Friday, 29 October 2010
The Practitioners Select Purchasing Club
Attention all complementary therapists! Would you like to earn "£1800" every year with virtually no effort?
How about "£3000"? Or "£5000"? Or maybe even "£13,500"?
Welcome to the "Practitioners' Select Purchasing Club"!
The "club" is a new venture from my old friend, Nutri Centres Ltd - a company whom I've already caught red-handed in the act of breaking the law.
Nutri Centre's flyer (available here and here) helpfully explains how a therapist can get rich quick - all she has to do is hand out leaflets to her patients.
When the grateful patients buy something from the "club", the therapist earns a 10% commission.
"What Happens If I Give Away 10 Leaflets Each Week?
"If...they all start to use it, you'll be earning extra revenue very quickly. But say 9 out of 10 never use it - and only 1 of them chooses to use it regularly; spending around £30 a month; you will receive around £1,800 EXTRA PROFIT this year.... and every year afterwards."
£1800 is a decent sum, but if 3 out of 10 patients visit the "club" and each spend £50 a month, the therapist can expect to earn £9,000.
Better still, if the therapist is a member of the Complementary Medical Association, that figure rises to a staggering £13,500.
Sounds too good to be true? Well...it is.
Unfortunately, Nutri Centre's profit forecasts are completely fictional. It seems that, as well as a prediliction for breaking the law and telling porkies, the firm has a problem with basic arithmetic.
Let's take that £1800 figure, for example. If our hypothetical therapist were to give leaflets to five hundred of her patients on January 1st each year - and none throughout the rest of the year - the figure would be correct.
However, the "club" is asking her to give out leaflets to ten clients each week - ten in the first week, ten more in the second week and so on. When you add up the numbers, her actual commission drops to £936.
The "club" has a rather high opinion of itself. It arrogantly assumes that once a patient has spent £30 with it, he will continue spending the same amount, every month, for the rest of the year.
It's an absurd suggestion, of course. Consumers in the real world simply don't behave this way. Still, let's be charitable and assume that only a quarter of the patients stop buying from the club every month.
The therapist's commission then drops to £453.
What's more, if we assume that half the patients drop out every month, the commission falls to just £267.
The flyer predicts that at least 1 in 10 patients will start shopping with the "club" - a figure which is absurdly high. (1 in 1000 would be nearer the mark, I think.)
Still, let's give the "club" the benefit of the doubt and say that 1 in 20 patients actually buy something.
The therapist's annual commission has now dropped to just £105 - and even that figure relies on some pretty unrealistic expectations!
The Complementary Medical Association (CMA) - who wittily describe themselves as "the world's largest multi-disciplinary body" for complementary therapists - feature prominently in the flyer as having officially "approved" the scheme.
The "club", by the way, is being operated by a sub-contractor, Magic Bullet TV Ltd.
The sole shareholder of Magic Bullet TV is Jayne Goddard, the ageless beauty depicted above.
If you've ever had any dealings with the CMA, the name might be familiar to you - their President is the aforementioned Jayne Goddard!!
The scam (did I say, 'scam'? I meant, 'scheme') hasn't got off to a good start. Anyone taken in by the sales pitch has to sign up at a website which, hilariously, doesn't exist!
My complaint to the ASA explains, in unfathomable detail, why the firm's promises are misleading. (If you don't believe my results, check the sums for yourself.)
I've also complained that the CMA's financial interest in the "club" hasn't been made clear, and that the flyer is guilty of a few technical infractions of the advertising codes.
(I wonder if anyone has told Nutri Centre's parent company about their dastardly deeds?)
(Grateful thanks to a number of people, especially Alan of Zeno's Blog, for their generous assistance in preparing this complaint. Any mathematical mistakes or defamatory comments to be found in the article are, of course, my responsibility alone.)
"I write to complain about a flyer I picked up at the CamExpo exhibition in London on 24th October this year.
The flyer, for the Nutri Centres Ltd, promotes a commission-based business opportunity.
I suspect that the flyer may be in breach of the British Code of Advertising, Sales Promotion and Direct Marketing (CAP Code). I can provide the original flyer by post, if necessary.
1. (i) The "Practitioners Select Purchasing Club" is a promotion for an online mail-order service.
(ii) The flyer encourage practitioners of complementary therapies to "join" the "club". In exchange for handing out promotional leaflets to their clients, the therapists receive a 10% commission on anything purchased from the "club"'s mail-order service.
2. (i) The flyer is titled:
"Earn up to £5000 or more, EXTRA PROFIT from your practice this year...Without having to become a 'salesperson'"
(ii) The flyer presents a number of worked examples explaining how therapists can expect to earn "£1,800", or "£5,000", or even "£13,500" during "this year...and every year afterwards".
3. The essence of my complaint is threefold:
(i) The sums in the worked examples don't add up
(ii) The calculations in the worked examples are based on false assumptions
(iii) The assumed percentage of clients who, having received the leaflet, will make purchases at the "club" is unrealistically high
4. (i) The first worked example reads:
"What Happens If I Give Away 10 Leaflets Each Week?
"If you simply give The...leaflet to 10 patients every week and they all start to use it, you'll be earning extra revenue very quickly. But say 9 out of 10 never use it - and only 1 of them chooses to use it regularly; spending around £30 a month; you will receive around £1,800 EXTRA PROFIT this year.... and every year afterwards.
"(1 out of 10 'active users' a week; (x50 weeks a year) = 50 'active users' a year; spending around £30 p.m. each (£360 p.a. each); and you get 10% = £36 p.a. per active customer x 50 active customers = £1,800.)"
5. (i) The calculation is incorrect. If the therapist sees 500 clients in a year (10 clients per week for 50 weeks), the calculation can only be correct if the therapist were to hand out leaflets to all 500 clients in the first week of the year.
(ii) However, the text states that 10 new clients are given a leaflet every week - 10 in the first week, 10 in the second week (making a total of 20) and so on.
(iii) In this case, 40 clients will receive leaflets in the first month (4 weeks). 4 of them will spend £30, and the therapist will receive a commission of £12 (£30 x 4 clients x 10% commission).
(iv) In the second month (4 weeks), 8 clients will each spend £30 and the therapist will receive a commission of £24 (£30 x 8 clients x 10% commission).
(v) In the final month of the year, 48 clients will make purchases.
(vi) After 12 months (48 weeks), the therapist will receive a total commission of £936 (12+24+36+48+60+72+84+96+108+120+132+144) - a sum much less than the promised £1800.
(vii) In the second worked example, the therapist would receive £2496 (not the promised £5000). In the third example, the therapist would receive £4680 (not the promised £9000).
(viii) All of the worked examples contain this same error.
6. (i) The calculation is based on the manifestly false assumption that all the clients who pick up a leaflet and spend £30 at the club will never stop spending that amount every month.
(ii) If we assume that just a quarter of the therapist's clients who have made purchases with the "club" drop out every month, the promised £1800 commission drops even further.
(iii) In the first month (four weeks), 40 clients will receive leaflets and 4 of them make purchases at the club. Of these 4, only 3 will make purchases in the second month.
(iv) In that case, the number of clients making purchases in the final month will be reduced from 48 (in paragraph 5. v) to just 15.
(v) In the following calculation, all numbers are round to the nearest integer - thus 75% of 7 clients is 5 clients, not 5.25 clients: (4 + ([4 x 0.75] + 4) + ([7 x 0.75] + 4) + ([11 x 0.75] + 4) + ([12 x 0.75] + 4) + ([13 x 0.75] + 4) + ([14 x 0.75] + 4) + ([15 x 0.75] + 4) + ([15 x 0.75] + 4) + ([15 x 0.75] + 4) + ([15 x 0.75] + 4) + ([15 x 0.75] + 4)) = 151 total purchases in a year.
(vi) Thus, the therapist will receive a total commission of £453 (151 purchases x £30 each purchase x 10% commission) - a sum far less than the promised £1800.
(vii) If the drop-out is higher than a quarter, the commission would of course be even lower. Assuming a drop-out rate of 50% - still a fabulously generous figure - the therapist would receive a commission of just £267 - a sum far less than the promised £1800.
(viii) All of the worked examples contain this same false assumption.
7. (i) I believe that the promise that 1 in 10 clients who receive a leaflet will make purchases from the "club" is unrealistically high. In fact, I would describe it as a fantasy.
(ii) Even using a generous expectation - purchases made by 1 in 20 clients - the promised sum of £1800 falls dramatically again.
(iii) In the first year, assuming 40 customers receive a leaflet every four weeks and 2 of them make purchases, and assuming a drop-out rate of 50% per month, the number of clients making purchases every month never rises above 3. In that case, the therapist would receive an annual commission of just £105 (35 purchases x £30 each purchase x 10% commission) - a tiny proportion of the promised £1800.
(vi) All of the worked examples contain this same unrealistically high claim.
8. (i) Section 20.7 of the CAP Code (2010) says:
"Marketing communications for business opportunities must neither contain unrepresentative or overstated earnings figures nor exaggerate the support available to investors."
(ii) Therefore I challenge whether the flyer contains unrepresentative and overstated earnings figures, in which promised earnings of £1800 are actually likely to be £105 or even less.
9. (i) The flyer states "Save 10% On every purchase of every major healthcare brand you buy. Simply come online to NutriCentre.com or call us on 0208 752 8463..."
(ii) Due to a DNS configuration error the advertised webpage does not exist (as of 29th October).
(iii) The correct webpage is www.nutricentre.com (a fact which may not be obvious to those who are not technology-savvy), but it contains no mention of the "club".
10. Since there is apparently no follow-up material available, under Section 20.8 I challenge whether:
(i) The full name and geographical address of the marketer is unavailable to potential "club" members
(ii) A clear description of the work involved is unavailable to potential "club" members
(iii) A statement of the extent of investors’ commitments, including any financial investment or outlay, is unavailable to potential "club" members
11. (i) The flyer notes, in small print, "This programme is operated for us by Magic Bullet TV Limited".
(ii) The flyer boasts the the "club" is "Approved By The Complementary Medical Association...the world's largest multi-disciplinary body for HealthCare Practitioners [which] has approved The Practitioners' Select Purchasing Club".
(iii) Indeed, members of the CMA enjoy a further 5% discount on purchases made with the "club".
(iv) The President of the CMA is Jayney Goddard.
(v) A check at Companies House reveals that the only director, and sole shareholder, of Magic Bullet TV Limited is the same Jayney Goddard. (I enclose a copy of the company's annual return.)
(vi) Therefore, under Section 3.1 I challenge whether the flyer is misleading, because it does not make clear that the president of the CMA, which has "approved" the club, has a direct financial interest in it.
12. I confirm I have no connections with the advertiser. I confirm I am not involved in legal proceedings with the advertiser."