Chapter 1

Introduction
1.1 Network Marketing
Network Marketing or Multi-level Marketing (NM) — a person-to-person direct
marketing and selling technique rather than conventional advertising and retailing
method, to promote and sell a company's goods and services — is fast becoming one of
the leading marketing approach of the decade.

NM, also named as Network Marketing, has been termed by many as the wave-of-the-
nineties. Today, mounting numbers of multi-national companies have entered the Indian
market while a number of local firms are being set up to channel their products and
services direct to consumers through NM strategy. Companies employ NM to generate
sales leads and reduce selling cost. It continues to grow at an amazing rate with no
slowdown in sight.

The world business community has embraced this "new" distribution channel for selling
direct to consumers. NM is a $45 billion industry in sales worldwide with sales of about
$15 to 20 billion annually in the U.S., according to Debbi Ballard, President of the
International Multi-Level Consultants, using figures drawn from estimates developed by
the Multi-Level Marketing International Associates (Scott, 2008). Stand-ford Research
and Wall Street Journal anticipated that over 60% of products and services would be
routed through NM at the end of 2010s. Even Staid Corporate America is catching the
NM fever. Industry sources say that the New York times has been considering selling
subscriptions through NM. Even AT & T might be taking notice of networking marketing
after losing approximately 26 percent of its long-distance market share to MCI and U.S.
Spirit — companies that use NM sales forces.

In 2007, there were 156 Multi-level Marketing companies in U.S.A. selling a wide range
of products, ranging from personal care, household products, nutrition-health products to
encyclopedia, financial investments, computers and radiant barrier (Kisher,1992). NM

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business has gained high level of acceptance and popularity in the world business that it
has established the Multi-level Marketing International Association with its head office in
the US.

In the local market, sales figures from World Federation of Direct Selling Association
show that $72 million retail sales are generated through NM in India in 2008. Currently,
over a hundred kinds of products reach the consumers through the NM system (Provini,
Oct 2008). NM not only opens an advanced direct marketing channel to manufacturers
but also provides an opportunity for individuals to earn sizable incomes as independent
distributors. Just as franchising opened the door to entre-preneurship for millions of
prospective business owners in the 1970s and 1980s, NM is now doing the same thing in
the 1990s — at a fraction of the start-up cost. There are over 500,000 millionaire in the
U.S. today and 20% of them made their fortune in the last ten years through Multi-level
Marketing (Clothier, 1990).

Buying from NM distributors has become a buying habit of many local city dwellers who
enjoy to purchase direct from friends, relatives or co-workers whom they know rather
than shopping at retail outlets. Network Marketing was once thought to apply only to the
selling of personal care and household products; that is no longer the case. Now the
product being sold is just as likely to be a computer program, financial advice, a travel
package, or a book, sold by one business executive to another.

1.2 Objectives of the Study

Although the basic NM structure has been successfully employed by NM giants such as
Amway and others since the late 1950s, the NM industry itself is still considered to be in
its take-off stage especially in the local market. This in due to both the number of new
companies, many of them major corporations, that are choosing to use NM; and also the
growing interest of managers and professionals in becoming distributors.
Despite its impact on the territory, relatively little information is available to help us
build up a comprehensive knowledge framework of the NM business, not to say develop

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sound strategies for NM companies. Primary data and information on the size, profile and
characteristics of NM customers in local market is extremely rare. There might be
research and study conducted by individual NM company, but such information is often
for internal use and limited to their spfecific needs only. The objectives of the present
study is to

To Study the marketing strategy of Amway corporation, as it is Network marketing

Business.

• To Study the marketing strategy of Amway corporation, as it is Network marketing

Business.
• To study the competitive position of Amway with other Network Marketing Business
Companies.
• To study the difficulties and problem faced by Amway to further develop its
Network.
• To study the different aspects of sales promotion schemes adopted Amway
Corporation.
• To study the percentage of market share of various Networking Business.
• To analyze the NM technique in the scope of Direct Marketing (DM)
• To assess factors for the increasing popularity of NM distributing methods in Wardha
• To identify the problems facing the NM companies in the local market
• To estimate the size and assess the profile and characteristics of NM customers in
Wardha.
• To assess possible potential available and effective strategies for local NM companies
to realize this potential.
• To study the competitive position of other Network Marketing Business and system
of distribution of products in the Amway with its evaluation and various type of
Distribution channel in the Amway.
• To study the difficulties and problem faced by Amway to further develop its
Network.

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• To study the different aspects of sales promotion schemes adopted Amway
Corporation.

1.3 Hypothesis

In normal sense, general experience , idea, conclusion ,estimate which becomes the basis

of future research work is called hypothesis. According to S. Bogardus "Hypothesis is a

statement which is yet to be tested".

Following are the hypothesis of the researcher -

• Amway Corporation has remarkable share in Market.

• Advertisement policy of Amway Corporation is inadequate to attract new people
for Network Marketing Business .
• As the products manufacture by Amway corporation are all FMCG products
(Cosmetics) so they have very large demand in market.
• Customers Generally prefers Purchasing Through Network Marketing Means for
quality of the Product.
• Network Marketing products are very expensive.
• Satisfaction level of Network Marketing Consumers is very high.

1.4 What is Network Marketing?

Network Marketing or Multi-level Marketing is one of the direct marketing and selling
methods by which the products or services move directly from seller to consumer through
independent distributors in a personal selling approach. Bypassing traditional wholesaler-
retailer arrangements and expensive advertising media, NM companies, in effect, rely on
networks of independent distributors to reach customers by word-of-mouth. Money that
would otherwise go to middlemen and promotion specialists goes to network members

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instead, resulting in savings for NM companies and earnings for the distributor-
entrepreneurs .

Multi-level Marketing is the system of introducing a product to consumers through a vast

network of layers of independent distributor, by way of demonstration and word-of-
mouth. The NM marketers are called distributors. Profitability comes from selling
product to a consumer. If one becomes a distributor, he would be Level 1. If he sponsors
someone else to be a distributors, they are Level 2. If they sponsor someone, Level 3, etc.
The more levels one sponsors, the higher he is in the network hierarchy. By this way,
products are marketed through layers of distributors each of whom duplicates his or her
efforts and form a close knit.

Multi-level Marketing Company is a company by which it builds an organization not

by hiring people to work for it, but by convincing them to enter into an independent
relationship with the company. There are patterned relations among distributors, but each
person is legally independent of every other person. When one builds a NM organization,
he is actually building a network through which to channel his products.
The NM company provides the products for the distributor to market or sell. The
distributor buys them at a lower wholesale price, then sell them to customers at a
suggested retail price. The distributor could also enjoy reward from the company for
sponsoring downlines through the incentive programme.

Benefits to customers

This form of marketing goods or services directly to consumers takes place: at the
customer's convenience often in his/her home either on a one-to-one basis, or in the
context of a sales party. Customers value the advantages of: convenience personalised
attention a good selection of products ability to examine the products for a period of time
protected by a customer refund policy.

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Benefits to sellers

Many of these people have chosen direct selling because they want to own their own
business, but do not have : considerable funds required to buy a franchise or start a new
company training time education Among the top five reasons people sell direct are that
they: like and believe in the product like being their own boss, and working their own
hours like the supplemental family income or like making extra money for themselves
feel that the harder they work, the more money they can make enjoy selling and meeting
people.

Benefits to companies

In today's world of rapid change, direct selling offers companies: a direct distribution
channel that can be accessed immediately bypassing rigid and costly traditional
distribution channels.

1.5 Scope of Current Study

In the review of general theories about NM, it is aimed that as broad a coverage as
possible is to be defined for the study. This helps to provide the background knowledge
for understanding why NM developed so rapidly during the past decades both overseas as
well as in local markets.

The subject NM is studied in the scope of Direct Marketing in order to appreciate NM in

a wider scope of marketing strategies and its position in the marketing distribution
channels. Although some may like to categorize NM under the scope of Direct Selling, a
more clear clarification should be made. Direct Marketing is a term that represents any
type of direct-to-consumer marketing whereas Direct Selling is also a form of direct-to-
consumer marketing through personal explanation and demonstration of products and
services to consumers, primarily in homes. Direct Selling takes the form of party plans,
telephone solicitation, in-home demonstration, and door-to-door selling. It is clear that
Direct Selling is a subset of Direct Marketing. No doubt that NM could be described as a

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form of Direct Selling but strictly speaking they are under the umbrella of Direct
Marketing. Personal selling is Direct Marketing in its purest form. Direct response
techniques just make selling a little easier.

NM does not only focus on the "selling" directly to consumers but also incorporates
"marketing" through comprehensive marketing plan and company marketing strategies.
Although it is clear that Direct Selling is within the scope of the collective version of
Direct Marketing, two separate trade associations exist for the two areas both in overseas
and local market. In this study and the customer survey, NM is referred to as

"The marketing and purchasing experience through the direct person-to-person approach
of independent distributors built into a multi-level network of organization."

Although some NM practitioners might see insurance as a kind of NM approach in which

the person-to-person selling approach and layers of commission system are involved.
However, for practical and definitive purpose, only NM products or services which are
distributed from NM companies are included in the survey. It is clear that the insurance
companies do not define themselves as NM companies.

For the customer research, as the current study aims at finding out the latest position of
NM purchasing experience and the profiles of contemporary NM consumers, it is not
meaningful to include those pioneers who bought through NM approach, say more than a
decade ago. As such, the customer survey only aims at estimating the percentage of local
customers who have bought through NM during the most recent one year. For practical
reasons, details on only the NM purchasing experience within the past 12 months are
surveyed.

Individual domestic consumers are the main focus of the customer study. It is not the
intention of the current project to analyze industrial or company buying behaviour. As
such, only consumer products bought by individual domestic consumers for personal
consumption have been covered. Both goods and services promoted through NM fell

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under the scope of the present study and the term "product" will be used to mean
"tangible goods and intangible services".

Regarding the age of the customers, it is sometimes arguable that young children should
be surveyed as well since they are important influences in many purchase decisions.
However, as those young customers aged under 15 years are rather unlikely to be the
target of most NM efforts, as expressed by NM practitioners and reviewed in the pre-test,
it is not fruitful to include them in the present study. Furthermore, it might have difficulty
to explain fully to these young customers the survey requirements and concept of NM.
Therefore, only persons aged 15 or above are interviewed in the customer survey.

Although the population of Wardha is small and relatively homogeneous, there still exist
some differences in the socio-economic and purchasing patterns for individual customers
living in different geographical districts. To obtain a good representation of the total
population of Wardha and to avoid over -or under- representating-any part of the
population in various regions, the whole Wardha was covered and a similar proportion of
household individuals was selected.

1.6 Theorization of Research Topic

The report is structured from general theories of MLM to local application in Wardha
with support of consumer survey and concluded by the recommendations of effective
strategies.

An overall review of the methodology of the whole project is given in Chapter 2 to

enable the readers to appreciate the variety of approaches adopted in the study in ana-
lyzing the subject under different angles.

A detail discussion on the theories of MLM in the scope of DM is presented in Chapter

3 to enable clear step-by-step appreciation of the subject from a wider angle in the
marketing theories.

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Chapter 4 presents the effort and result on the research of MLM in the local market
through bits and pieces of reference material. A review on historical development, MLM
companies in India , local favourable factors and problems are covered to achieve a
systematic and comprehensive analysis of the local situation.

Only theories and general concepts of MLM could not disclose the whole picture of
MLM in the local market. Case studies of local examples could pin down the theories
into practices. Chapter 5 presents case studies of local MLM company — Amway

The methodology of the consumer research survey is presented in Chapter 6 to highlight

the approach of the survey.

Detail findings of the research is covered in Chapter 7 which presents and analyzes the
research results on the customer characteristics and extent of MLM purchase experience
among customers in Wardha.

The information obtained from the variety of sources is tapped and analyzed to produce
suggestions on the effective strategies for MLM companies and the project is wrapped up
by overall recommendations and conclusions in Chapter 8.

It is hoped that such a rich collection of data and information gathered from both primary
and secondary sources can fill the existing information gap in the local MLM field.

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Chapter 2
Research Methodology

The current study focuses on analyzing the NM business and reviewing the current
situation of NM application in Wardha. To achieve a thorough and all-rounded analysis,
different research methods are attempted. These includes:
(a) Literature review
(b) Interviews with NM professionals
(d) Consumer questionnaire interviews

It is hoped that each of the research methods used will supplement the weakness or
deficiency of the others, thus improving the overall quality of the study both in terms of
validity and reliability of findings. As the existing knowledge base on NM is limited, an
exploring approach has to be adopted to unveil as many information as possible to
achieve a more comprehensive picture on the subject.

2.1 Literature Review

The collection of reference material on the general theories of the NM subject is rather
limited, not to say references on its application in the local market. An extensive search
was conducted among all possible sources, including all libraries of the tertiary
educational institutions, books stores, reference corners of relevant associations. It was
found that most of the NM literature was published in the recent decade which indicates
an increasing interest from marketing professionals and academics to contribute more in
the field. However, most of the books found are targeted at NM companies or distributors
as audience by concentrating on how to build up successful NM business. Comparatively
speaking, there are more reference materials on the general theories of Direct Marketing
and Direct Selling as a whole, which might be due to the longer history and attention of
the academic field.

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Except the literature and publications produced by existing NM companies in Wardha, no
reference book on the local NM market could be found. Most of the information on the
local market are drawn from bits and pieces of articles in local newspapers and
magazines in order to establish some basic idea and up-to-date information in the local
situation.

Published articles on general characteristics of NM customers at large are even more

difficult to find. Some NM companies indicate that they conduct customer surveys and
focus group study from time to time. However, these surveys are limited to their specific
needs and for internal use only.

2.2 Interviews With Network Marketing Professionals

To really appreciate the actual application of NM in Wardha, a number of interviews with

some knowledgeable practitioners in the local NM field are conducted to gain an
understanding of the supply end of NM. The combination of professionals in NM
companies and experienced distributors is intentionally selected so that representations
from different angles in the process of NM application can be secured to give a full
picture of the topic.

All of the NM experts interviewed are very willing to offer their kind assistance and
share their experience on the subject. They contribute their views and even share the NM
literature they have. The information and views gathered are very valuable in
understanding the real practice of the NM theories. Details of the discussion have been
incorporated into Chapter 4, 5 and 8.

The interviews are carefully planned and a list of questions related to specific area of
focus was sent to them beforehand to facilitate the discussion.

The topics covered in the interviews include:

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(a) General theories of NM
(b) NM as a Direct Marketing and Selling strategy
(c) Brief history of Company
(d) Application of NM in specific companies
(e) Local factors for growth of NM
(f) Characteristics of NM customers
(g) Opportunities and threats / problems faced by companies / distributors
(h) NM code of ethics

2.3 Consumer Telephone Survey

The discussions with experience NM people is useful in building up the picture of NM
industry in Wardha. But information on the buyer side is still lacking. There is little
research data or information of any kind on the size of NM customers, their
characteristics, differences between NM and non-NM customers, as well as the volume of
NM purchase in Wardha.

To fill up the gap, a survey covering the whole population was planned. The most
commonly used research methods on consumer market research include:
(a) Personal interviewing
(b) Telephone interviewing
(c) Group interviewing

After considering the merits and limitations of each alternative and the resources avail-
able, telephone interviewing (TI) technique is chosen for this survey as it could offer
numerous sampling advantages and is considered more suitable for such kind of con-
sumer market research. The advantages of TI includes:

(a) Higher completion rates. A major sampling advantage of telephone interviewing is

that completion rates - with limits - can be higher than other research methods. The
opportunity for call-backs is virtually unlimited. It takes only a few seconds for another
dialing attempt.

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(b) Greater level of cooperation. The telephone is an imperative device and interactive
in nature. There is a compulsion to answer it. Empirical examples review that the
cooperation rate is much higher than personal interview or postal returns.

(c) Dispersed samples. Unlike the personal interview survey, the sample can be
dispersed just as much as desired, with little increase in cost of interviewing. Whether a
local or territory-wide survey, the sampling method need not generate numbers of people
who live close to each other.

(d) Established sampling frame. It is easier to obtain a reasonably up-to-date frame of

telephone numbers but it is more costly and time consuming to obtain a similar frame for
all consumer individuals in Wardha for personal or postage inquiry.

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Chapter 3
Network Marketing as a Direct Marketing Strategy

3.1 Overview of Direct Marketing

The subject of NM is studied here in the context of Direct Marketing (DM) in the sense
that it tales a direct route for marketing and selling the company's product from supplier
to buyer. Thus, we must first understand what DM is.

In Drayton Bird's terms, DM is any activity which creates and profitably exploits a direct
relationship between the company and its prospect. It embraces different types of direct
response techniques as a "new" distribution channel for selling direct to the consumers .

The general agreed definition of DM is that of the Direct Marketing Association (DMA).
DM is an interactive system of marketing which uses one or more advertising media to
effect a measurable response and/or transaction at any location. DM is getting the
message direct to the customers or prospect to produce some type of immediate action.
The two keys are direct and action. This is because DM is really the straightest line
between the marketer and the action he wants the consumer to take. DM uses media to
deliver the message, it calls for action on the part of the message recipient, and it often
provides its own distribution channel.

The utilization of DM methods has shown spectacular growth over the past decades.
More companies are learning that DM can help them market more cost-effectively. It has
emerged as an integral part of the overall marketing mix in many major companies. The
Direct Marketing Association estimated that 15% of all consumers purchases are made
through DM in 1988 and it would rise to 50% by end of 1990. There are about 25,000
companies in U.S. selling consumers products by DM either solely or as one of their
distribution methods.

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In conventional terms, DM is often referred as a type of marketing heavily on use of
direct mail and telemarketing. However, the scope of DM in modern marketing now
includes many more strategies and means which use direct responses of potential
customers to evaluate the consumer market.

No longer a discipline delegated only to mail-order sales of goods or services or to be

used principally by small business, multi-media— printed, electronic, interactive media
and new emerging media such as teletext, interactive TV, videotext, cable TV— lend
themselves likewise to ripe the benefits of direct marketing. As Martin Baier described,
DM has also been integrated into the "total marketing" programs of major corporations
such as AT&T, IBM, Xerox and Chrysler. Even Procter and Gamble and R.J. Reynolds
are achieving amazing success through DM. Cheer Free, introduced by DM, was the most
effective detergent launch in P & G history. This phenomenon is also significant in the
local consumer market with the emergence of a number of DM company such as Direct
Force, Direct Communication, BBRD Direct, Ogilvy and Mother Direct, etc.

3.2 Direct Marketing in the Distribution System

Direct Marketing is viewed as an aspect of Total Marketing, not a fancy term for mail
order, which move goods and services directly from seller to buyer . In this sense, DM
could be described as one type of distribution channel in the marketing distribution
system.

Typically, the conventional distribution channel comprises various types of marketing

middlemen, wholesalers, retailers, and brokers, each performing a marketing function and
each involve in the process of moving goods from producers to users. Direct marketers
often seek to channel their products or services through the shortest channel directly from
supplier to consumer.

With DM, the normal distribution channels are bypassed. The Direct Marketer brings the
DM message and the product direct to customers without using wholesalers and retailers.

15
The medium itself is the market place. The distance between supplier and consumer is
shortened with less intervention by the middleman or agent in between. In fact, some
firms might employ both conventional distribution channel as well as DM at the same
time for their products. But there is an increasing trend that some organizations choose to
distribute their products through DM exclusively.

3.3 How DM Differs From Conventional Marketing

What is really different about DM from conventional retail marketing techniques? The
major difference could be highlighted as follows:

Advertising and selling combined

General advertising transmits ideas about products and services. But the actual sale of
those products and services happens somewhere else — in a retail store or other selling
situation. DM, on the other hand, combines the advertising and sales function into a
single ad, mailing or commercial. One result of this combining of avoiding a separate
sales function is that a lesser percentage of gross sales income is spent on advertising.

Direct contact with the consumer

DM enables the supplier to establish direct contact with his customers and to adopt his
products or services perfectly to their needs. The supplier no longer has to sell through a
retailer who may not be completely aware of his customer's needs and rarely has any
dialogue with them. By marketing and selling direct, the supplier can ask those who use
the product what they want. DM avoids the wasted effort required to persuade and
motivate reluctant traders. Target segmentation could be effectively employed through
DM. Base on a direct continuing relationship — he is the person the marketer knows,
who knows the marketer. The company could target precisely what he needs and sell to
him much more easily.

Service concept adds value to products

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DM has the unique ability to convert products to services and satisfaction. The service
concept is built into the way the company sells. The DM merchandise offers not only a
product but also something of a service such as convenient monthly terms, free home
trial, delivery service.

Action oriented for impulse sales

Various studies have shown that the majority of retail sales are planned. purchases. Direct
Marketers know that most customers are not sitting home waiting for an attractive ad or
mail to land in their lap. So Direct Marketers concentrate their efforts on stimulating
unplanned or impulse sales. And everything they do is geared toward marketing it as easy
as possible for the prospect to place an immediate order. Basically, the general advertiser
attempts to build brand or image awareness so that when a customer is ready to buy, he or
she will be favorably inclined towards the advertiser's product. Thus, the general
advertiser may have to wait months or even years before the full effects of today's ad
dollars are realized.

Built in result feedback

Inherit in DM's appeal is its self-measurement. The reply cards, coupons, phone calls,
home visit that come back — the inquires, orders, referrals and payments — give the
Direct Marketers an opportunity to measure virtually every element of the marketing
program. Every next move of marketer could be based upon feedback — the instant reply
— available from the marketplace. As a result, DM is often described as the most
scientific method of advertising and selling.

3.4 Why Organizations Use Direct Marketing

Direct Marketing is steadily gaining acceptance. Marketers have predicted that with
information explosion and decreasing costs in computer technology, this trend will
continue right through to the next decade. To many advance marketers who have tried
DM in its various form, these are the reasons that have held them to the decision:

17
Direct Marketing is interactive. Because DM allows the marketer to communicate with
his recipients directly, this inevitably fosters a closer and more personalized relationship
between the two parties resulting in greater satisfaction for both. Conventional
advertising appeals to the anonymous masses while direct response advertising talks to
identifiable individuals. By 'identifiable1, it means that the marketers know the names,
addresses and telephone numbers of the recipients. They also command knowledge about
the purchasing behaviour, the frequency of purchases and the responsiveness to
advertising of individual prospects. In other words, through direct response advertising
we are talking to a real person— a human being about whom we know a lot. It's different
from conventional advertising which speaks to unknown individuals.

Direct Marketing reduces wastage. As a concerted effort is made to evolve a marketing

plan specially for the target audience, the time and cost involved is almost always
justified by the returns.

Direct Marketing controls distribution. General advertisers often spend many months
in filling the distribution pipeline. Much of their marketing effort is directed toward
moving the product along from various wholesalers through distributors to the retail
shelf. Because the advertiser does not control the distribution, getting enough shelf or
display space becomes very important. In DM, the product usually moves directly from
the supplier to the consumer. They control the distribution. The supplier decide when and
where to move out the product, what market segment to go after, how much advertising
support the product should have in the marketplace. And the whole process is geared
toward making things happen much faster.

Direct Marketing maximizes market penetration. DM offers the opportunity to fill the
gaps in a existing distribution system. It's an excellent way of reaching into unrepresented
markets where the company lacks retail distribution outlets. The supplier may also
maximize market penetration by developing new products and services that for one
reason or another do not result in profitable sales through other channels. DM and retail

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distribution may even be used simultaneously to allow customers to purchase in the
manner most convenient to them.

Direct Marketing is measurable. Through the database that captures the profile, such as
age, sex, race of customers and prospect, the marketer can perform market segmentation,
identify the target audience and run direct response campaign. By tabulating the response
generated, the effectiveness of the DM campaign can be measured easily.

3.5 Network Marketing As An Interactive Person-To-Person DM

Strategy

Underlying all DM success is the ability to trigger a direct action; a measurable action at
the right cost, and we don't care if that action is by mail, or telephone, or personal visit, or
other access. Most direct marketers today use a variety of media and the range of media
employed could not be exhaustive. As the Direct Marketers describe, it involves all
media, ranging from direct response TV, print mail to statement stuffers, direct response
billboards. To make it simple and manageable, basically we could categorize the most
commonly used media into four major types:
(a) Direct mail
(b) Print media
(c) Broadcast media
(d) Interactive media

Although Direct Mail is the basic and most widely used medium of Direct Marketing,
there are numerous media in rearching the DM purpose and Direct Marketers are
continuously exploring new ways. The place of personal selling in DM has become more
important.

The focus of the present study is on the person-to-person DM method — Multi-Level

Marketing — which employs person (distributor) as the medium of moving the product
from supplier to consumer. The strength of personal selling in DM is centered around the

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ability of the salesperson to develop, modify and maintain a flexible intercommunication
relationship with customers. Gaining strategic advantage of superior customer service has
been described as the competitive marketing strategy in the 1990s. The person-to-person
direct marketing method could overcome and supplement many shortcomings of other
one-way DM media in achieving this competitive advantage.

3.6 How Network Marketing Differs From Other DM Techniques

Similar to other DM technique, NM seeks to channel the products direct from supplier to
consumers. It emphasizes immediate response from customers through persuasion, push
and reinforcement, not the mere awareness generated by conventional advertising media.
NM also places strong emphasis on building a direct and close relationship with
customers like all other DM techniques. However, NM is an unique direct marketing and
selling technique that have some degree of difference with other DM techniques with its
own unique features.

Salesforce
The salesforce in NM organization is developed through sponsoring Independent
distributors rather than recruiting waged salesperson. Salesperson in other DM organ-
ization are employees while that of NM organization are independent boss of their own
who are motivated to build a business of their own by selling the organization's products
in accordance with the given rules through superior customer service.

Personalization
Sales in NM is generated by the distributor sharing the quality and benefits of the
products with his friends, neighbors and relatives. The marketing and selling technique is
by word-of-month, face-to-face demonstration and personal distribution. Personalization
of contact is a prerequisite in all DM techniques but the degree of personalization in
terms of exchange relationship is the highest in NM. Customers purchasing through other
DM media place order to a third party whom they do not know but in NM the customer is

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buying from someone whom he knows and he has confidence in. Customer loyalty could
be secured at the highest degree which means higher rate of repurchase.

List and database

Other DM techniques rely heavily on in-house lists or externally build database such as
mailing lists, telephone lists in order to target a specific market segment. NM, though
also rely on customer database, rely more on personal contact list and circles of social
network to build up customer list and profile. The distributors are expected to compile
customer list in the forms of customer record card, customer file entry, etc. to keep track
of the customer profile and products they bought for future market planning purposes.
However, as the distributors are independent bodies of the NM organization, such
database of customers are the assets of the distributors rather than the organization.

Measurability of response
In most of the DM techniques, the direct response advertising could often account for the
measurability of response. This could be done more easily in media like mail, printed
advertisements, broadcasting which could tell from the responses that flow in about how
well their promotion or advertisement have been received by the target customers.
Although the promotion effort in other means like telemarketing, personal selling in the
case of NM could also be measured by systematic detail recording of sales effort such as
telephone call, home visit, demonstration with the orders received in a certain period of
time for analysis purpose, many sales effort that involves personal touch, such as sending
goodwill card, party plans, searching referrals, could not be as easily measured as other
DM promotion media.

Advertising
While other DM techniques employ extensive advertising including media like TV, radio,
newspaper, magazine, NM approach uses minimum advertising but instead below-the-
Iine publicity. Much of a NM company's promotional effort center around the sales-and-
business-opportunity presentations, timely event, guest speaking, newsletters,
sponsorships, charitable donations, etc. in order to obtain media exposure.

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Flexibility
The person-to-person distribution method could supplement a number of weaknesses of
the DM media. The customers could touch and see the product or even have a free trial.
Demonstration could be performed in front of them. The waiting time for delivery would
not be long and there is no need to use credit card. The fear of "too easy to overspend
could be overcome. Face-to-face direct marketing and selling situation allows the
distributor to do many things that written word or the TV screen does not. He can see
when the right moment comes to ask for the order, see which arguments work, which
don't. By approaching in the press, or through the mail or on radio, the marketer cannot
vary the approach to suit them because they don't have contact with them. Even the
telephone, though it is the closest thing to the personal communication, can be devilishly
deceptive.

Profit sharing
In most of the business corporations, including other DM company, the recipients of the
profit share are the owners or directors of the company. Very rarely will the retailer's
sales staff share the profits, however excellent and hardworking they may-be. In the NM
organization, every distributor could share the profit in direct proportion to his or her
efforts in the form of different bonus systems.

22
Chapter 4

Network Marketing In India

4.1 Historical Development Of Network Marketing

NM is not a newly invented marketing concept. Its history could be traced back as far as
1945. Multi-level marketing started on a small scale back in 1945, when Cali-fornias Lee
Mytinger and William Casselberry — a former cemetery-plot salesman and a
psychologist — invented a new marketing plan for the Nutrilite company. Nutri-lite sold
green tablets and red capsules that were made of alfalfa, watercress, parsley, vitamins,
minerals and yeast. Cost: US$19.50 for one month's supply for 279 vitamin tablets. The
Nutrilite marketing plan, now the model for many NM companies, worked like this:
A Nutrilite distributor bought his supplies from Mytinger and Casselberry receiving
bonus of as much as 25 % of his monthly sales volume. When he lined up 25 customers
to buy a month's supply of Nutrilite (many became distributors), he was made a sponsor.
Then, his customers and distributors bought Nutrilite directly from him. He made a 35%
profit on sales to customers and as much as 25% of sales from distributors working below
him. When he and his distributors amassed 150 customers, he became a key agent at the
top of his organization. Once his distributors became key agents, he got 2% of their sales.
Mytinger and Casselberry cleverly realized the four advantages of NM:
1. Since the business relies on word-of-mouth sales, a NM company can save on
marketing and advertising costs.
2. By touting the exclusivity of its own products, a NM can charge more than similar
products sold in stores.
3. NM can develop loyal customers who enjoy buying from other people they know.
4. NM can motivate salespeople with higher commissions on increased sales.

23
In the late 1950s, two NM companies were created in the U.S. that have since become the
industry's giants: Shaklee and Amway. Shaklee is now a privately traded firm (US$400
million in sales), known mostly for its vitamins. Amway started in Ada, Michigan homes
of two Nutrilite distributors, Rich DeVos and Jay Van Andel, who developed a cleanser
and launch detergent. Their company grew and, in 1972, bought out Nutrilite.

The local history of NM in India could only be traced through bits and pieces of
information from magazine articles, newspaper cuttings and from memory of the NM
professionals. NM has a short history of about 20 years with Swipe as the first NM
organization in India. The NM business has all along been dominated by Multi-national
foreign NM Organization. Swipe is an American NM organization selling household
cleansing products produced in U.S.A. They often held demonstration seminars in
Y.M.C.A. Despite its new concept imported from the West, participants often reached
200 to 300. However, most of the housewives at that time had been used to traditional
type of detergents. Despite Swipe products had strong erasive power, the price were too
high to be accepted by hardworking households — the average price of a cleansing bottle
was $25 while an average civil servant's monthly salary was only $300 to $400! Thus,
their expansion was limited.

Following Swipe, the giant household NM Amway entered the Indian market in 1974 and
has now developed into a renowned NM model in the local NM business. Amway's 1992
world wide sales were $3.9 billions from its 2 million distributors in more than 50
countries. Many NM experienced distributors in India have gained their valuable
experience from Amway and the organization has been complimented for its contribution
in developing high quality distributors.

NM business was only in its infant stage in early 1980. Beginning from the mid-1980s,
more and more NM companies established its footing in India. A wave of health products
distributed through NM strategy created a fever and talk of the town. Nihon Kenko
Zoushin Kenkyukai Wardha Co. Ltd., which distributes magnetic bedroom products,
grew very fast since its establishment in mid-1980. The aloe products of Forever Living

24
Products and pollen products of Carnation Company became a health diet of many India
ladies and even gentlemen. These health products were described to be able to cure
disease, regulate blood circulation and helps to keep fit.

However, the incident of moss nurturing incident in mid-1991 has detrimentally harmed
the image of NM business. A company making use of illegal pyramid scheme recruited a
network of members and offered them rewards for nurturing moss which said to have
curing value. The unscrupulous founders of such a pyramid company prey on some of the
most gullible and often unknowledgeable people in the town. Instead of generating
income from sales of a product to customers as in legitimate NM companies, the
company generated income simply from bringing in new members and charging them
high fees. The moss "product" was nothing more than window dressing. The mass media
widely published the bankruptcy of the company and distributors crying outside the
company with pots of moss. As many people in Wardha do not have a clear concept of
what NM is, such incident stormed the territory and created much suspicious towards all
types of network-like business.

However, many NM companies have put a lot of effort to promote and educate people on
concept of NM. Waves and waves of NM companies make their way to the local market
by such an advanced and unique marketing strategy.

4.2 Network Marketing Companies In India

As mentioned in Section 2, much effort has been put to explore and collect information
on the NM companies existing in INDIA during the research process, a list of the
information collected is presented below:

25
Name Of NM Company Parent Year Of Product Lines
Company Establish-
(Country) ment;
In India
USA 1995 Personal Care, Home Care,
Amway India Enterprises
Nutrition, Cosmetics
Private Ltd.
Www.Amway.Com

AMC Cookware India Switzerland 1997 Cookware

(P) Limited
Avon Beauty Products Personal Care
India Pvt. Ltd.
USA 1995 & Cosmetics
Www.Avon.Com
(Founder
Member)
USA 2000 Aloe Vera, Health-Care,
Forever Living Products Beauty-Care, Nutrition
(India) Pvt Ltd.
Www.Foreverliving.Com

Sweden 1995 Cosmetics

Oriflame India Pvt. Ltd.

Www.Oriflame.Co.In

India 1996 Health & Nutrition,

Quantum International
Personal Care, Home Care,
Pvt. Ltd.
Www.Quantumindia.Net Food & Beverages,
Household Products, Semi-
Precious Jewellery
Sunrider India USA 1999 Herbal Nutritional Food
Www.Sunrider.Com
Supplements & Herbal
Cosmetics

26
Tupperware India Pvt. USA 1996 Plastic Moulded Kitchen
Ltd.
Containers
Www.Tupperware.Com
Altos Enterprises India 2000 Herbal
Limited
Products/Cosmetics/FMCG
Www.Altosindia.Net

Daehsan Trading (India) Malaysia 2000 Ayurvedic Medicines/Food

Pvt. Ltd.
Www.Daehsanindia.Com Supplements/ Personal/
Health Care
CNI Enterprise (India) India 2000 Home Care / Personal Care
Pvt.Ltd.
/ Daily Use Consumer
Products

4.3 The Direct Selling Association Of India

What is The Indian Direct Selling Association (IDSA)?

The Indian Direct Selling Association is an association of companies engaged in the

business of direct selling in India. Its members are of high national and international
repute having set standards in delivering quality goods and in following ethical business
practices.

Its Main Objectives are:

• To protect and promote the interests of the direct selling industry and of consumers.

• To support and protect the character and status of the direct selling industry and to assist
and guide in maintaining qualitative standards in direct selling.

Keeping in mind the above objectives, the IDSA will work towards the enhancement of
direct selling as a profession so that all those engaged in it can work in a congenial

27
ambiance of growth and achieve their objectives to earn, learn, become self-fulfilled and
well respected. The concept of direct selling creates the need for a Code of Conduct
which would respect the rights of a customer and ensure that the companies and their
sales people practice ethical behavior.

That's why the IDSA lays down a Code of Conduct which is to be followed by all of its
members

It is an association of companies in India which market and distribute products and

services directly to consumers. At the time of the research, members of IDSA includes:

The objectives of the Association are:

(a) to serve the public interest, while preserving and enhancing the marketplace
environment in which the direct selling industry conducts business
(b) to enhance professionalism and expertise within the industry and to assist members
maximize their growth potential in the marketplace

As high standard of ethics and integrity is of vital importance to the NM industry and
other members of the direct selling industry, the HKDSA has deviced a set of Direct
Selling Code of Ethics which have to be abide by the member associations. Most of the
code's standards and procedures are applicable to NM companies. There are clauses
specifying the prohibition of pyramid practices and much emphasis is placed on handling
customer complaint and code complaint. The code of ethics is extracted in Appendix B
which is often used as a reference and guideline for NM companies in designing their
company code of ethics and rules of conducts.

28
4.4 Characteristics Of Network Marketing Product Lines

From the data collected in Section 4.2.1, some special characteristics on the product
marketed by the NM companies could be observed. If we are to categorize the products
lines of these NM products, most of them could roughly fall into one of the following
product categories:

(a) Home and Family Care

— e.g. cookware, laundry, kitchen cleansing, car cleansing, bedroom

(b) Personal and Lifestyle

— e.g. personal care, beauty care, skin care, body care, hair care, fashion

(c) Environmental and Health

— e.g. health improvement, weight control, body shaping, air purifying

(d) Leisure and Educational

— e.g. toys, books

Of course, these broad categories could not be exhaustive and inclusive. But it could at
least shed some light on the most popular product types through NM distribution
network.

In fact, the person-to-person approach has special merit in marketing and selling the
above four categories of products. The query on the truthfulness of advertisement is
high ,especially for some "problem" types identified by the Consumer Council research—
among them are cosmetics, beauty parlour slimming agents and patent drugs. There is
little standard to access the quality of these goods or services and it is easy to be
deceptive in selling them. The effect or result of using the product also differs greatly for
different people. Thus, the NM channel offer an effective way to fill this gap of
skepticism in marketing personal and health products. The NM approach is also a

29
favorable method in selling these products as explanation and demonstration are
important for using these products. The one-to-one approach of selling is more effective
for personal care, kitchen ware and health products because the customers really require
much explanation to understand the features and benefits of the product. For health
products in particular, customer resistance is usually high in accepting the new concept of
taking nutritional supplements and would easily confuse them with medicine. Face-to-
face explanation plays a vital role to provide detail personal explanation, quote examples
or personal experience and provide important tips (such as how many hours before meal)
in taking the health food. All these cannot be done in retail outlets, even the dispensary
corner in Watsons.

The above product lines are mainly used or purchased by female customers. The NM
distributors are mostly female, it is more appropriate for them to sell something that they
are interested in and they have knowledge of. As female customers generally have more
time to spend for purchasing and more time for chatting and social gathering, it is more
easy for NM channels to target at them.

Another special feature for these product types is that they are mainly portable con-
sumables that have to be used everyday. NM is all about a lot of people selling a little, as
opposite to a few people selling a lot in conventional company set-up. Consumption
products instead of luxury products could reach large market with large sales volume but
each item is within the budget of individual consumer. The portable characteristic of
products is important for NM distribution as the distributors are required to collect and
deliver these products directly to the consumers' face. No transportation or delivery is
provided by NM companies.

Besides the product categories, we could also observe some common themes that are
marketed by local NM companies and are proud of by the Multi-level Marketers. These
product themes include:

30
(a) Exclusivity and uniqueness — almost all of the products sold by NM companies
are exclusively manufactured and distributed by the NM company. They cannot be found
in retail or other outlets. Thus, the products are said to have unique feature that could not
be achieved by other products.

(b) Superb quality — most of the NM companies claim that the products are of higher
quality and consumers have high confidence in them as they play much emphasis on
laboratory research and development due to money saved between the layers of
middleman.

(c) Rejuvenating ability — nearly all the personal care and health products are de-
scribed to have rejuvenating ability due to the "secret" formula. They could prolong
youth, revitalize soul, change a new way of life. A number of NM companies uses names
like Nu Sun to symbolize this rejuvenizing concept.

(d) Natural ingredients — most of the products are said to use pure naturally-derived,
non-toxic ingredients to appeal for the increasing health consciousness of customers in
the age of artificial fixes. The products often highlight wordings like "no added synthetic
fragrance or dyes”, "hypoallergenic”, "non-irritation", "gifts from mother nature"... ,etc.

(e) Environmental protection and people friendly — As NM distribution method

gives first priority to "people", the products they sold are highlighted for its
environmental concern. Products are sold for its concentrated nature and thus could use
less. Containers are recyclable. Products do not emit toxic, do not pollute lakes and
rivers. Products are made from renewable resources, do not contain animal by-products
and bio-degradable into substances which are safe to aquatic life.

(f) Value for money — A major selling point of NM product is the high value for a
competitive price. Brand names and packages are overshadowed by high value, such as
nutritionally advanced, concentrated, high cleansing power to show that the products are
worth for its same price level to other lower value products.

31
4.5 How Network Marketing Works

The uniqueness of NM is that it is a method of direct marketing and selling in which

customers have the option of becoming product distributors, who in turn develop
"downlines", or levels of distributors beneath them, all levels sharing in the profits of the
level(s) below them. Many general public do not have a clear concept or understanding of
how NM works.

Basically, the concept of NM is simple. It works as a non-storefront way of selling

products and services through a tiered structure of independent distributors. It is a person-
to-person approach providing full personal services. The marketing and selling are
achieved by such a "people power".

The development of sponsoring lines that create financial ties between distributors.

A company that decides to use this marketing method starts by making its product offer-
ing available to a small number of highly motivated people in key sales regions. In
exchange for selling the company's merchandise and signing up new distributors, the
initial distributors are given the opportunity to earn sales commission and to build their
own sales organization, or network. Basically, they have to do two things: to sell
company's product to the friends, neighbors, and other retail customers; and to sponsor
other people to do the same.

The new distributors who join the company are given the same opportunities as the initial
distributors, and as the process repeats itself, the NM company's distribution system
expands, spreading from person-to-person, from state to state, and even, in some cases,
from country to country.

NM companies as supplier and supporter while distributors as seller and sponsor.The

whole distribution channel starts from the NM Company as manufacturer or supplier of
products. It also provides back-up supports for the distributors — holding presentation

32
meetings, seminars, providing sales brochures, audio and video tapes, warehousing,
transporting merchandise and most important of all the terms and conditions of
distributorship, codes of ethics and marketing plan — to ensure quality and sufficient
back-up service and logistic arrangements.

The distributors are the frontline in the transaction process by promoting and selling the
products to friends and relatives from experience. They have to know the product well,
compile contact list, train and equip themselves for workshop, party plans, referral plans,
hold effective demonstration class, serve the customers and teach downlines to sponsor
others. The marketing plan of NM business pays him for sponsoring and training others
to join as distributor. When he sponsors interrelated friends, business associates and
acquaintances to retail product, he can receive a bonus on the recruits' personal volume.

Selling and sponsoring as ways to generate income

Distributors buying the products wholesale, and they can if they wish, to sell those
products at retail and make a profit. The most common misunderstanding about NM is
the notion that one must have to sell retail to be successful. But in regard to making the
larger sums of income — the real success is in building the network, i.e. let the sales
come as the natural result of building the network. There are a number of different types
of compensation plans utilized by NM companies. Some of the most common elements
of these plans include:

(a) Commission on Personal Sales- This is what the distributor makes on the goods he
actually sells. It is the difference between the wholesale price and selling price.
(b) Group Bonus- This is the percentage the distributor receives of the dollar sales
volume generated by the members in his network.
(c) Leadership Bonus- This is a bonus with which many organizations reward network
members whenever they help someone they have sponsored move up to a higher level in
the organization.
(d) Residual Income- This is an opportunity that network marketers often have to earn
residual income on customers' repurchase or renewals of products or services. Thus,

33
when this compensation method is offered, even of the distributor does not personally
make the sale the next time, he still receives a commission for it.
(e) Usage Bonus. This bonus, offered by many NM companies that provide
membership services such as discounts on air travel, and telephone and credit card
charges, is paid to distributors as a percentage of their group's total purchase.

Given their emphasis on people power to market their wares, NM companies do offer
network members a wide variety of compensation methods beyond the ordinary. Unlike
the "linear" incomes most people make — a day's pay for a day's work — NM offers the
possibility of "multiplex" income, that is, earnings from several sources over an extended
period of time.

Recognition of levels and titles

When the distributor achieves a certain level of recruiting and selling limit stated in the
Incentive Programme, he can receive a series of honorific titles (such as the honor of
Ruby, Pearl, Emerald, Diamond in Amway; Gold, Lapis, Ruby, Emerald, Diamond, Blue
Diamond in Nu Skin) which represent a formal status hierarchy recognized within and
among the organizations and also rewarded with escalating bonus system.

Mutual benefits between the NM company and its distributors

For the process to work, the relationship between the NM company and distributors must
benefit both parties. From the company's point of view, the cost of supporting the
distribution network should be less than that of using standard retailing channels. From
the distributors' point of view, the start up costs and work-capital expenditures should be
both affordable and reasonable with respect to the profit to be gained. Equally important
is the fact that the earnings potential should justify the degree of effort that the business
venture requires.

34
4.6 Pyramids Are Not Companies
Despite the fast growing of NM business in the world, it is yet the most misunderstood
method of moving products in use today. Illegitimate business called Pyramid Schemes
(also known as "Ponzi Schemes" after the man who originated the concept) have stormed
the territory of NM, thus blemishing the image and reputation of the NM business.

Legitimate NM companies generate income from sales of a product to consumers;

pyramids generate income simply from bringing in new members and charging them
fees.

Participants make money primarily by collecting fees for or profiteering on the signing
up of new participants and loading them up with unsalesable inventories; and who in turn
can get profits or fees by bringing in still more participants. The payment required to join
is normally a hefty one. The problem with pyramid schemes, and the reason that they are
illegal, is that only the first people who join have a chance of making any money.
Eventually the pyramid collapses when the people on the bottom discover that there is no
one left to bring into the group.

Due to their physical resemblance to legitimate NM, many illegal pyramids and chain
distribution schemes try to pass themselves off as being a Multi-level Program. This
creates such a stigma, although unjustified, that many of the new NM companies are
using other names we could hear are "Uni-level Marketing'1 , "Network Marketing" and
"Co-op Mass Marketing".

The pyramid as a scheme is defined as -

(a) a participant in the scheme is granted a license or right to introduce another
participant into the scheme who is also granted such license or right and who may further
extend the chain of persons who are granted such license or right, notwithstanding that
there may be a limitation to the number of participants or that there may be any further
conditions affecting eligibility for such license or right; and

35
(b) a participant receives a reward on, or at any time after, the introduction into the
scheme by him of another participant which reward is based, whether wholly or in part,
otherwise than on the fair market value of goods or services actually sold by him or by or
through that other participant.
In brief, pyramid schemes are fraudulent and designed so that a large number of people at
the bottom of the pyramid pay money to a few fortunate individuals at the top. Of course,
the pyramid may collapse long before a participant reaches the top. For everyone in a
pyramid scheme to profit, there would have to be an endless supply of willing
participants. In reality, however, the supply is limited, and as soon as the shallow well of
recruits begins to run dry the pyramid begins to crumble, and the chances of innocent
victims losing money increases greatly.

36
4.7 Local Favourable Factors For Growth Of Network Marketing At
Wardha

Wardha at a Glance

Geographical Area
Total Area 6310 Sq. K.M.
Area under Forestry 1046 Sq.K.M.
Geographical Location
North Altitudes. 20.18 to 21.21
East Altitudes. 78.33 to 79.15
Population (2001 Census)
Total 1230640 Nos.
Male 635751 Nos.
Female 594889 Nos.
Urban 309696 Nos.
Rural 921244 Nos.
Schedule Cast 149975 Nos.
Schedule Tribes 166000 Nos.
Literacy
Total 869673 - 8050%
Male 489417 - 87.70%
Female 380256 - 72.80%
Administrative Divisions
Revenue Subdivisons Wardha, Arvi, Hinganghat.
Tahasil Offices Wardha, Deoli, Seloo, Arvi, Ashti,
Karanja, Hinganghat, Samudrapur.
Municipal Councils Wardha, Deoli, Pulgaon, Sindi (Rly),
Hinganghat, Arvi.
Wardha, Deoli, Seloo,Arvi, Ashti, Karanja,
Panchayat Samities
Hinganghat, Samudrapur
Gram Panchayats 512 Nos.
Villages 1361 Nos.
Police Stations 17 Nos.
Police Out Posts 8 Nos.
Health
Major Private Hospitals 2 Nos.
Medical Colleges 2 Nos.
Civil Hospital 1 No.
Rural Hospitals 7 Nos.
Primary Health Centres 27 Nos.
Cottage Hospital 1 No.
Tuberculosis Hospital 1 No.
Ayurvedic Hospitals 11 Nos.
Alopathic Hospitals 21 Nos.

37
 Maternity Homes 8 Nos.
Power Sector
Electrified cities 8 Nos.
Electrified Villages 1276 Nos.
Electrified Pump sets 781 Nos.
Road Development
National Highways 108 Kilometer.
State Highways 602 Kilometer.
District Roads 660 Kilometer.
Villages connected by roads 870 Nos.
Total Railway Track 397 Kilometer.
Education
University(Hind) 1 No.
Primary School 1694 Nos.
Secondary Schools 159 Nos.
Jr./Sr. Colleges 82 Nos.
Adivasi Ashram Schools 13 Nos.
Engineering College 1 No.
Medical Colleges 2 Nos.
Pharmacy Colleges 1 No.
Technical/Vocational Education
Technical Schools 1 No.
Industrial Training Inst. 8 Nos.

The favourable factors for the growth of NM in the recent times would be analyzed in
specific to the Wardha market in light of four aspects in the distribution channel: NM
company and distributor at the supplying end, customer at the receiving end and the
market as a whole.

38
4.7.1 The Market of Wardha
(a) Conventional retailing techniques have suffered from increasing overheads
including rapidly rising rent, operating cost especially labour cost. The hot property
market in these five years has resulted escalating rental cost for retail outlets. The rental
index of private retail premises has been consistently increased ,the price index of
private retail premises has been also increasing day by day , besides labour cost, the wage
index for labour engaged in retail business has risen from 281.3 in 2007 to 351.1 in 2008
— which is the 2nd highest wage index among all other industry groups and the
percentage increase is the highest. The heavy burden of overheads has put much pressure
on improving the quality of merchandise and capability to cope with keen price
competition. As a consequence, it gives way to the growth of direct selling which is
unburdened by costly overheads and capital investment. Today, as never befote, DM can
provide greater service at attractive prices. NM is often a preferred DM channel .

(b) The soaring advertising and sales promotion cost has risen steeply. The cost for
sales promotion activities such as exhibition, in-store demonstration has also increased
sharply. Advertising and selling are separated in conventional selling. The high cost of
advertisement is often spend for information and image-building purpose and it is hard to
tell whether the sales are generated by a certain advertisement. However, in NM the
advertising expenditure is kept to minimum. The bridge between manufacturers and
consumers is the hierarchy of sales force with word-of-mouth as the promotion channel.
The cost of advertising and sales promotion could be employed for the improvement of
merchandise quality.

(c) With scientifically advanced technology and rapid life pace, generations of new
products are pushed into the market with relatively short life cycle. With conventional
marketing channel, it incurs high initial cost to break into the market through efforts of
wholesalers and retailers. With NM, new products could be pushed into the market fairly
easy. The educational aspect of NM is best illustrated when a manufacturer introduces an
entirely new product to the market, consumer resistance is usually high and one way to
overcome this is to sell through personal persuasion of friends and relatives. They would

39
be less defensive in accepting a friendfs advice and demonstration than a store
demonstrator. NM is also an effective ground for testing new products. Manufacturers
could avoid producing large volume and keep large stock of new products. Immediate
feedback could be obtained from consumers through distributors for product
improvement or further market penetration.
(d) Wardha is becoming a service economy in line with the changing industrial base and
rising living standards. Wardha has traditionally been very price competitive, but
customers are getting more educated, more sophisticated in their choice of products. One
key to success in marketing is adding value to the transaction. Customer expectations
have risen, particularly customer care expectations. For services, the interface with the
customer is critical to business success. No matter how retailing business have
revolutionalized in producing client-base culture, it is difficult to motivate counter
salesperson to be aware and practice company's customer service mission. However, the
NM sales force-is highly motivated to care and achieve customer expectations for their
friends and relatives. Superior customer value is a build-in element in NM from the pre-
transaction stage to post-transaction stage. Exchange relationship is build up through bits
of personal touch which add to getting and keeping customers in NM.

4.7.2 The Consumer's Viewpoint

From the angles of the consumers in the market place, products from the NM distribution
network are often preferred due to the following reasons:

(a) The popularity of NM could be attributed to the demand for personalized buying. In
the age of seventies, products were sold on a functional basis. There were few products
and less competition. People were more homogeneous and had less money to spend.
They didn't care too much about the style, the look and image of products. All they
wanted simply was ownership. However, in the age of nineties, products are sold for their
psychological satisfaction rather than durability and functional excellence in a product.
They are willing to pay more for personal style, image and charm. Consumers are
becoming more individualized. Therefore, the one-to-one direct personal selling approach

40
of unique NM products are well received as an effective marketing form. Personalization
in NM is a means to bonding-relationship through the personal touch such as sending
birthday cards, calling them up with special offer, asking them how they feel about the
product, wrap the product as gift or give them personal advice to build up the clientele
relationship.
(b) Changing consumer life style resulting from greater emphasis on leisure time
activities and dual roles of working homemakers provide favourable opportunity for
growth of convenient shopping. The increasing number of working women and dual-
income primary shoppers make the household shopping activity change. With less
shopping time, working housewives demand convenient and comfort in shopping which
could not be achieved by modern retail shopping. The in-home or in-office shopping
characteristic of NM relieve the stress of modern shopper by saving time,accessing
distributor and merchandise more easily, receiving the service and merchandise at home
or work. With NM, buyers can make selection in privacy, at their leisure and in the
comfort of their own homes, party occasion, or tea time by chatting with friends. The
housewife can keep her eyes on the kids and the dinner while she is appraising a new
item, no clerk hurries or delays her nor is there a line of impatient customers at her back.

(c) For a modern shopper in Wardha , there are simply too many products, too many
companies, too many brands, and too much marketing noise. The consumer is
overwhelmed with choice, sometimes difficult ones. They demand for more product
information and more guidance during shopping for a more rational and appropriate
choice. In NM, consumers can make a purchasing decision with more information about
the products, such as its unique feature, its difference with other brands, the different
types of product category in the market. As the distributor is also an user of the product,
not only a seller, he often plays the role of an adviser. If the consumer finds problem with
the product, he could simply return it to the distributor who could return to the company
for refund.

(d) The consumers have higher confidence in the products and distributors whom they
know. The distributor has personal experience of using the product and could tell

41
which type of product is more suitable for his friends. As lasting relationship is the
backbone of sustaining the network, distributors would choose what is best for his friends
to ensure repurchase. Moreover, products selling through NM do not pay much emphasis
on packaging and advertisement while exploitation by middlemen through the selling
process is kept to minimum. All these expense will be invested in product development
and research to ensure the consumers can enjoy high quality products at reasonable price.

4.7.3 The Network Marketing Company's Viewpoint

(a) By developing a NM hierarchy of salesperson to market the products directly, the
NM company may remove the distribution intermediaries in order to strengthen his links
with the consumers. Since the manufacturer has to perform the functions previously
undertaken by the wholesaler and retailer, they can have more control on the distribution
of the products through their tightening control on distributors. This often also result in
reduced distribution costs for the NM company.

(b) The NM company could have their products widely distributed at a lower cost.
- NM give manufacturers or suppliers a distribution network far less encumbering than
retail operation or a sales force of employees. The overheads including capital
investment, advertising expenditures, rentals are much reduced in NM. Distributors are a
cheap, flexible source of labour.

The heavy burden on managing and maintaining the large workforce could be . much
reduced especially in period of economic slowdown. The extra cash flow could be
directed to develop and improve products and this is why products sold by NM has
usually higher quality.

(c) Instead of waged frontline staff to handle customers, NM build up and train up
motivated sale force who could perceive the importance of customer relationship. They
are the boss of their own, they are dedicated to their business— more effort, more reward.
This is not often achieved in other means of marketing. The employees — like

42
receptionists, telephonists, credit officers, delivery drivers and even salesperson— do not
recognize their important marketing role in the transaction process.
(d) NM provides an effective distribution alternative for suppliers. Many suppliers
supplement or even change what was originally channeled through retailing to NM
because there is no better way to get the product at the consumer's face. With NM, the
supplier could reach people through their families, their neighbors, their co-worker, who
could break down sales resistance more easily. This is an effective means of marketing
by capitalizing on individual relationship.

4.7.4 The Distributor's Viewpoint

(a) NM business provides a golden opportunity for local enthusiastic entrepreneur who
want to build up their own business. Wardha is often described as the paradise of
opportunity. By joining the NM company, a distributor could make use of the system,
marketing plan and products created by a large prestige company which back him up to
build his own business. The company provides extensive training on product knowledge,
motivation, demonstrating and selling techniques, etc. which could not be easily gained
elsewhere. Such kind of interrelated but independent relationship makes a nice fit
between an established NM company and an entrepreneur. Going into die NM business
has long been a goal of enterprising individuals who want financial independence. They
could control their downlines, control their time, takes initiative to work for himself. It is
common to have a husband-and-wife forming joint distributors to build up their "family
business". In addition, NM also provides a good opportunity for people to earn extra
money on part-time basis.

(b) The NM business has high earning potential. In many instances, new recruits to
network marketing have begun earning monthly incomes in the five-figure range within a
year of joining their companies. Proven success stories about self-made NM millionaires
abound in the network marketing industry. Some companies, like Amway, even stage the
success stories in the Wardha by presenting awards and having the distributor telling his
story and sharing his experience. Distributors dash to learn how to "earn top million
rupees at home" or "to get rich from the efforts of others" and called themselves "dream-

43
builders". In fact, the miracle lies on the multiplier effect by building the network through
hard work. The distributor not only earn from his own sales, but also have hundreds of
people working for him and reaping the reward.

(c) Initial capital investment is minimal for NM distributors. The beauty of this
unique business venture is it works, unlike most ventures of this potential magnitude,
very little capital is needed. The only requirement is to apply as a distributor, buy a starter
kit at very low cost, usually few hundreds, and a dedication to the business. Unlike the
franchise business which requires substantial initial investment, the NM distributor could
start the business with much less financial pressure. In addition, little or no experience is
needed for a distributor because the company will offer distributors training opportunities
to learn the way to start and build up the business. Thus, the strong advantage of NM is
the minimal financial risk involved in a legitimate one. The NM company usually does
not exert pressure on distributors for marketing the product. No product purchase is
required to become a distributor. The company will exchange products with new ones or
buy back reasonable quantity of unsold inventory from distributors. In fact, NM
companies usually discourage distributors to hold high level of inventory.

(d) NM distribution is a home-base business. The operation and administration

costs are held to minimum through this type of business venture, since distributors work
from their home rather than expensive leased office space. The home could be a rest but
also working area. Time could be employed flexibly. They have the freedom to work full
or part-time. They could take care of their children and rest at their sofas for earning
money, this is why many housewife join the NM business to earn money. Not only does
this makes it much easier for new distributors to come on board, but it also allows a great
portion of operating expenses and time to spend on care on the customers. Another
advantage for distributor is the substantial tax breaks and save on annual tax payments if
the distributor registers his own organization as a legally bounded business. He can
deduct the phone bills, rent, repair or entertainment expenses.

44
(e) Some distributors join the business simply to enjoy the privilege of buying at
wholesale price from the company he is representing. Besides selling to friends and
relatives, he can use these items for his own consumption. In fact, many describe the NM
company as a buyers club in which they could enjoy the fun of "shopping" at wholesale
price.
(f) Many distributors enjoy the NM business not simply because of earning money but
also its appeal on psychological fulfillment. The NM company pays great emphasis on
the family-like nature of the network relations. To many distributors, the industry's
promise of self-control, independence, status, freedom and friendship are attractive to
them. By joining the NM business, they could have opportunity to make friends, to work
on a team, to achieve the sense of self-fulfillment and loyal association which could not
be achieved through the normal rationalization and insecurity of corporate life.

All these factors explain why NM, though has roots in the West in the early past, is a
wholly modern marketing business phenomenon in the 90s created and sustained by the
local social and economic conditions of the day.

4.8 Problems Faced By Network Marketing Companies

Despite its merits over conventional retail marketing and other DM strategy, NM
companies have to face and overcome a number of problems.

Limited knowledge on NM
The history of NM in the local market is very short and knowledge of general consumers
on NM is limited. People often see it as a type of door-to-door direct selling. There are
few who could have a correct concept of NM and even fewer could tell the difference
between NM and pyramid scheme. The "moss incident" has detrimentally harmed the
name and image of NM. Interested ones might hesitate to join the NM business while
consumers might be afraid of buying a merchandise from illegal organization.

Company's image may be harmed easily

45
There is the danger that company's image can be harmed by overzealous members.
Distributors come from all walks of life and the company has no special requirement nor
any screening system. The distributors are independent members rather than employees,
they could use their own ways for marketing and selling the products. Though there are
codes of ethics and rules of conduct, it is still difficult for the company to control the
ways distributors sell and sponsor downlines. A few bad apples can spoil the barrel and
harm the company's reputation. The company has to exercise balance between control
and flexibility of this distributorship system. Thus, it is difficult for the company to
maintain market stability and order in NM. Most people who get into trouble in this
business are those who chose to ignore the rules of conduct and the teachings of
successful distributors because successful meaning profitable as well as legal and ethical.

Communication with distributors

When the network is becoming larger and more complex, the company often finds it
difficult to communicate effectively with distributors. The spread of message is more
distant. Although the NM companies often hold regular distributor seminars, training
courses, it is up to the distributors to choose whether to participate. However, commu-
nication is of vital importance in the network to keep distributors update with the product
information, marketing techniques, change of policy or emergence of new products, etc.

Lack of professional knowledge

As the NM company requires no experience in marketing and selling from the part of
distributors and many distributors are part-time workers, training for them is difficult and
might take a long time. The company has to devote much resources, time and effort to
develop sales training and promotional materials. It is difficult to train and require non-
employees to do the business in a professional manner.

Difficult to keep distributors motivated

As distributors are not employees of the company, it is difficult to keep them motivated
in the long run. The percentage of non-active distributors is quite high in NM companies.
The network stop at the point of these non-active distributors who do not bother to branch

46
out the downlines. Some active distributors may not be able to stay motivated in the long
run due to personal or family changes.

Distributors expect to make easy quick money

After hearing the success stories of others, many distributors expect to get rich from
MLM business in a couple of years. However, not many aware that to achieve any degree
of financial success, the distributors have to be prepared to put in the necessary time and
energy to make the network grow. NM is no get-rich-quick scheme. It takes hard work,
charisma, and leadership to motivate the downline to sell, not just sitting on the sofa.
That's why NM companies arrange tapes, meetings, toil-free numbers, voice man and
seminars to drench their people with success testimonials, sales pointers, incentives.
However, the short-term orientation of many distributors makes the company difficult to
conduct more long-term planning and strategic development for the clients.

Distributors easily lose focus

The balance between selling and sponsoring is important for the distributors. However,
not many distributors could maintain the balance in order to build up a "healthy net-
work". Distributors might easily lose the focus by emphasizing too much on the spon-
soring aspect, rather than the basics — the products. The distributors must have to i
know the product well in order to teach the downlines. On the other hand, some dis-
tributors may take it as a sales business. Many fail because they are too sales-oriented.
The proper attitude of a NM distributor should be to teach and sponsor after knowing the
product well. However, not many understand that NM is a method of marketing.

Lack of trade or affiliate association

Despite the development and increasing popularity of the NM business in Wardha, there
is little build-up industry information nor any rules or regulations abide by the whole
industry. Each company do it their own way. There lacks cooperation and
information exchange between the NM companies.

Entertainment value of shopping activities

47
Many consumers of Wardha still enjoy shopping around as a kind of entertainment and
social gathering opportunity. The population of Wardha is highly concentrated with
numerous retail outlets, in addition with the recent development of several large shopping
arcade, purchasing from retail shops become even more easy.

48
Chapters 5
Case Study
Amway : The Giant Of Network Marketing

5.1 Amway : Company Profile

Amway is more than an income opportunity or a company or products. It’s about putting
people in control of their lives. It’s about connecting people to others who respect them,
who share their goals and aspirations. It’s about supporting people in their achievements.

Amway is about people connecting people to a better way of life.

Amway Corporation is one of the world's largest direct selling companies. Originally
founded by Jay Van Andel and Rich DeVos, Amway operates in more than 88 countries
and territories in Asia, Africa, Europe and the Americas. Amway products and services
are marketed through independent business owners worldwide. Amway is a wholly
owned subsidiary of Alticor Inc.

Amway has more than 6000 employees worldwide. In addition, Amway has more than
3.6 million Independent Business Owners (IBOs) around the world. In China, Amway
products are sold by Amway sales representatives.

5.1.1 Products and Services

Over 450 unique, high-quality products carry the Amway name in the areas of nutrition,
wellness, beauty and home, as well as commercial products and a variety of services. In
addition, Amway independent business owners in selected markets sell additional brand-
name goods through local merchandise catalogues, plus a variety of services and
educational products. All products are backed by a customer satisfaction guarantee.

49
5.1.2 Governance And Management
Doug DeVos is the President of Amway and Steve Van Andel is the chairman.

5.1.3 Affiliations
Amway is a prominent and active member of the regional and national direct selling
associations worldwide. Doug DeVos is a member of the U.S. Direct Selling Association
Board of Directors. Former Alticor President Dick DeVos is the current Chairman of the
World Federation of Direct Selling Associations (WFDSA). Globally, direct selling is an
industry with approximately $80 billion in sales and more than 30 million salespeople.

5.1.4 Amway: Timeline

1959

Amway Corporation founded by Jay Van Andel & Rich DeVos

Launch of LOC Cleaning Product

1960

SA8 Laundry Detergent Introduced

1962

Nutrilite brand introduced

1963

Gross sales over $6 million

1968

Launch of Artistry brand

1971

50
Amway expandsAustraliaEuropeJapanKoreaThailandMalaysia1980Sales pass the $1
billion mark

1981

Amway Grand Plaza Hotel opens

1984

State-of-the-art cosmetic plant opens

1985

Amway expands to Latin America

1989

Sales force surpasses 1 million

1995

Amway expands to China

1997

Sales force surpasses 3 million Amway expands to Africa

2000

eSpring logo

2001

1 online health & beauty sales – business 2.0 magazine

2003

51
One by One Campaign for children started

2005

Sales reach $6.4 billion Amway expands to Russia

2006

Nutrilite Health Institutes Center for Optimal Health Opens

Own farms in: Brazil, Mexico, United States

Nutrilite is the world’s leading brand of dietary supplements

A global leader in prestige beauty

2009

50 years Of growth and innovation Of quality product brands Of helping people live
better lives

5.2 The History of Amway

What does the word Amway mean? Amway is an abbreviation for "American Way" and
was coined in 1959 by company founders, Jay Van Andel and Richard DeVos. Short,
unique and easy to remember, Amway has been registered as a corporate name and
trademark ever since.

In the following decades, Amway Corporation successfully established itself as a leading

multilevel marketing business, built on strong values and founding principles that
continue to sustain our company today. The business is built on the simple integrity of
helping people lead better lives.

Today, Amway is a multibillion-dollar international business representing freedom and

opportunity to millions of people in more than 88 countries and territories around the
world. Amway generates US$6.4 billion (September’04 - August’05) in sales at

52
estimated retail through this global product distribution network. We offer over 3 million
Business Owners the inspiration to grow those businesses, and we work hard to provide
new and better ways for them to achieve their life goals.

5. 3 Amway India Fact sheet

Amway promotes individual entrepreneurship through its innovative direct selling
approach of world class consumer products. Amway India is the country’s leading direct
selling FMCG-company which manufactures and sells world-class consumer products. Its
business opportunity and all its products are covered by 100% Money Back Guarantee.
Amway sources all its products from within India, thereby providing stimulus to the local
manufacturing industry.

5.3.1 Corporate Credentials

Amway India is a wholly owned subsidiary of US $ 7.2 billion Amway Corporation,

Ada, Michigan, USA. Amway Corporation is one of the largest Direct Selling companies
in the world. It has a presence in 80 countries & territories.

Established in 1995, Amway India commenced its commercial operations in May 1998
and has emerged as the largest Direct Selling FMCG Company. The Company is
headquartered at the National Capital Region of India - New Delhi.

Amway has invested in excess of US $ 35 million (Rs. 151 crore) in India of this; US $ 6
million (Rs. 26 crore) is in the form of direct foreign investment..

Amway India has 400 full time employees and has generated indirect employment for
1,650 persons at all the contract manufacturer locations.
The Company has provided income generating opportunity to over 4,50,000 active
independent Amway Business Owners.

53
Amway India provides free and unlimited training to all its distributors to help them
grow their business. Amway India conducted over 29,000 training sessions during in the
past 12-months with an attendance of over 1.5 million Amway Business Owners and
prospects.

Amway India recorded a sales turnover of over Rs. 800 crore during January’07 –
December’07.

Amway India is a member of the Indian Direct Selling Association (IDSA). The IDSA is
an industry regulatory body, with several reputed international and Indian Direct Selling
companies as members.

Amway India is also a member of the Confederation of Indian Industries (CII) and
Federation of Indian Chambers of Commerce (FICCI).

The World Blind Union presented an award and citation to Amway India in 2003, for its
peerless work for the blind children.

5.3.2 National Presence

In ten years of commercial operation, Amway India has established a nation-wide

presence in over 125 offices and 55 city warehouses and four regional mother
warehouses. The distribution and home delivery network set up with the support of
independent logistics partners is spread across over 3,000 locations.

54
5.3.3 Manufacturing

Almost all Amway India products are manufactured in the country through 7 third party
contract manufacturers. To bring the identified contract manufacturers’ production
facilities and skills to international standard, Amway has invested in excess of US$ 4
million (approx. Rs. 17 crore). The transfer of this state-of-the-art, world-class
technology, has been free of cost.

5.4 What Is Direct Selling ?

The sale of a consumer product or service through personal contact, away from a fixed
retail location or shop. Worldwide, the number of direct sellers is growing at 220,000 per
week.

NM - a definition

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.

Benefits to customers

This form of marketing goods or services directly to consumers takes place: at the
customer's convenience often in his/her home either on a one-to-one basis, or in the
context of a sales party. Customers value the advantages of: convenience personalized
attention a good selection of products ability to examine the products for a period of time
protected by a customer refund policy.

Benefits to sellers

Many of these people have chosen direct selling because they want to own their own
business, but do not have : considerable funds required to buy a franchise or start a new
company training time education Among the top five reasons people sell direct are that

55
they: like and believe in the product like being their own boss, and working their own
hours like the supplemental family income or like making extra money for themselves
feel that the harder they work, the more money they can make enjoy selling and meeting
people.

Benefits to companies

In today's world of rapid change, direct selling offers companies: a direct distribution
channel that can be accessed immediately bypassing rigid and costly traditional
distribution channels.

5.5 Amway Sales and Marketing Plan

The Amway Sales and Marketing Plan is a low risk, low start-up cost business
opportunity that is open to everyone. It allows you to build your business through
retailing products and sponsoring other people who, in turn, can retail products and offer
the business opportunity to others. By passing your sales and marketing knowledge to
your developing team, you not only build your own business network but also enable
others to build one of their own.

The Amway Sales and Marketing Plan has been operating for over 40 years and is
available in over 80 countries and territories around the globe.

The core of the Amway Sales and Marketing Plan's income opportunity is the sale of
quality AMWAY products to retail customers. As your Amway business grows, the
rewards you earn grow in proportion. The Amway Sales and Marketing Plan does not
compensate anybody for simply recruiting others as Amway Business Owners.

5.6 Joining Amway

To start the Amway Business one needs to buy the Amway Business Kit and be
sponsored in the business by an already existing Amway Business Owner.

56
Despite what one may have heard, starting an Amway business doesn't involve handing
over large amounts of cash.

With efforts and knowledge, the Amway opportunity can become everything from a
means of earning a little extra cash to building an international business.

5.7 Amway : Product Lines

At present, Amway India offers over 105 products in four categories. They are Personal
care category, Home Care category, Nutrition & Wellness category and Cosmetics
category.

With the exception of Cosmetics range and some products in Nutrition and Wellness
category, all Amway India products and bottles are manufactured in India.

The products match Amway’s global quality standards. They carry a tamper-proof seal
and a ‘100% Money Back Guarantee'. If not completely satisfied with the product, the
consumer can return it for a refund. Amway products are environment friendly, and are
not tested on animals. Amway encourages the return of its used product bottles for re-
cycling and to prevent their misuse.

57
Amway Product Lines
No two people are the same, so why would anyone want anything less than the best choices
at their disposal? Peruse the following categories for the premium-quality products you need
to live life your way!

Nutrition and Wellness

• Food Supplements

• Foods

• Miscellaneous Health & Fitness

Cosmetics
• Artistry / Attitude

• Skin Care Products

Home Care
• Laundry Care

• Apparel Care

• Household Cleaners

• Kitchen Care

• Glass and Metal Care

• more..

Personal Care
• Hair Care Products

• Oral Care

• Body & Skin Care

• Family Care

58
• Male Grooming

• more..

Catalogue Products
• Home Products

• Kitchen Appliances

• Children's Toys/Apparel

• Women's Apparel & Accessories

• Mens Apparel & Accessories

• more..

Commercial Products
• Agricultural

5.8 Rules Of Conduct

Each new Amway distributor is provided with an Amway Business manual which covers
the distributors rights and responsibilities. Amway Corporation itself has an entire Rules
Administration Department to access the legal requirements in line with business climate,
market potential, new market challenges, and most important of all is to ensure and
monitor the ethnical business standards and distributor integrity.

Amway has 10 official "Code of Ethnics" for Amway distributors. The major spirit is to
ensure distributors to present Amway products in a truthful and honest manner by
upholding and observing the rules of conduct.

To ensure distributors build the Amway business through a balance of sponsoring and
selling, various safeguards are built into the rules of conduct. Some examples are high-
lighted as follows:

(a) The "ten-customer rule" requires a sponsoring distributor to make not less than
one retail sale to ten different customers each month, in order to obtain the right to earn

59
Performance Bonus on the volume or products sold by him or his sponsored distributors
during any given month.

(b) The "70% rule" requires that 70% of the products a distributor buys must be sold at
retail.

(c) The "buy-back rule" protects against any possible inventory loading. Every
sponsor must buy back from any of his personally sponsored distributors any unused,
currently marketable Amway products, Amway literature and sales aids which the
distributor may have purchased from his sponsor.

(d) The "Amway Satisfaction Guarantee" assures customer of the full value on every
purchase of Amway products. Should a customer return a product to the distributor for
any reason the distributor could simply return it to his sponsor or Amway for a refund.

60
CHAPTER 6
Methodology Of Research Survey

6.1 Survey Objectives

To understand more fully the NM business in Wardha primary data on the consumer
market is very important. However, there is little data or information on the NM
consumers in the local market. A questionnaire survey is conducted with the objectives
to:
(a) estimate the size of NM consumers and NM sales in Wardha
(b) gauge information on NM customer profile and characteristics of NM purchase
experience
(c) compare NM customers and non-NM customers with a view to establish more
effective strategies on the part of the NM companies.

6.2 Sampling Frame

However, there is no readily available full list on all the consumer population in Wardha
in order to conduct the telephone interview. As over 75% of the domestic population in
Wardha have residential telephones, the closest and most convenient sampling frame for
the survey is the latest version of the Wardha residential telephone directory published by
the BSNL. Although the telephone directory is not a perfect frame for selecting a totally
representative sample of the Wardha consumer population, it could satisfy most of the
criteria in evaluating sampling frames -

(a) Adequacy - A sample frame should cover the population to be surveyed and that it
should do this adequately related to the purposes of the survey. The telephone directory
could adequately cover the domestic consumer population in Wardha with sampling
population of different age, sex, income or marital status. Thus, it could be satisfactorily
used in relation to the purpose of interviewing domestic consumers of NM.

61
(b) Completeness - Using telephone directory as the sampling frame has the defect of a
certain degree of incompleteness. It is incomplete as some domestic households do not
have a telephone and some households prefer not to have their entries listed in the
directory. As the sampling frame does not include these units of population, the missing
units will not have the opportunity of being selected. However, as only about 25% of the
domestic households in Wardha do not have a telephone installed, these households are
usually less well-off and they will be slightly under-represented in the survey. As the
major reason for households not enlisting their entries in the directory is to maintain
privacy and reduce unnecessary disturbances; co-operation of this minority group is
expected to be not high.

(c) No duplication- The telephone directory might contain duplications of some

households who have more than one telephone. However, the possibility of such
duplication is low in a random sampling method and the effect is also expected to be
quite insignificant. Moreover, the respondents would usually tell the interviewer if he
himself or his family members have already responded to a similar survey within a short
period of time.

(d) Accuracy- The latest version of telephone directory is still not the up-to-date
sampling list as inclusion of the number of a newly-connected telephone number in the
directory takes time. There are also telephone numbers disconnected owing to the
dynamic nature of the population. However, it is difficult to obtain an absolutely accurate
up-to-date frame and the effect is considered insignificant.

(e) Convenience- The telephone directory is a very convenient source of sampling

frame in terms of both assessability and suitability of its arrangement for the purpose of
sampling. The alphabetical organization and systematic listing of the telephone entries
facilitate the selection of sampling units.

In actual fact, it is extremely difficult to build up a perfect frame for a population as

mobile as Wardha. The telephone directory is regarded as a reasonably satisfactory

62
frame for the consumer survey as the defects are believed to be not serious and would not
pose major threat to the representative ness of the respondents.

6.3 Sampling Method

To enable statistical inference to the population, a systematic random (probability)

sampling method is used to ensure its measurability and representative ness.

Having taken into account the amount of available resources and the acceptable level of
precision, a sample size of 500 telephone interviews is included in the survey.

6.4 Questionnaire

Data for the study was obtained by means of a structured questionnaire which consisted
of no. short questions. The survey questionnaire was designed after reading literatures on
the NM subject. Views were sought from people working in the NM field to improve the
wordings used, structure of organization and add or delete appropriate options. As the
concept of NM is still 'new’, the wordings used in the questionnaire were designed
carefully to minimize misinterpretation and maximize accuracy on the part of
respondents.

The questionnaire was designed and structured in order to collect required information
for analysis purposes which include the following parameters in the NM purchasing
experience:

(a) Why buying / not buying

(b) What was bought
(c) How much / many was bought
(d) When encounter the experience
(e) How was the experience
(f) What do you know about NM

63
To reduce as much as possible unforeseen snags in the actual usage or administration of
the questionnaire, a pilot survey was conducted before the main survey. The telephone
numbers of this pilot survey was drawn at random from the telephone directory. A total
of 54 successful contacts were made. An analysis of the data received, difficulties
encountered, queries on the questions and feedback discussions with the interviewers was
carried out in order to make necessary amendments to the original questionnaire. The
final questionnaire adopted for the main survey is at Appendix C.

6.5 Fieldwork
One female interviewers were employed to assist conducting the telephone interview
survey. Only female interviewers were recruited because it has been demonstrated in
many other telephone interview that female interviewers are more successful in soliciting
cooperation from the respondents. Three of the interviewers have previous experience
while the other two have no experience in conducting this kind of interview. An one
-hour briefing was given to them on the clear concept of NM, technical details in
conducting the fieldwork, including the objective of the study, the correct usage of the
questionnaire, survey requirements, interviewing techniques and dissemination of
standardized explanations to any queries which arise.

Each interviewer was assigned one-fifth of the 500 selected telephone numbers covering
all regions in equal proportion. They had to mark down on the designed telephone contact
list how many times they had tried the number and which time was successful. The result
of the contact was classified into the followings:

64
Chapter 7
Analysis Of Research Study

7.1 Summary Of Response

The overall response of the consumer telephone survey was rather satisfactory. Out of the
500 selected entries, 327 (65.4%) individual consumers were successfully interviewed.
Only 75 (15%) of the respondents refused to participate or refused to ask eligible family
members to respond to the survey. The remaining 98 (19.6%) were non-contact cases
where the telephones were disconnected, out of order or nobody was there to answer the
phone call after four trials were made at different times and on different days.

The response rate of the survey is summarized below:

Selected entries
500

Contacted
Non-contacted
402 (80.4 %)
98 (19.6 %)

Responded Non-responded
327 (65.4 %) 75 (15%)

Figure7. 1: Summary of Response

65
7.2 Estimation Of Size Of Network Marketing Customers

Among the 327 responded customers, 95 of them have purchased through the NM
method in the past year ending May 2008 while 232 indicated that they have no NM
purchase experience in the past 12 months. As the basis of survey in this research is
consumer individuals, a direct Point Estimation of the size of NM customers could be
obtained from the sample:

Estimated % of Wardha population aged 15 or above having

purchased through Multi-level Marketing method during
the 12-month period ending May 2008

Summation of all persons aged 15 & above having purchased

through NM method as obtained from the sample
=
Summation of all persons aged 15 & above in selected
consumer individuals successfully interviewed
= 95/327 X 100
= 29.1

FROM THE TELEPHONE INTERVIEW CONDUCTED, IT WAS FOUND THAT

29.1% OF ALL THE POPULATION IN WARDHA WHO ARE AGED 15 YEARS
AND ABOVE HAVE PURCHASED THROUGH MULTI-LEVEL MARKETING
METHOD DURING THE 12-MONTH PERIOD ENDING JAN 2008.
This estimate is, however, subject to both sampling as well as non-sampling errors and
bias.

66
7.3 Analysis Of Network Marketing Purchase Experience

7.3.1 Items Bought Through Network Marketing Channels

There are a great variety of products that were quoted by the NM customers. 12
customers said that they could not remember what they had bought while the others are
requested to quote as many item that they had bought as possible within the past 12
months. Most of the items bought are personal care products such as cosmetics, skin care,
hair care and body care products while household products, cleansing products and
cookware are the second largest category. In fact, these are also the major product
categories that were distributed through NM.

Item Bought No of Times Quoted %

Cosmetics 27 19.2
Household Products 20 14.2
Cleansing Products 20 14.2
Skin Care 18 12.8
Health Food 15 10.6
Hair Care 12 8.5
Body Care 12 8.5
Cookware 8 5.7
Bedroom Products 4 2.8
Car Cleansing 2 1.4
Toys 2 1.4
Books 1 0.7

Table 7.3.1 : Distribution of Items Bought by NM Customers

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7.3.2 Sources Of The Network Marketing Product

In answering the items that had been bought, NM customers were also asked the name of
NM company that they bought the particular product. 22 (23.2%) of NM customers
expressed that they could not recall or did not know the name of the company. Among
the 112 names that the 73 (76.8%) customers mentioned, over half were Amway. Due to
the long history, large distributor network and variety of products, it was inevitable that
Amway is a familiar NM company among the customers

Sources of NM No. %
Products bought
Amway 62 55.4
Avon Beauty 16 14.3
Products
Oriflame 9 8.0
Daehsan 8 7.0
Tupperware 5 4.5
Quantum 5 45
Forever Living 4 3.6
AMC Cookware 2 1.8
Sunrider 1 0.9

Table7.3.2 : Distribution of Source (NM companies) of Product

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7.3.3 Channel To Know The Network Marketing Products

Over half of the NM customers knew the products through introduction by friends and

68
relatives. This explains the power of personal influence and word-of-mouth through
someone that the customers knew. Over a quarter knew the product through distributors.
Thus, the influence of the network of distributors and their customers is a highly
determining factor for products to reach the potential customer.

As the customers could give more than one answer and render priority in his or her
personal view (as they might have different purchase occasions), thus weighted percent-
age is used to calculate their importance.

Channel to know the NM products Weighted %

Introduced by friends / relatives 55.3

Introduced by distributors 26.5
Search by customers themselves 9.0
Known from promotion / advertisement 7.0
Family member is distributor 1.1
Respondent himself is distributor 1.1

Total 100

Table7.3.3 : Distribution of NM Customers by Channel of

Knowing- the NM Products

69
7.3.4 Reason For Purchasing Through Network Marketing Means

There are a number of reasons for customers to purchase through NM means. The most
frequently quoted reasons are higher quality, persuaded by friends or distributors,
personal service, and convenience. These explain and also highlight the uniqueness and
selling points of NM products. The weighted score of the reasons is presented below:

Reason for purchasing through NM means Weighted %

Higher quality 21.5

Persuaded by others / distributors 14.9
Personal service 12.6
Convenient shopping 11.3
Unique / special features 9.4
Confidence in distributor 7.8
Cannot found through other channel 6.0
Variety 5.8
More product information 5.5
Price 5.4

Total 100

Table 7.3.4 : Distribution of NM Customers by Reason for

NM Purchase

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7.3.5 Assessment On Price Level

The NM customers were asked to rate their views on the price level of the NM products
they bought in comparison to that in retail shops. About 40% of the NM customers
perceived the price level of the products they bought were more expensive than similar
type of product available in retail outlets. Despite the higher perceived price level, they
were still willing to purchase. We could get some hints from.the reasons for NM purchase
stated above. As quite a high number of customers value the product's higher quality,
personal service, convenience and relationship with friends or distributors, the NM
customers were willing to pay a relatively higher price level.

Assessment on Price Level NM Customers

No. %

More expansive 41 43.2

Relatively the same 31 32.6
Cheaper 23 24.2

Total 95 100

Table7.3.5 : Distribution of NM Customers by Assessment on Price Level

71
7.3.6 Level Of Satisfaction

The NM customers were also asked to give their general assessment on the level of
satisfaction on their NM purchasing experience. Over 75 % of the NM customers
expressed that they were satisfied with the purchase experience. Only 4 said that they
were unsatisfied while 1 was very unsatisfied. The reasons for the unsatisfaction include:
the distributors did not follow up the purchase, the products were not up to expectation
and the company did not fulfill the return guarantee.

Level of satisfaction NM Customers

No. %

Very satisfied 17 17.9

Satisfied 73 76.8
Unsatisfied 4 4.2
Very unsatisfied 1 1.1

Total 95 100

Table7.3.6: Distribution of NM Customers by Level of Satisfaction

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7.3.7 Knowledge Of Network Marketing Business

The NM customers were requested to provide information on their knowledge of the NM

business which include:
(a) When did they first encounter the NM product
(b) How many NM companies they knew and what are their name(s)

It was reviewed that about a quarter of the customers encountered the NM product for
less than 1 year while over 80% came across the product for less than 5 years. Over a
quarter of the customers could not tell any other name of any NM company, except the
one he had bought the product. Over 80% knew less than 2 names of NM companies.
Among the names they could tell, over a third quoted Amway. Summaries of what the
NM customers knew about NM are presented in the following tables:

Time that first encountered NM Customers

NM Product No. %
Less than 1 year 25 26.3
1-2 years 35 36.8
3-5 years 20 21.1
6-8 years 7 7.4
over 8 years 8 8.4
Total 95 100

Table7.3.7: Distribution of NM Customers by Time of First

Encountering Network Marketing Products

73
 Time that first encountered NM Customers
NM Product No. %
0 26 27.4
1 34 35.8
2 18 18.9
3 10 10.5
4 5 5.3
5 2 2.1
Total 95 100

Table7.3.7.1 : Distribution of NM Customers by No of Network Marketing Company

known (Other than the One(s)They had Bought from)

Name of NM Company Mentioned No. of times %

Amway 50 38.5
Avon Beauty Products 20 15.3
Oriflame 11 8.4
Daehsan 9 6.9
Tupperware 8 6.2
Quantum 8 6.2
Forever Living 8 6.2
AMC Cookware 7 5.4
Sunrider 6 4.6
sunsky 3 2.3
Total 130 100

Table7.3.7.2 : Distribution of Names of NM Companies

Mentioned by NM Customers

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7.3.8 Joining The Network Marketing Business
Both the NM customers as well as non-NM customers were asked on information in
respect of joining the NM business which includes:
(a) Whether being persuaded to join NM business
(b) Whether intend to join
(c) Factors to be considered for joining NM business

Over half of NM customers had been persuaded to join the NM business while only less
than a quarter of non-NM customers were being persuaded. The distributors make use of
their build-up relationship with customers through selling for developing their sponsoring
business.
Among those respondents who have been persuaded to join the business, only 6.1 % said
that they had the intention to join. Majority of them expressed no interest to join the
business.
For those who showed intention to join the business, over a third of them viewed that
product offering is the most important factor to be considered followed by reputation of
company and incentive scheme. Summaries of the above information are presented in the
following tables:

Whether being NM Customers Non-NM Total

persuaded to join Customers
NM business
No. % No. % No. %

Yes 52 54.7 54 23.3 106 32.4

No 43 45.3 178 76.7 221 67.6

Total 95 100 232 100 327 100

Table7.3.8 : Distribution of Respondents on Whether Being-Persuaded

to Join NM Business

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Intention to join NM Customers Non-NM Total
NM Business Customers

No. % No. % No. %

Yes 15 17 63 15.8 5 2.2 20 6.1

May be 17.9 . 20 8.6 37 11.3
No 66.3 207 89.2 270 82.6

Total 95 100 232 100 327 100

Table7.3.8.1 : Distribution of Respondents on Intention to Join NM Business

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Factor to be considered for joining NM Weighted %
business

Product offering 30.9

Reputation of company 21.1
Incentive scheme S 18.1
Strength of company 12.9
Industry attractiveness 10.2
Marketing plan 6.8

Total 100

Table7.3.8.2 : Distribution of Factors to be Considered in Joining

the NM Business

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7.3.9 Reasons For Not Buying NM Products

For the respondents who had not purchased any product through NM method in the past
12 months, the major reasons for not buying were that they had no such habit and they
were not approached by distributors. Quite a large number of them expressed that they
had no confidence in distributor, and they had no idea of what NM was. The reasons for
not buying the NM products are presented below:

Non-NM Customers
Reason for not buying No. .%
No such habit 54 23.3
Not approached by distributors 47 20.3
No confidence in distributors 28 12.1
No idea of NM 23 9.9
Not necessary, easy to buy through retail 19 8.2
Choice too limited 18 7.8
Product expensive 12 5.2
Product not relevant to need 9 3.8
Troublesome 9 3.8
Product quality not good 7 3.0
Bad previous experience 6 2.6
Total 232 100

Table 7.3.9 : Distribution of Non-NM Customers by Reasons of Not Buying

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7.4 Limitation Of The Survey

The measurements obtained from the sample surveys are subject to both non-sampling
and sampling errors, which are often referred to as bias and variable error respectively

7.7.1 Non-Sampling Error

The present research is subject to the following non-sampling errors:
(a) Measurement error — Measurement error potentially can arise in any stage of the
sample survey. In the transmittal stage, there may be errors due to nonverbal messages
such as the way interviewers ask the questions or the way in which the respondent
interprets the question. In the response phase, errors may occur because the respondent
gives incorrect information, the interviewer interprets it incorrectly, or there are errors in
recording it. In the analysis stage, errors of incorrect editing, coding and descriptive
summarization may occur.

(b) Frame error — The potential for frame error exists unless a perfect frame is
available. The use of telephone directories as the sampling frame is also subject to this
error. However, perfect frames are seldom available for the sampling of human
population.

(c) Recall error — As the purchase experience of the past 12 months is used for
analysis, a certain degree of recall error might have resulted due to memory lapse. The
respondents might have difficulty in recalling the NM purchase experience especially the
in numerical terms and tend to give an answer in estimated figure.

(d) Non-response error — The non-response include the non-contact and refusals. Not-
at-home respondents are typically younger with no small children. There is much higher
proportion of working wives than among those households with someone at home.
People who have moved or are away for the survey period have a high geographic
mobility than the average of the population. Refusals tend to be less educated and older
ages who did not understand and refuse to participate. There might result a certain degree

79
of error in the profile of respondents. During the interview process, the interviewers did
observe a relatively higher rate of non-response in N.T. region with respondents who
sound older in age.

All the above-mentioned non-sampling error cannot be reduced by increasing the size of
sample but only by improving the quality of survey questions . In the present survey,
much effort has been spent to minimize the non-sampling error. However, due to the
relatively "new" concept of NM, a certain degree of non-sampling error cannot be
avoided.

80
Chapter 8
Conclusion & Recommendations
Conclusion

Amway Corporation has remarkable share in Market.

The NM industry is a dynamic direct marketing force which has developed naturally and
successfully as a result of the evolvement of the marketing eras. It functions to benefit an
important segment of a consuming public, both in terms of the employment it offers, and
the sales stimulus it provides. It has established successfully in the Western markets. In
Wardha, Amway has a most familiar Network Marketing company and has a remarkable
market share which is aptly clear from the table 7.3.2 and 7.3.7.

Advertisement policy of Amway Corporation is inadequate to attract new people for

joining Network Marketing Business .

Though Amway’s product are the most popular products in the Market ,Amway is doing

its business through Network Marketing way is not popular among the people. Large

number of people still unknown about the kind of business opportunity Amway is

offering and its benefit. table 7.3.8 illustrates this issue in detailed.

As the products manufacture by Amway corporation are all FMCG products

(Cosmetics) so they have very large demand in market.

Network Marketing companies are offering variety of products for its customers. But the
most popular among them are Cosmetics, skin care, hair care and body care products due
to its rather high quality while household products, cleansing products and cookware are
the second largest category . The issue is clearly proven from the table 7.3.1.

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Customers Generally prefers Purchasing Through Network Marketing Means for
quality of the Products.

Since the quality conscious people are increased day by day, these people are moving
towards higher end of the products and the Amway offers them the best quality according
to survey which is presented in the table 7.3.4.

Network Marketing products are very expensive.

When the Network Marketing customers were asked to rate their views on the price level
of the NM products they bought in comparison to that in retail shops. About 40% of the
NM customers perceived the price level of the products they bought were more expensive
than similar type of product available in retail outlets. Despite its higher price level, the
customers were still willing to purchase as they value the product's higher quality,
personal service, convenience and relationship with friends or distributors. The same can
be illustrated from the table 7.3.5

Satisfaction level of Network Marketing Consumers is very high.

Over 75 % of the NM customers expressed that they were satisfied with the purchase
experience besides the quality of the Products. Thus the satisfaction level of the Network
Marketing is vet high proving its point from the table 7.3.6

Recommendations

The research not only reveal an estimated size and projected potential for the NM
business, the information gathered also provide some background for NM companies to
design effective and well-coordinated marketing strategies to improve their current NM
promotional efforts. A number of observations and suggestions for effective NM
strategies are presented as follows:

82
(a) Young to middle-aged female customers, housewives and working women who earn
an average income of about 9,000 or above, should be the initial target of NM promotion
because this group of people is more inclined to the person-to-person style of marketing.

(b) However, male customers are also increasingly accepting and trying NM means. They
account for one-third of the NM customers and few expressed that they had used the
method for over 8 times in the previous year. NM companies should develop long term
strategies to target the male sector especially in terms of product lines and attracting male
distributors to expand the male market.

(c) One of the major tasks of NM people is to clarify the myths and misunderstanding of
NM especially its confusion with other physically similar network system such as
pyramid scheme .

(d) Besides establishing a healthy image of NM, a vital role of the NM companies is to
promote this healthy image of NM as a whole and the company's image. Despite its 20
years' history in Wardha, majority of the customers have little knowledge on NM. They
came across the products within these 5 years and few could tell more than 2 names of
any NM companies. Nearly 10% of the respondents indicated their reason for not buying
as being no idea of what NM is. In fact, during the questionnaire survey, the interviewers
find quite a number of non-responding consumers expressed that they knew nothing
about the subject.

(e) As the reputation of the NM companies and products depends highly on how the
distributors present it before the customers, it is important for the companies to ensure
and monitor the distributors to abide code of ethics. Many network distributors often see
it as a way of earning short-term quick money by neglecting the codes of ethics and
conducts. Thus, long-term planning and training should be provided to cultivate and
upgrade the attitude of distributors in the industry.

83
(f) NM is a "people" business. It is all about people — the people running the
companies, the people distributing the products, the people buying the products. It is
advisable for the company to value the "people" asset by fostering the community culture
of the network which does not only provide money, but also friendship, good feeling and
support by positive motivation and long-term oriented plans.

(g) Over 75% of the NM customers have purchased through the NM means at least
twice. Although an average NM customer makes about 3 purchases every year, satisfied
customers may do so more frequently and might establish the habit to do so. Thus, the
NM companies should encourage and provide supporting services for distributors to build
up good relationship with the customers, not only customer relationship but also loyalty
and friendship. Repurchase is the backbone of strengthening and expanding the levels of
network.

(h) Although the product items sold by NM companies are diverse, the major product
lines are quite narrow which are mainly household, personal care and health products.
Nearly all the products sold are tangible products with only very few intangible service.
Some respondents expressed that the choice of NM products is too limited or the products
are not relevant to need. Local NM companies should explore more product choices to
the customers to induce more purchases, with reference to the Western NM examples
which embrace over a hundred types of product categories including intangible services.

(i) Despite Multi-level Marketers often highlight that customers could enjoy lower price
level by avoiding the exploitation of middlemen, over 40% of the responding customers
perceive the price level of NM products as more expensive than products bought through
retail means. There are also a number of non-NM respondents expressed that the products
are too expensive. This indicates that NM companies should correct the perception of
customers on the price level if they indeed are relatively cheaper than that of retail
outlets, or they have to convey clearly that there is a premium value that are worth
paying.

84
(j) The primary force of word-of-mouth in NM purchase is through that of friends and
relatives who are not distributors but only customers who have bought through NM
method. This shows that they should build on such a "second-handed" channel to market
the products. In addition, this also indicates a large room for distributors to introduce
their products and for NM companies to expand promotion for reaching potential
customers.

(k) Higher quality, personal service and convenient shopping are important attractions to
NM customers. It is important for NM companies to ensure the quality product through
long-term innovative research and development. Although most NM companies offer
refund or return guarantee, it is advisable for them to really honor the promise.
Distributors have to be encouraged to build on the advantages of personal service and
convenient shopping that customers value.

(l) Some customers bought through NM means because they found the products offered
so unique and special, or they cannot found through other channels. It is thus highly
favourable for NM companies to ensure products not available for sale in ordinary retail
outlets.
(o) Despite the increasing popularity of this "new" purchasing method, there are many
customers refused to buy through NM because they have no such habit or they think there
is no such need. It is too convenient to buy through retail outlets. Building up the
customers' buying habit is not easy but important for the business to succeed. The
advantages of NM purchase have to be conveyed to the potential customers who might
not aware of them.

(p) Most customers seem to be rather happy with their NM purchasing experience. This
is a very good news for the NM companies because it is hoped that these satisfied
customers will share their good experience and recommend this purchasing means to
others.

85
 Bibliography

BAIER, Martin, Elements Of Direct Marketing, New York: McGraw Hill, 1985
BIRD, Drayton, Common Sense Direct Marketing, 2nd Edition,London: tCogan
Pate 1989
BLANKENSHIP, A.B, Professional Telephone Surveys, McGraw Hill, 1977

CHISNALL, Peter M., Marketing Research: Analysis and Measurement,

McGraw
Hill, 1986
CLOTHIER, Peter J., Multi-Level Marketing: A Practical Guide To Sucessful
Network Selling, Kogan Page, 1990

CONN, Charles Paul, Promises To Keep: The Amway Phenomenon And

How It Works, G.P. Putnam's Sons, 1985

DOUGLAS, Mack R., Freedom Unlimited: How To Achieve Success In

Multi-Level Marketing Organization, American: Free Citizens, 1983

FAILLA, Don, How To Build a Large Successful Multi-Level Marketing

Organization, NM International Inc., 1989

LUMPKIN James R. and CABALLERO, Marjorie J. and CHONKO, Lawrence B

Direct Marketing, Direct Selling And The Mature Consumer, 1989

PROVINI, Charles R., Become a Millionare Without Even Leaving Your

Home
Money World, October 1989 .

SCOTT, Gini Graham, Success In Multi-Level Marketing, Prentice Hall, 1992

86
Website :www. amwayindia.com (Accessed Oct 2008)

87
 APPENDIX A

Network Marketing: A Strategy Adopted by Amway(Year 2008-09)

TELEPHONE INQUIRIES TO NM COMPANIES

Guide Researcher
Dr V. G. Ukinkar Ms Amala Nahar

COMPANY NAME _________________________

1. Parent company (in any)__________________ Country ________
2. Year of establishment
a] Parent company _____Y _
b] Wardha branch ___ Y _
3. Distributor
a] Number of distributors at present
b] Estimated percentage of active distributor
c] Growth rate per year __________
4. Approximate sales volume
a] Sales volume (2008)
b] Sales volume (2009)
c] Growth rate per year ___
5. Product lines
Number of product lines _
Number of product items
6. Why choose the Multi-level Marketing method to market and sell the company's
products?

7. Means to recruit first line distributors.

8. Means to promote products and incentive scheme.

88
 APPENDIX B

Network Marketing: A Strategy Adopted by Amway (Year 2008-09)

QUESTIONAIRE SURVEY FOR CUSTOMER

Guide Researcher
Dr V . G. Ukinkar Amala Nahar
All the information gathered are only for research analysis and be treated strictly
confidential.

1. Name :…………………………………….

2. Sex
Male [] Female []
3 . Age
[] 15-19 [] 35-39 []55 or over
4. Marital status
[] Single []Divorced [] Married [] Widowed
5. Education
[]Primary []Secondary [] University/Post-graduate
6. Residence
[] Public housing []Private tenement
7. Activity status
[] Housewife [] Retired [] Student [] Unemployed [] Employed
8. Monthly personal income (Rs. )
[ ]Under 3,999 [ ]4,000 - 6,999 [ ]7,000 - 9,999
[ ]10,000 - 14,999 [ ]15,000 - 19,999 [ ]20,000 and over
9. During the past 12 months, have you ever purchased any goods or services
through Multi-level Marketing method?
[ ] yes -----> go to Q.3 [ ] no -----> go to Q.2

89
10. Why you have not bought through the NM method?
[ ] no such habit [ ] product expensive
[ ] choice too limited [ ] no confidence in distributor -----_> gO to Q.12
[ ]not approached by distributor [ ] product quality not good
[ ]product not relevant to need [ ] others (_______________)
11. How many times have you purchased by using this method during the past 12
months? –
______ times
12. What product (s) has you purchased from NM distributor(s)?
Please name it. Product
Organization(if known)
13. On the dollar amount involved (within the past 12 months)
(a) What is the maximum amount you have spent on one purchase? Rs_________
(b) What is the least amount you have spent on one purchase? Rs___________
14. How did you know the products?
(more than l answer, l for the most popular way) .
[ ] introduced by friends/relatives (who are not distribu-tors)
[ ] introduced by distributors [ ] known from the advertisement/promotion
[ ] search by myself [ ] others
15. Why did you buy these products? (more than l answer, 1 for the strongest
reason)
[ ] higher quality [ ] unique /unusual feature
[ ] price [ ] confidence in distributor
[ ] personal service [ ] convenient shopping
[ ] variety [ ] more product information
[ ] persuaded by others/distributors
[ ] cannot find through other channels [ ] others
16. What do you think is the price level of the products sold by NM distributors in
comparison to that in retail shops?
[ ] more expensive [ ] cheaper
[ ] relatively the same

90
17. When did you first encounter the products sold by NM organization?
[ ] less than l year [ ] l-2 years ago
[ ] 3-5 years ago [ ] 6-8 years ago [more than 8 years ago]
18. How many NM organizations do you know, please tell me their names.

19. Are you satisfied with the distributor(s)! service?

[ ] very satisfied [ ] satisfied
[ ] unsatisfied [ ] very unsatisfied
20. Have you ever been persuaded by a distributor to join the NM organization?
[] yes [ ] no
21. Do you intend to join the NM distributor business?
[ ] yes [ ]may be [ ]no ------> go to Personal Data
22. What kinds of factors you will take into consideration when you join the NM
organization? (more than 1 answer,1 for the strongest reason)
[ ] product offering [ ] industry attractiveness
[ ] incentive scheme [ ]reputation of the organization
[ | strength of the organization [ ]others

91
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