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NETWORK MARKETING
UNIVERSITY OF MUMBAI
ACADEMIC YEAR
2006
2007
SUBMITTED BY
MEHTA NEELKANTH S.
T.Y.B.M.S. [Semester V]
USHA PRAVIN GANDHI COLLEGE OF MANAGEMENT
VILE PARLE (W), MUMBAI - 400 056
PROJECT GUIDE
MEHTA RAJIV A.
A PROJECT REPORT ON
NETWORK MARKETING
UNIVERSITY OF MUMBAI
ACADEMIC YEAR
2006
2007
SUBMITTED BY
MEHTA NEELKANTH S.
T.Y.B.M.S. [Semester V]
USHA PRAVIN GANDHI COLLEGE OF MANAGEMENT
VILE PARLE (W), MUMBAI - 400 056
PROJECT GUIDE
MEHTA RAJIV A.
DECLARATION
I, MEHTA NEELKANTH S. The student of Usha Pravin Gandhi
College of Management of TYBMS [Semester V] hereby declare
that
have
completed
MARKETING
in
the
my
project,
Academic
titled
Year
NETWORK
2006-2007.
The
________________________
Signature of Student
[MEHTA NEELKANTH S.]
CERTIFICATE
I, (Mr.)
MEHTA RAJIV
Mr.
__________________
Signature of the Principal,
___________________
Signature of the Project guide
Coordinator
ACKNOWLEDGEMENT
This project report could not have been prepared, if not for the help
and encouragement from various people. Hence, for the same reason
I would like to thank my guide Mr. Rajiv Mehta. It was for his support
that I got proper guidelines for preparing this project. I would like to
thanks Mr. Santosh Gadigaonkar for the same. Mr. Amarjeet Ubhi,
country Manager, Forever Living Products (India) PVT. LTD.
Mr.
SYNOPSIS
Network marketing or MLM as it is called, one of the most efficient
ways of distributing products and services adopted by the various
corporations around the world, is a 50 year old concept. But in most
of the developing countries like India, the concept s relatively new;
due to which there are various misconceptions regarding the concept.
A clear understanding of this concept is required, so that industry and
the public at large would benefit from it.
The collection of various relevant data from various sources like;
Indian Direct Selling Association (I.D.S.A.), book Tai Chai ways to
success in MLM written by Eddy Chai, Forever Living Products
(India) pvt. Ltd., about the development of the concept, its past and
present scenario, and the future prediction by the industry leaders,
and finally giving certain recommendations to the industry on the
analysis of data.
The analysis will remove the misconceptions regarding the industry
and exactly tell how industry can be a boon to everyone in economic
structure.
Thus the project report will explain exactly why one needs to support
and encourage MLM industry.
contents
INTRODUCTION 09
SCOPE OF STUDY 10 - 17
Birth of MLM industry. 10
Overview. 11
World wide MLM sales volume.11
Top MLM markets.12
Global MLM sales force. 13
Products sold through MLM.14
Top 10 global MLM players. 15
India perspective. 16
Indian MLM sales volume. 16
Top 10 MLM corporations in India. 17
Types of matrix. 40
Why MLM? 41
For companies. 41
For individuals. 42
RECOMMENDATIONS. 48 - 57
Tips tp choose a good MLm organisation.48
Company. 49
Products. 50
Business plan. 51
Suggestion to MLM organisations. 52
Comply woth laws relationd to MLm industry.53
Should be managed by competitive staff.53
Better PR.53
Suggesttions to networkmarketers. 54
MLM success path 54
Tips for doing good business. 55
Solution to game playing. 56
MLM in Eddy Chai's words. 57
Biblography 58.
INTRODUCTION
Multi-level marketing (MLM) (also called network marketing (NM) or
matrix marketing) is a business model which utilizes a combination of
direct marketing and franchising. Typically, independent business
owners become associated with a parent company in a contractorlike relationship. Independent business owners receive remuneration
for shopping within their own business, for selling products and for
expanding their network of people ("down line") doing the same
Indian Direct Selling association has defined MLM as:
Multilevel marketing allows sellers to build a business through their
own sales efforts and by inviting others to become sellers.
Remuneration is based on a seller's personal sales AND on the
combined sales of those people they have sponsored, trained and
motivated.
MLM matrix
MANUFACTURER
DIRECT
SINGLE
LEVEL
INDIRECT
MULTI
LEVEL
TRADITIONAL
CHANNELS viz.
wholesaler,
retailer,
Advertisement
END CONSUMER
SCOPE OF STUDY
I. Birth of Network Marketin g:
China, 1920s;
Dr. Carl Rehnborg was working in China and began to observe
that urban Chinese citizen showed sign of malnutrition, but not he
poor citizen living in rural areas. His studies revealed that this was
because the riches urban folks were eating polished rice, void in any
nutrients critical to human diet. After many years of research and
study in this field, in 1939 Dr. Carl Rehnborg setup a company called
Nutrilite, to manufacture food supplements containing different
vitamins and minerals vital for human body. The major problem he
faced was in the marketing and the customer education relating to
this product or range, since most of the people at that time had not
heard about vitamins and minerals.
To solve this problem he came up with another new idea in
1945, whereby he used his zealous customers as a sales force,
working a system which we today know as multilevel marketing.
10
The MLM industry has grown to 147% between 1994 and 2004.
11
South
America,
9.03%
Austrelia, Canada,
New Zeland,
1.08%
Others,
2.09%
Europe,
15.53%
South Africa,
0.26%
Asia, 40.46%
U.S.A,
29.27%
US $ 99.965 Bn.
12
3.
The growth rate in MLM sales force grew from about 12.9
40 million.
13
Product lines
HQ
Established in
Turnover
US
$
Amway
corporation
Personal,
1955
4 Bn.
1978
2.13 Bn.
1973
1.5 Bn.
1979
1.6 Bn.
UT
1984
1.2 Bn.
Organic
Torrance, CA,
1982
products,
USA.
Michigan,
Health
care,
Products Inc.
personal care,
Scottsdale,
Arizona, USA
cosmetics,
skincare etc...
Nikken Co.
Herbalife
Nu
Health Fitness
Fukuoka,
& wellness.
Japan.
Los Angeles,
wellness.
CA, USA
Skin Pharmanex,
Enterprise
health
care
Provo,
USA
products.
Sunrider inc.
weight
management,
skincare.
Oriflamme
Swedish
Brussels,
cosmetics.
Belgium.
1967
Euros.778
Mn.
14
30.8%
30.5%
cutlery, etc.)
16.1%
Services/other
14.3%
8.3%
15
Year
Turnover
2001
1700 cr.
2002
1979 cr.
2003
2275 cr.
2004
2617 cr.
2005
3010 cr.
16
Product
HQ
category
Years
of
Turnover
operation
2004-05
New Delhi.
11years.
Modicare Ltd.
Health &
New Delhi.
Nutrition,
Cosmetics &
Skin Care,
Personal Care,
Laundry Care,
Home Care,
Auto Care,
Agriculture,
Food, and
Water
Purification.
7 years.
Forever Living
Mumbai.
5 years.
Products
wellness.
Bangalore.
6 years.
US $ 1.6 Bn.
11 years.
766
Amway
Health, Daily,
corporation
Personal,
Kitchen ware,
so on.
(India)
Pvt.
Ltd.
Herbalife
(India)
wellness.
Ltd.
Oriflamme Ind Cosmetics
Pvt. Ltd.
beauty.
million
euros
17
2.
3.
Pyramid scheme:
4.
18
METHODOLOGY
I. Causes of the problem
1)
Dubious companies:
Some companies are not true MLM companies but are in fact
pyramid schemes, set up by unscrupulous people whose only goal is
to cheat as many other possible. MLM is essentially a product
oriented business, no money rolling game.
19
They say you will have to do "little or no work because the people
below you will". You should be aware that the actual business of
sales and supervision is hard work. So if everyone is doing little or
no work, how successful can a venture be?
20
company's
incentive
ever
sell,
often
at
prices
inflated
3.
22
6
36
216
1,296
7,776
46,656
279,936
1,679,616
10,077,696
4.
who
have
little
experience
in
direct
sales,
5.
perfectly legal, approved by the IRS or a CPA, and that they are
definitely "not" a pyramid scheme.
23
Promoters may even flaunt the fact that they are illegal and are
therefore secret and exclusive. This adds to the allure and mystery of
this larcenous, but seemingly harmless, act.
often blame their own lack of recruiting skills for the failure, rather
than the original promoters who have benefited most, and almost
exclusively, from their deception.
six years and rise during times of economic boom by playing upon
the greed and envy among those who are eager to participate in
moneymaking ventures.
6. Legal Aspects
It is illegal to:
Pay money for the right to receive compensation for recruiting new
participants;
Require a participant to buy specific products before he/she is
allowed to join the plan;
Sell unreasonable quantities of the product or products to
participants (this practice is called inventory loading); and
Refuse to allow participants to return products on reasonable
commercial terms.
People who break the law relating to multi-level marketing or
pyramid selling can be convicted and sentenced to a fine or a
prison term.
Sometimes, no clear line separates illegal pyramid schemes from
legitimate multilevel marketing programs. To differentiate between
the two regulators in the U.S. evaluate the marketing strategy
(e.g., emphasis on recruitment versus sales) and the percentage
of product sold compared with the percentage of commissions
granted.
25
program,
the
original
participant
received
$300
26
27
2.
28
29
2)
3)
Many leaders exaggerate their product and marketing plans and their
incomes. In spite that MLM is a legitimate business, some network
marketers operate their businesses like pyramid schemes.
A. Good distributors under bad leader
It is a sad fact that there are groups of distributors who love MLM, but
do not understand what MLM is and how it should be done, simply
because they are under bad leaders.
B. Type Adistributors:
This is where a person grows up in an environment that demands
conditional love. Conditions are always attached to love or reward
given as a result; a person grows up doing things, not because work
has to be done, but rather in order to please others. Type Apersons
usually try to play games in the MLM business.
Financial
losses
to
all
the
downline
distributors,
as
playin
g game involve excessive buying of products to make up
for achieving pin levels or to makeup for undeserved bonuses.
30
2.
3.
Distributors then get stuck with unsold lot of products. Then the
easiest way to get rid of those products is to sell them cheap.
Some uplines have even been known to ask their downlines to
buy from them, and not from the company, by offering prices
below wholesale.
4.
Eventually breaking
2.
though
the
downline
doesnt
have
enough
of
31
4) unprofessional attitude:
The amounts of time distributors from one MLM company spend to
criticize
HYDERABAD:
Even as Amway India Enterprises
contended on Tuesday that the
provisions of the Prize Chits and
Money Circulation Scheme (Banning)
Act, 1978 does not apply to the Amway
business
model,
the
Crime
Investigation Department (CID) of the
Andhra Pradesh police conducted raids
on some more of its offices in the state.
According to CID officials, raids were
conducted on the offices and godowns
in
Kurnool,
Vijayawada
and
Visakhapatnam, apart from Hyderabad.
CID,
economic
offences
wing,
Superintendent of Police, V C Sajjanar
said two persons, Padmavathi and
Ramu, involved in the Amway
operations in Tirupati, were produced
before a court in Hyderabad on
Tuesday.
32
th
th
sept.
Following the raid on Amway, this was due to defects in its policy.
33
consumers.
The support and protect the character and the status of direct
7. AMC Cookware
2. Forever Living
13. Herbalife
3. ModiCare
9. Oriflame India
5.
Altos
Limited
Enterprises
34
35
Manufacturer
MLM
business
DISTRIBUTOR
Wholesaler
Area agent
Middle man
Retailer
Customers
MLM Business
Traditional Business
between
manufacturer
and
final consumer
We
have
national
Major requirements to
do business. Viz.
organization.
No risk
Capital,
2) One of the most important reasons to join MLM is: Time Leverage
For example:
General people:
8hrs/per day 5days/per week = 40hrs/per week
40hrs/per week 50weeks = 2000hrs/per year
2000hrs/per year 40years = 80000hrs/your whole life.
Top Corporation:
80000employees 8hrs/per day = 640000hrs/per day.
37
You Introduce
You Introduce
2
4
3
2 + 1 = 90?
27
61
81
Total 30
Total 120
You Introduce
5
25
125
625
Total = 780
38
39
27
81
243
729
2.187
6,561
19,683
Total - 29,523
C. BINARY PLANS
40
Traditional channel
huge
expenditure
on
advertisement.
selling
and
distribution
payable.
41
encourages
big
factories
or
selected
few
of
corporations,
opportunity
for
selected
42
III.Developed country:
1. Where infrastructure is done, factories are built; people have
higher standards of living.
2. Big corporation flush with money. Will begin to go into business
sector that used to be the territory of small vendors.
3. The difference is that, these corporations will go into these sectors
in a big way. Huge technological developments, more expertise,
economies of large scale. For instance; Reliance and other
multinationals are entering in the retail sector, where there were
small players until now.
Currently India is in the transitional stage, from developing stage
to developed stage. A tank formally of small fishes, usually survive
together. But now of really big fishes are entering in tank, where
big fishes are eating away small fishes.
Welcome to the business world.
43
If you cant
44
stock
market
to
compete
with
small
and
marginal
entrepreneurs?
With economies of large scale they are able to sell a product at the
cost price of the local vendors.
When they can give out special deals or loss leaders every week,
selling at their wholesale price to attract customers to their
doorstep?
When they have money to employ specialists and professional
help?
When they have money to set-up their shops at the best selected
locations?
When they can build a one-stop shopping mall?
Most people who run small and medium scaled business, are not
afraid of hard work .they are troubled by the facts that rules have
changed.
45
2. It will be difficult to keep up with inflation and taxes, working for other
people.
How much was it enough for a family of four to run a house (no
luxuries, just necessities) 40 years back?
Ans: Rs. 100 Rs. 200 p.m.
How much is it required for the same family to run the same
house today?
Ans: Rs. 15000 Rs. 20000.
And how much do you think one will require 40 years from now, if
you count at the same rate
Ans: Rs. 500000 Rs. 750000
46
back
office
banking,
auditing,
financial
analysis,
in costs.
Bank of America is shifting 4700 credit card jobs to India.
Microsoft and IBM are going to pledge over $450 million p.a. and
$1billion respectively to India in next three years.
th
47
48
49
2) Company:
Proven financial stability: It is always advisable to ask for
established and financially stable company. The company should
represent their steady growth, sales figure and sales history,
ultimately projecting their future trends.
Good reputation and background, strong management and
established international markets in place. If its a new company
then make sure that the owner has at least 10 years of MLM
experience.
Never join a company just because the owner is rich. Dont join
even if there experts employed by the company.
Extensive support network: your company should offer extensive
support network, for training seminars and materials, to incentives
and helpful staff at regional, national and international levels. Your
success depends on MLM Companys success.
50
3) Business plan:
What is the real bonus paid by the company?
Are there multiple income opportunities? A variety of income
opportunities must be offered to you, along with the advantages of
working on your own schedule, either part or full time. You should
earn multiple opportunities to earn money.
No pass-ups: you should look for the marketing plan that rewards
for your efforts. When someone you sponsored and introduced to
your MLM business excels in sales, you should be rewarded and
not passed up.
No demotions: distributors should not be demoted due to inactivity
of sales. Once youve been promoted to certain level you should
be there for lifetime.
Bonuses paid on retail cost of the product: even though you pay
wholesale price of product, a quality company will still pay you on
the RETAIL prices of the product.
change frequently.
51
(independent
contractors),
rather
than
through
Cannot
people.
find
find
Can
people.
Dont want to
listen.
Want to
listen.
Dont want
to do.
Want to do.
Cant build a business.
Leverag
e.
54
2)
3)
Work with others interest at heart. Help others get what they
want and you will get what you want.
4)
5)
6)
7)
8)
55
Work the business in the healthy way; your bonus must reflect
the number of distributors in your organization.
2.
A good MLM company will have 25-75 product buying rule i.e.
that unless the distributor has sold 75- 80% of the previous stock,
he is not allowed to make a new purchase.
4.
56
57
BIBLIOGRAPHY
SCOPE OF STUDY-
Selling (W.F.D.S.A.).
METHODOLOGY.
RECOMMENDATIONS.
58