with this recruited sales force.

Warning: you may need a masters degree in finance to make any sense of it. Another name for multi-level-marketing is pyramid selling. Its not called pyramid selling because its been around since Egyptian times but rather because of its shape with only a few at the top making any profit.

Oftentimes the sales people are expected not only to buy their own products but also sell to friends and family leveraging on these pre existing relationships. Nothing quite as desperate as a salesperson trying to pull the wool over the eyes of loved ones.

How Does it Work?

Independent salespeople often referred to as distributors or independent business owners are given the right to sell ACN products and services. They profit both directly from direct sales to
customers but are also given a commission on company sales through their directly recruited sales ‘downline’.

There is a huge incentive to recruit more staff as a result. The independent business owners are usually allowed to purchase products for wholesales prices and sell them for a retail profit.

Earning Potential

It is difficult to get accurate income levels from ACN directly but there is a lot of information relating to other pyramid selling companies that give you a good indication.

In a USA Today article the DSA (Direct Selling Association) states that the median income for those in direct sales is $2,400. [1]
A business professor named Roland Whitsell studied MLM for his entire career and concluded that you would struggle to find someone that earns more than $1.50 per hour. [2]

It’s quite clear that there are not many people earning much money from multi level marketing. The system seems rigged to benefit only a very few people at the very top. The rest would be better off working for Walmart or Tesco.

Is it Legal?

Many pyramid schemes masquerade as Multi-Level-Marketing companies. Most courts assert that all MLM companies are pyramid schemes even if legal and should be avoided. Its a grey area in the law as pyramid schemes are illegal but MLM are not but they are effectively the same thing.

There is currently a class action against ACN filed in North Carolina and in many other states. This is based on the following points:

1. The ACN and Xoom sales pitch is deceptive and misleading as their prices are well above market price. Customers are being scammed into paying exorbitant prices for gas and electricity.

2. Sales reps or Independent Business Owners are told to tell customers that by switching to Zoom they will save on their bills. This is not the case.

Pressure Selling

The sales reps for ACN use a variety of different pressure selling techniques. These include non stop talking monologues where the rep will talk loads to avoid the customer having any say at all.

Another tactic is emotional selling. Where the sales rep will sense what kind of emotion to scare the potential customer with. If the person is anxious about money they will hone in on the cheap price of the service or if they seems concerned about security they will mention how reliable and trustworthy it is.

Often they will use limited time offers. Suggesting that a low price is only available for a few more days forcing the customer to think they might be missing out on a once off deal.

How did ACN get so big?

Most service product companies have large costs such as marketing and sales commissions. ACN only pays commission to the MLM. It is you that pays for the Marketing. This is a business model that can grow because there will always be more people that get signed.

The sign up fee is enough for desperate salespeople to keep recruiting more people to recoup their sign up fee. They get a lot of revenue from their events also which run frequently.

ACN and Donald Trump

This is quite controversial for Donald Trump. He is a shrewd investor and has made a lot of money over the years. The multi-billionaire has developed numerous successful commercial real estate ventures, has written many books, and hosts his own reality television show. Its clear he is a good investor. He has also put his name behind ACN.

Someone of this notoriety supporting the business is a first of its kind in the direct sales industry. For many years Donald Trump has praised the company and the home-based business model. Mr. Trump is a regular at ACN Training Events. So why does he endorse ACN?

Apparently he loves and believes in the industry of direct selling. Is there something we are missing here? It will be interesting to see will Mr Trump reduce his involvement in the company with the increase in law suits being brought forward. Even if you truly believe in something its going to be really bad publicity if he is seen to be rubbing shoulders with less than honest businesses. This could be enough for him to walk away.

Is ACN Still Growing?

ACN state that the company is growing towards a billion dollars in turnover. Perhaps Mickey Mouse has been on the calculator as these numbers seem implausible.

Consumers are encouraged to join up immediately or they will miss out. ACN’s high growth is touted as one of the main benefits of signing on. According to ACN’s own reports, the company has not increased its revenue or its customer base at all in many years.

In 2006 ACN reported to the FTC that it had roughly the same number of customers and total revenue. But one figure did change during this time. ACN managed to double the number of sales staff on its books. In that time, the number of United States sales representatives grew from 50,000 to 100,000.

More money would have to come from the salespeople if this was the case. The data suggests that the mean average earnings of all sales personnel has to have reduced over the last four years, while the company itself did not grow.

ACN’s Residential Video Phones

Donald Trump is a big fan of ACN’s video phones, but is there really a demand for them? ACN’s video phones are not even portable and they require a monthly service fee.

They are no good at all for video unless, which is unlikely, the person you are calling also has the same phone and the ACN service. It doesn’t appear to me that this is something customers will be flocking to in their droves.

These lines can’t be used for a primary phone line and do not have emergency call access (911). Video Phone purchases require a 2 year contract which is very prohibitive in a time, where contracts are usually much shorter especially for new technology.

Early termination fees for services and equipment apply .At present only a few other brands of residential video phone are on the market. The number of models currently in use is unknown. Future demand is uncertain.

Costs Involved in joining

Team Trainer application fee: $499
Annual renewal fee: $149

Additional costs:
Your business assistant: $39.99 per month, this is optional but strongly encouraged by the founders to give you an edge and allow you to succeed.

‘Your Business Assistant gives you all the tools that you need to plug in every single day, month after month. Every single person out there who is serious about winning needs to subscribe to this package, so that we can pour all the positive things into your life that are necessary in order for you to win in ACN.’ – ACN President and Co-Founder Greg Provenzano [3]

Weekly meeting: $5-$10
ACN Training Events: $149-$159 plus food, travel and accommodation.

Apparently you shouldn’t join unless you can commit to making these events.

So in your first year you are looking at paying well over $1000 and that is by just attending one of the training events. The weekly meetings if they are $10 a week and you go to 50 of them for 2 years will set you back another $1000 alone. Seems strange to be charged for training with your own company.

Its not all bad though

There are some key skills that you can learn from ACN:

How to run a business from home
ACN teaches you the necessary administration skills to run a business from home.You will learn how to file and complete contracts and also how to deal with customers.

How to build a team
Another key skill you will learn with ACN is team building. This is a transferable skill that will be valuable in another job. Managing people and getting the best out of them is a highly sought after ability and will put you in a good position to get a managerial job down the line.

You will also have to deal with unruly or discontent sales people in your network and managing how to deal with them will be a key area of development. Training and coaching your sales team will also be another area you can develop.

A good manager needs to know how to understand his team and be able to influence and motivate them. With ACN you will gain financially if your sales ‘downline’ make sales so you will have a vested interest in bringing out the best in them. These motivation tools will be an asset to an employee in another job.

Sales Tactics
You will most certainly learn some sales skills. Selling is something you need to know how to do in virtually all jobs. Even if you are not directly selling as in ACN, sales will indirectly be a part of most jobs.

In ACN there is a chance to build on your basic sales tactics and add some new ideas such as pressure selling or selling through emotion. Influencing people is another way to make a sale in a less direct way.

In Conclusion

ACN uses a multi-level-marketing business model which has been heavily criticised by many people as it seems to reward only a very few people at the top.

MLM has been called a pyramid scheme as you need to keep attracting more sales people who each pay the costs that we outlined above. These initial and ongoing costs are whatkeeps the business alive.

There are certain skills that the IBO will acquire but I believe there are much easier and less costly ways to develop these skills so avoid at all costs.

Resources:

1. Peterecca, Laura (September 14, 2009). “What kind of business do you want to start?”. USA Today. pp. 4B. Retrieved September 14, 2009.
2. O’Donnell, Jayne (February 10, 2011). “Multilevel marketing or ‘pyramid?’ Sales people find it hard to earn much”. USA Today. Retrieved April 5, 2011
3. https://www.facebook.com/ACNINC/posts/10151184241560442