A key non-financial measure we focus on is Volume Points, which is essentially our weighted-average measure of product sales volume. Volume Points are unaffected by exchange rates or price changes and are used by management as a proxy for sales trends.
In general, excluding the impact of price changes, an increase in Volume Points in a particular geographic region or country indicates an increase in our local currency net sales while a decrease in Volume Points in a particular geographic region or country indicates a decrease in our local currency net sales, similar to unit measure at comparable CPG companies.
We use Volume Points for Member qualification and recognition purposes, as well as a proxy for sales trends, and therefore we generally keep Volume Points for a similar or like product consistent on a global basis.
Preferred Members and Distributors
In certain geographic markets, we have introduced segmentation of our Member base into two categories: “preferred members” – who are simply consumers who wish to purchase products for their own household use, and “distributors” – who are Members who also wish to resell products or build a sales organization.
Any existing Members in these markets who do not convert to preferred members have been or will be categorized as distributors but may convert to a preferred member at a later date; all new Members in these markets will join as either a preferred member or a distributor.
In markets where we have not introduced segmentation, our member base consists of individuals who join Herbalife Nutrition simply to receive a discounted price on products for them and their families, as well as Members interested in reselling products through the entrepreneurial opportunity and to pursue the opportunity to earn compensation based on their own skills and hard work.
To become a sales leader, Members must achieve specified Volume Point thresholds of product sales during specified time periods and generally must re-qualify once each year. Qualification criteria can vary somewhat by market.
Sales Leader Retention
Our compensation system requires each sales leader to re-qualify for such status each year, prior to February, in order to maintain their 50% discount on products and be eligible to receive royalty payments. In February of each year, we demote from the rank of sales leader those Members who did not satisfy the requalification requirements during the preceding twelve months. The re-qualification requirement does not apply to new sales leaders (i.e. those who became sales leaders subsequent to the January re-qualification of the prior year).
For the latest twelve-month re-qualification period ending January 2021, approximately 67.9% of our sales leaders, excluding China, re-qualified, versus 66.5% for the comparable figure for the twelve-month period ended January 2020.
Please see the following document for more information regarding our Sales Leader Retention.