Lead System Network Review: Gifting and recruitment

There is no information on the Lead System Network website indicating who owns or runs the business.

The Lead System Network website domain (“leadsystemnetwork.com”) was registered on the 21st of September 2013, however the domain registration is set to private.

Further research reveals Lead System Network affiliates crediting a Clinten and Ashley Aragona as the founders of the company.

At the time of publication, there is no official Lead System Network marketing material that credits the Aragonas (right) with ownership of the company.

On her personal blog (see comment #4 below) , Ashley Aragona reveals

Clinten and I have always been in business together. He was an entrepreneur when I met him (cute story, but for another time) and it was quickly evident that we made a great team, not only as a couple in love, but a couple of business partners.

We’ve owned multiple businesses including coffee shops, fitness centers, and marketing businesses.

When I met Clinten, he owned multiple coffee shops and a fitness center. I knew of these because they were the brick and mortar businesses that he was known for locally. What I didn’t know was that he was also a network marketing beast and had been in the industry since he was 18, back in the days of ACN.

To keep the length of this down, I’ll fast forward through the next 5 years of marriage. We have been in multiple network marketing companies and have seen vast success, but also disappointment and failure.

Why this information isn’t included on the Lead System Network website is unclear.

In any event, read on for a full review of the Lead System Network MLM business opportunity.

The Lead System Network Product Line

Two product services are listed on the Lead System Network website, a “Basic” and “Pro” Tool Suite.

The Basic Tool Suite costs $30 a month and includes your standard assortment of marketing tools.

The Pro Tool Suite builds on the Basic Tool Suite offering, adding an “EZ Mobile App Creator”. This appears to be software that can be used to create business related apps.

The Lead System Network Compensation Plan

The Lead System Network compensation plan is best explained when broken down into the various product service levels.

Basic Tool Suite

The Basic Tool Suite is a straight forward single-level (non-MLM) commission payout. For every $30 affiliate or customer signed up, the Lead System Network affiliate who makes the sale is paid $30.

Pro Tool Suite

The Pro Tool Suite increases the direct commission paid out on each sale to $50, with the other $50 being paid into a matrix compensation structure for payout.

Lead System Network use a 3×9 matrix to pay out Pro Tool Suite commissions.

A 3×9 matrix places an affiliate at the top of the matrix with three positions directly under them (level 1):

In turn, these three positions branch out into another three positions (level 2), and so on and so forth down a total of nine levels (29,523 positions).

Positions are filled up as Pro Tool Suites are sold, with each filled position generating a monthly commission as long as the monthly $100 fee is paid for the service.

How much of a commission is paid out depends on what level of the matrix the paid positions resides on:

• levels 1 and 2 – $1 per position
• level 3 – $37 per position
• levels 4 to 9 – $1 per position

Note that commission payout qualification is tied into the recruitment of affiliates who qualify for Pro Tool Suite commissions. Lead System Network affiliates who do not recruit can get paid one payout on levels 1 to 3, but after that single payment they then need to meet the following recruitment criteria:

• levels 1 to 3 – recruit and maintain 1 Pro Tool Suite qualified affiliate
• levels 4 to 6 – recruit and maintain at least 6 Pro Tool Suite qualified affiliates
• levels 7 to 9 – recruit and maintain at least 9 Pro Tool Suite qualified affiliates

According to the following information from the Lead System Network compensation plan material,

First $1,000 “GET TRAINED BONUS” requires ZERO Pro Tool Suite personally sponsored affiliates. Future residuals require a minimum of ONE
active Pro Tool Suite personally sponsored affiliate.

there does not appear to be a retail sale qualification alternative, with only recruited affiliates counting towards Pro Tool Suite commission qualification.

Also note that in addition to the recruitment criteria above, Lead System Network affiliates must also either subscribe to the Basic Tool Suite, or have passed up five $30 independent subscription commissions (initial sales, not monthly recurring fees) to their upline.

Master Distributor

Lead System Network charge affiliates $1000 to become a “Master Distributor”. This qualifies them to receive $1000 commissions (100% of the fee paid), from affiliates they recruit who also wish to become Master Distributors.

An additional $99 fee is charged annually.

Note that in addition to the requirements above, a Lead System Network affiliate must also either be subscribed to the Pro Tool Suite or have passed up five $100 independent Pro Tool Suite commissions (initial sales, not monthly recurring fees) to their upline.

Diamond Master Distributor Commissions

Diamond Master Distributor is a rank that is qualified for by recruiting at least nine affiliates, three of which have paid $1000 to become a Master Distributor.

Once a Diamond Master Distributor and their downline are generating at least $10,000 a month in Pro Tool Suite matrix commissions, they then qualify for the Infinity Team Bonus.

The Infinity Team Bonus pays out on the matrix leg (there are three, starting at level 1), which generates the most monthly sales volume.

A 5% commission is paid out on this sales volume, subject to the following monthly earnings cap criteria:

• $10,000 downline Pro Tool Suite matrix volume = $500 a month
• $20,000 downline Pro Tool Suite matrix volume = $1000 a month
• $40,000 downline Pro Tool Suite matrix volume = $2500 a month
• $80,000 downline Pro Tool Suite matrix volume = $5000 a month
• $150,000 downline Pro Tool Suite matrix volume = $10,000 a month
• $250,000 downline Pro Tool Suite matrix volume = $20,000 a month
• $500,000 downline Pro Tool Suite matrix volume = $40,000 a month
• $1,000,000 downline Pro Tool Suite matrix volume = no limit

Diamond Partner Commissions

Diamond Partner is a rank that is qualified for by recruiting at least twenty-four affiliates, twelve of which have paid $1000 to become a Master Distributor.

Diamond Partners qualify for shares in a straight-line revenue-sharing pool.

When an affiliate joins Lead System Network, they are placed in a queue. As people join after them (whether personally recruited or otherwise), they are placed in the queue according to when they joined.

Lead System Network don’t disclose how much money the fund the pool with each month, but share 50% of the money in the pool equally amongst Diamond Partner qualified affiliates.

The rest of the money is paid out via pro-rata shares, determined by how many affiliates are in the straight-line queue after them. The earlier a Lead System Network affiliate joined the company, the larger their share of the revenue-sharing pool.

Joining Lead System Network

Basic affiliate membership to Lead System Network is $19.95 a month.

Master Distributor membership is an additional $1000 upfront and then $99 annually (first year is $1099).

Conclusion

The danger with marketing system MLM companies is that the marketing system winds up being used by affiliates primarily to market the opportunity itself. Thus a closed-loop recruitment scheme is born, with little to no observable retail activity.

Such is the case with Lead System Network.

The alternative commission qualification criteria appears to be mostly an attempt at psuedo-compliance. Affiliates are going to have a hard time selling either the Basic or Pro Tool Suites if they don’t use them themselves, let alone the five required as an alternative commission qualification.

As such, bar a handful of affiliates, by and large this is going to result in defacto qualification for commissions by self-purchase.

This alone isn’t a red-flag, but when every affiliate in the whole company is doing it, if there’s no comparable retail activity taking place it’s evidence of a recruitment driven pyramid scheme.

Affiliates buy in for $130, pay their $19.95 participation fee and then set about recruiting affiliates who do the same.

The payment of 100% of fees between affiliates is also a worry at the Basic level, as it introduces a cash gifting element to the compensation plan. Affiliates pay $19.95 and then are gifted $30 by each and every affiliate they recruit. Those recruited pay $19.95 to qualify to receive the same, and so on down a theoretically endless recruitment loop.

Lead System Network themselves can’t actually claim to sell anything at this level, as the company does not receive any money for the Suite itself. Instead it merely serves as a marketing prop for the evident gifting scheme.

The typical counter to this is “It’s not cash gifting, we have a product!” However merely having a product isn’t good enough, you need to actually be selling it.

The Pro Tool Suite level isn’t much better. Affiliates can qualify by passing up five sales to their upline, but realistically that’s not going to happen. In MLM especially, customers like to hear personal experience with a product or service. And if an affiliate isn’t using the service themselves, that raises questions that are likely to lose the sale.

As such all you’re then left with is another $100 a month recruitment layer. Affiliates pay $130 (Pro + Basic) every month, and earn a $50 commission for every new Pro Tool Suite affiliate they bring in.

Additional commissions are earnt via the matrix, subject of course to how many affiliates are personally recruited. If there was even the slightest effort to focus on retail sales, this would be where you’d see some retail sales qualifiers, but instead it’s all about affiliate recruitment.

Meanwhile the Master Distributor qualification is about as blatantly cash gifting as you can get. Pay $99.95 and your $1000 gifting fee, and then receive $1000 gift payments from those you recruit.

Worse still, getting others to buy into the scheme is built into the qualification for both Diamond Master Distributor and Diamond Partner qualification. In reverse, there’s a strong motivation directed at an affiliate to buy into the $1000 Master Distributor scheme themselves, as otherwise their upline receives the $1000 gifting payments that result as part of their Diamond Master and Diamond Partner qualification process.

The Diamond Master matrix brings with it the same concerns as the Pro Tool Suite matrix. In that if the majority of revenue being paid out is affiliate-generated, that’s evidence of a recruitment-driven pyramid scheme. Only here, instead of raw recruitment requirements, affiliates are paid based on the revenue their downlines generate (which is indirectly via recruitment).

As for the Diamond Partner revenue-sharing pool, given that only affiliates are put into the straight line queue, once again we have a commission tied into recruitment. Being a straight line, those at the top of the Lead System Network affiliate hierarchy are guaranteed the largest payouts, irrespective of their own effort and performance within the company.

They are paid more simply for joining earlier, which is another trademark of a pyramid scheme.

Significant retail activity could go a long way to negate some of these concerns (not the gifting levels though), but given how Lead System Network is set up and what the compensation plan focuses on, I’m just not seeing it.

Approach with caution.